Outsourcing

1. Proposed Title

 Consequences of Outsourcing on Employee’s Attitudes

1. Background / Introduction of Study

Organizations respond to challenges and demands for greater performance with various programmes designed to overcome obstacles and enhance business performance. Organisation must focus on flexibility, agility and speed if an organisation wants to survive in the business world today. Outsourcing is an exercise use of external resources to reduce costs to perform portions of work that are carried out by internal resources and staff.

According to Sampson (2007), outsourcing is a method to shift internal business functions to an external service provider who offers a similar services for a specific period of time at an agreed price. Outsourcing has the largest interest in United States due to changing nature of competition from globalization and transformation in the business environment (Clott, 2004).

Outsourcing has its pros and cons to it. Some of the organisation decided to outsource to suppliers who expert in the filed by having specific equipment expertise, and can produce a  faster and better quality output, whereas some intends to shift certain responsibilities to outsourced vendor to share risk and it will give more time to focus and strengthen the core business process. As an example of Nike Ic which outsourced whole of the shoes production and solely focus on its core competencies, as marketing, research and development design and sales distribution.

However the disadvantages overshadow the advantages of the outsourcing decision. Outsourcing might cause employees feel decline in their level of participation in the work groups and caused the stress level and thus result in loss of productivity. There will be a possibility for information leak and release of sensitive of company information if the organisation outsource the core business activities. Outsourced employees who lack of understanding of organisation culture would cause a negative impact on the organisation. As an example, Royal Bank of Scotland outsourced the IT facilities and the inability of IT facilitators ad a failed software update have caused the bank customers unable to access to their bank accounts to view the balances or withdraw the funds in June 2012.

The consequences of outsourcing strategies on employee attitude were studied using quantitative and qualitative techniques. Delphi techniques will be use to gather data from a number respondents.  It is very important for an organisation to have a better understanding on the employee’s attitudes towards outsourcing as it has vital impact for the organisation regarding employee involvement, motivation and commitment. The purpose of this research was to design a scale to measure employee’s attitudes towards outsourcing decision.

Employee’s attitudes strongly relate to the changes in the organisation by implementing outsourcing decision. Outsourcing would create poor morale within the employees and thus cause absenteeism and voluntary turnover in the workplace. A high turnover rate in a workplace would be cause a lost for the company key skills. Employees tend to leave the organisation when they feel job insecurity, and it will caused impact on productivity and financially levels of the organisation.   When the employees leave, they will take with their skills, knowledge and ability that would help to contribute the vision and mission of the organisation.

In short, is important for the organisation to determine which are the tasks are to be outsourced and what kind of strategic to be implemented. Employees are the important resources of any organisation. Thus, consequences of outsourcing strategies on employee attitude have to be studied.

1. Problem Statement / Research Problem(s)

Most of the organisation look at efficiency and cost containment rather than only relying on the increased revenue in order to compete globally (Bartlett, 2004; Drezner, 2004; Farrell & Rosenfeld, 2005; Jasper, 2003).  Thus, most of them discovering that they can maintain the quality and cutting the cost by rely on outside service providers for those supplementary activities to their core business in order for the companies to enhance their competitive position in the global market. Outsourcing decisions were historically decided primary based on a cost basis (Yang et ai., 2007; Leavy, 2004).

From a survey conducted by Miller (2006), identified that 59% of the respondents outsource due to concentrate on the core business activities, whereas 36% of the respondents intended to outsource due to quickly attain business goals, and 32% of the respondents wanted to focus research & development innovation, and 28% of the respondents wanted to focus on the market changes and last 22% are based on cost basis. Nowadays, there are few factors that affect the organisation decision in making whether or not to outsource nowadays, such as lack of internal knowledge, high technology and etc.

Outsourcing has its share of advantages and disadvantages but outsourcing brings far disadvantages outweigh than advantages. For the research project will study the consequence of outsourcing activities on employee attitudes. The research seeks to identify the outsourcing determinates, external and internal factors that affect the outsource decision. And finally evaluate how the employees attitudes impact the organisation overall performance in terms of cost, delivery and quality.

Outsourcing would affects employees in few ways (Palvia & Parzinger, 1995).  For an example, a group of employees protest again the management outsourcing decision in British Aerospace and Inland Revenue in 1994 (Kessler, Shapiro & Purcell, 1999).  

By increasing productivity through outsourcing would create downsizing as many of the US company such as Dell, Avago Techonologies have announced that they will reduce their workforce as a part of their outsourcing program. Unemployed workers have higher rates of spousal abuse, bankruptcy, divorce and etc  (Dobbs, 2004; Jasper, 2003; Engardio, 2006; Weidenbaum, 2004).

Furthermore, outsourcing has been shown to have an impact on employee attitudes. Outsourcing would create the existing employee to start to wonder when will be their turn and thus affect the loyalty, performance and efficiency in the workplace. Employees would less likely to help the co-workers compare than in the past, as they are primarily in protecting their own jobs. Co-workers conflict would hurt the quality and the work environment as they are less likely to work together.  In addition, outsourcing lead to poor employee loyalty and morale and impact on the service quality to the customers (Lam and Han, 2005; Ghobrial, 2005).