Abstract

Outsourcing is the strategic use of outside resources to perform activities that are usually handled by internal staff and resources. The consequences of implementing outsourcing strategies in an industrial setting were studied using a field study. This study is designed to explore both the financial as well as the human aspects of outsourcing activities. Although outsourcing can lead to certain gains for the organization, there are definitely human costs to be taken into account, and they should be considered as major factors contributing to the outsourcing debate, not just the financial aspects of organizations' decisions.

CHAPTER ONE

INTRODUCTION

1.1      Background of the study

Most corporations believe that in order to compete globally, they have to look at efficiency and cost containment rather than relying strictly on revenue increased (Bartlett, 2004; Drezner, 2004; Farrell & Rosenfeld, 2005; Jasper, 2003). As companies seek to enhance their competitive positions in an increasingly global market place, they are discovering that they can cut costs and maintain quality by relying more on outside service providers for activities viewed as supplementary to their core businesses (Baily & Farrell, 2004; Cassale, 1996; Donahoe & Pecht, 2003; Irwin, 2004; Li & Barnes, 2008). The trend is for outsourcing relationships to function more as partnerships. Outsourcing providers are taking increasing responsibility in realms that have traditionally remained as in-house, such as corporate strategy, information management, business investment, and internal quality initiatives (Engardio, 2006). According to Gartner, an independent research company, the worldwide business process outsourcing segment will expand from $160.7 billion in 2007 to $235.2 billion by 2011, a compound annual growth rate of 10.3% (Musico, 2008).

Outsourcing is relatively a new phenomenon which is becoming very popular in modern organizations. Outsourcing recruitment process is mainly used to increase the efficiency of the organization through managerial time saving along with the cost (Corbett, 2004). The telecommunication industry of Pakistan is one of the most profitable industries which have achieved unparalleled success over the years. In order to increase the profitability and efficiency, they are adopting new human resource practices such as hiring external agencies for recruitment (Mansen, 2009). Employee commitment and loyalty is very fundamental for this industry as committed and loyal employees will give high outputs along with efficiency (Sharma and Punia, 2008). Employee commitment is significant for an organization, and in this case for the telecommunication sector as a committed employee relates with the objectives, goals, culture and values of the organization however, external recruitment agencies are not well aware with the core values, culture and goals of the organization and therefore fail to instill commitment and loyalty into employees (Gaertner and Nollen (1999) and Ogilvie 1996). Firms that fail to pose strategic human resource practice may lose valuable employees due to lack of commitment and loyalty (Meyer & Allen, 1997). Maintaining employee commitment is significant and vital to an organization’s effectiveness and competitiveness in today’s world. Organization should consider various aspects as far as outsourcing recruitment process is concerned because employee takes valuable knowledge when he leaves an organization along with the wastage of time and resources invested on him (Kennedy, et al.) Therefore, the disadvantages of outsourcing recruitment process can outweigh its advantages which overall decreases the efficiency of the organization.

Several authors agree that if outsourcing is implemented with prior planning, it can result in lowering cost, increased capacity and productivity, and sometimes can lead to downsizing (Elmuti, 2003; Casale, 1996; Sinderman, 1995; Outlay & Ranganathan, 2005). Perhaps the most common reason for taking noncore functions overseas in the United States is the lucrative cost-saving derived from allowing a job to be done by a professional employee(s) that are paid much lower than their U.S. counter parts (Jasper, 2003). Many companies that are taking manufacturing and service jobs from the U.S. also consider the lower tax rates, available in foreign countries compared to the higher rates in the U.S. (Donahoe & Pecht, 2003). Although most of the outsourcing efforts made so far have been by big businesses, this dominance is starting to change in that smaller firms are also moving in the same direction in order to realize the benefits of outsourcing (McCracken, 2002). Some companies view outsourcing as a fast track system for penetrating new regions rather than a trend for the future (McCracken, 2002). Still others view outsourcing as a way to increase concentration on core-competencies, thus making it a more long-term approach (Bender, 1999; Corbett, 1996; Drezner, 2004; Engardio, Bernstein, & Kriplani., 2003; Farrell & Rosenfeld, 2005; Hoffman & Tibodeau, 2003). Most of the criticism concerning outsourcing has been primarily in the areas of changing employment patterns, globalization of the labor force, and its effect on individuals and organizations (Klass, McClendon, & Gainey, 2001 ; Dobbs, 2004). Among the main causes considered to be the reason for job losses in manufacturing is increased productivity (Stonecipher, 2004). Outsourcing, by increasing productivity, may result in downsizing (Outlay & Ranganathan 2005). Many US companies like Harley-Davidson, Dell, and Avago Technologies have announced that they will reduce their workforce as part of their outsourcing program. However, the consequences of outsourcing are not limited to unemployment and the loss of capital (CNN Money, 2004). It can also result in the deterioration of morale among employees, (Engardio, 2006; Kennedy, Holt, Ward, & Rehg, 2002). Displaced, unemployed workers have higher rates of child and spousal abuse, alcoholism, bankruptcy, divorce, etc (Dobbs, 2004; Jasper, 2003; Engardio, 2006; Weidenbaum, 2004)

1.2      STATEMENT OF THE PROBLEM

Over the last 10-15 years, global outsourcing activities have continued to increase. Study indicate that this trend is expected to continue. Continued outsourcing growth presents a need for the development of expertise around successful outsourcing management and a comprehensive understanding of relevant trends and issues. Based on anecdotal evidence and empirical research regarding the growing trend of outsourcing, the benefits tend to appear insurmountable. Outsourcing has the potential to decrease costs, increase focus, improve productivity, add flexibility and innovation, and simplify tasks and costs related to personnel management (Barthélemy, 2003; Elmuti, 2003; Logan et al., 2004; Walsh & Deery, 2006). Amidst these numerous advantages the cost of outsourcing to an organization profitability is like a hydra monster. It   is on this backdrop that the researcher intends to investigate the impact of outsourcing on employee’s engagement.

1.3      OBJECTIVE OF THE STUDY

The main objective of the study is to investigate the impact of outsourcing on employee’s engagement

i)             To identify impact of outsourcing on employee’s productivity

ii)           To critically evaluate the effect of outsourcing on the organization profitability.

iii)          To evaluate the impact of outsourcing on employee’s efficiency

iv)         To critically assess the efficiency between outsourced job and job performed by employee’s.

1.4      RESEARCH QUESTION

For the successful completion of the study, the following research questions were formulated by the researcher;

i)             What is the impact of outsourcing on employee’s efficiency

ii)           What are the effects of outsourcing on the organizations profitability?

iii)          What is the impact of outsourcing on employee’s productivity?

iv)         What is the effect of outsourcing on the growth of the employee’s?

1.5      SIGNIFICANCE OF THE STUDY

It is believed that at the completion of the study, the findings will be of great importance to the Nigeria telecommunication industry, who are the primary benefactor of the study as the study will enumerate the benefit and demerit of outsourcing in an organization. The study will also be of great benefit to the management on telecommunication company as the study will proffer solution to the challenges of outsourcing and training recruiting of staff.

The study will also be of great benefit to researcher who intends to embark on research in similar topic as the study will serve as a reference point to the study. Finally, the study will be of great importance to academia’s, researchers, lecturers, teachers, students, and the general public as the findings will add to the pool of knowledge.

1.6      SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers the impact of outsourcing on employee engagement, but in the cause of the study, the researcher encounters some constrain which limited the scope of the study

Some constrain which limited the scope of the study, bellow are some of the limitations to the scope of the study;

(a)Availability of research material: The research material available to the researcher is insufficient thereby limiting the study.

(b)Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

(c)Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.7 DEFINITION OF TERMS

Outsourcing

In business, outsourcing involves the contracting out of a business process (e.g. payroll processing, claims processing) and operational, and/or non-core functions (e.g. manufacturing, facility management, call center support) to another party (see also business process outsourcing). The concept "outsourcing" came from the American Glossary 'outside resourcing' and it dates back to at least 1981. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always

Employee

An employee contributes labor and expertise to an endeavor of an employer or of a person conducting a business or undertaking (PCBU) and is usually hired to perform specific duties which are packaged into a job. In a corporate context, an employee is a person who is hired to provide services to a company on a regular basis in exchange for compensation and who does not provide these services as part of an independent business

Telecommunication

Telecommunication is the transmission of signs, signals, messages, writings, images and sounds or intelligence of any nature by wire, radio, optical or other electromagnetic systems. Telecommunication occurs when the exchange of information between communication participants includes the use of technology. It is transmitted either electrically over physical media, such as cables, or via electromagnetic radiation. Such transmission paths are often divided into communication channels which afford the advantages of multiplexing

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