Academic journal article Journal of Business Strategies

Consequences of Outsourcing Strategies on Employee Quality of Work Life, Attitudes, and Performance

Academic journal article Journal of Business Strategies

Consequences of Outsourcing Strategies on Employee Quality of Work Life, Attitudes, and Performance

Article excerpt

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 was designed to explore both the financial as well as the human aspects of outsourcing activities. The attitudinal results of this research indicated that the outsourcing strategies had a negative impact on the perceived quality of work-life dimensions. The performance results presented here provide, at best, circumspect support for the claims of outsourcing proponents that the technique improves participants' performance and productivity. 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.

Introduction

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).

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 last 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). …

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