Employee Reactions to Outsourcing: Development of the Attitudes toward Outsourcing (ATO) Scale

By Jarvis, Amy; Mills, Stephanie et al. | Competition Forum, July 1, 2006 | Go to article overview

Employee Reactions to Outsourcing: Development of the Attitudes toward Outsourcing (ATO) Scale


Jarvis, Amy, Mills, Stephanie, Desai, Ashay, Subramony, Mahesh, Sridhar, B. S., Competition Forum


EXECUTIVE SUMMARY

With the growing importance of business process outsourcing in the increasingly globally competitive world, attitude of strategic constituents toward the phenomenon merits attention. This study represents a first step toward construction of a self-report attitude scale. Exploratory Factor Analysis of the data collected from university samples yielded promising results. Resulting factor-structure captured both positive and negative attitudes toward various causes and consequences of outsourcing. Strengths and limitations of the study are discussed. Future research will consider larger, diverse samples to arrive a valid and reliable instrument that serves both academics and practitioners well.

INTRODUCTION

Business process outsourcing (BPO) is described as the process of externalizing formerly performed in-house activities, functions and services to outside vendors. Although this is not a new business practice, the magnitude, direction and character of outsourcing has changed drastically in recent years (Jenster & Pedersen, 2000). The current interest in outsourcing in the United States is largely due to transformation in the environment of business and the changing nature of competition resulting from globalization and technology (Clott, 2004).

Globalization has made the world seem smaller, with fewer barriers across countries. Technology has made instantaneous communication across the world possible. Firms have realized that work can be performed just as well in another country as it can in the United States, often at reduced cost and round the clock. BPO began with non-core activities; however, it has evolved and migrated to higher-end activities, including "...research, product development, logistics, human relations, accounting, legal work, and marketing and market research" (McDermott, 2002, p. 22). Quoting the McKinsey Global Institute and OECD, The Economist, a business periodical, predicts that by 2008, 4.1 million service jobs will be outsourced and approximately 20 percent of total employment in the 15 pre-expansion EU countries, America, Canada and Australia will be affected (The Economist, 2005).

Outsourcing of jobs, particularly to overseas vendors, has become a controversial national concern (e.g., Dobbs, 2004). Some see outsourcing as a means of retaining or increasing an organization's competitiveness, while others view it in a pessimistic light, focusing on the job loss for employees. Proponents of outsourcing, based on the theory of comparative advantage, argue that it will be beneficial to shift a function to a firm that specializes in that function, resulting in lower costs and better quality (Clott, 2004). Yet, the disadvantages of outsourcing, specifically the potential loss of jobs resulting from this practice at both the organizational and national level, has attracted much attention (Marshall & Heffes, 2005).

As in any new area of research, the topic of BPO has generated a lot of literature in business journals; however, there has been modest empirical research on the psychological aspects of the practice. Despite the upward trend in outsourcing, and the controversies surrounding it, there have been few attempts to systematically measure employee and managerial attitudes toward the practice of outsourcing. How employees feel about BPO is important because it may have mediating effects on employees' behavior and attitudes as well as on a variety of organizational outcomes. A better understanding of the antecedents and outcomes of attitudes toward outsourcing can have vital implications for firms regarding such things as employee commitment, involvement, and motivation.

The aim of this study was to design a scale measuring employees' attitudes toward outsourcing. First, the researchers undertook a comprehensive literature review. Next, they conducted personal interviews with practicing managers and academics to generate a large number of items that could potentially capture multiple facets of outsourcing. …

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