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Outsourcing involves contracting an external service provider to undertake an in-house business task. Under the current business environment, it is almost impossible for a business organization to meet all of its business requirements by itself, implying that the viable solution that can facilitate the focus on core business activities is outsourcing (Burkholder, 2006). A significant challenge during outsourcing in IO Corp. is employee resistance because they fear that they may lose their jobs. In light of this view, this paper discusses the factors involved in the outsourcing decision, and the issues surrounding the sense of control. In addition, the paper prioritizes the steps involved in meeting employee resistance to the outsourcing plan and rationalizes the plan. Finally, the paper offers a discussion of why employees’ jobs should be protected.
Factors Involved in the Outsourcing Decision
The outsourcing decision is mostly a cost-benefit analysis, whereby the marginal benefits are weighted against the marginal costs prior to embarking on the decision to outsource. The key driving factor to outsourcing is to reduce costs (Engardio, 2006). However, there are other challenges that IO Corp. is likely to face when embarking on the outsourcing of its customer service activities, such as legal expenses, transition costs and contractor selection. Therefore, it is important to conduct a thorough cost-benefit analysis to ascertain that the outsourcing decision has a considerable return on investment. Verhoef (2009) asserts that this requires an analysis of the company’s vision, business strategies and goals prior to the outsourcing decision. It is also vital to assess the long-term effects of outsourcing on cost reduction, which entails an analysis of its consistency with the business strategy of IO.
The second factor to be considered when taking the outsourcing decision by IO Corp. is the absence of experts in customer service (Engardio, 2006). Absence of specialists in this business function compels the firm to outsource in order to eliminate the costs and time associated with hiring or employee training. In case IO Corp. lacks the expertise in this business function, then it can consider the outsourcing decision (Verhoef, 2009). The third factor to consider during the outsourcing is the risks involved. The high risk factor is a significant driver for outsourcing since risks are transferred to the external service provider.
The expertise of the external service provider in the business function should also be assessed prior to the outsourcing decision. The fundamental argument is that outsourcing should aim at ensuring perfect process. The core strength of external service providers is their capacity to standardize with the internal business processes of the IO Corp. (Verhoef, 2009).
Significant savings in the management time should also be taken into consideration before embarking on the outsourcing. It is important to assess the level of management involvement when the business operation is outsourcing and any instances of secondary work. Since outsourcing is mainly driven by the need to focus on core business functions, it should not consume a lot of IO Corp. management time (Engardio, 2006).
Issues Surrounding the Sense of Control
A significant challenge during outsourcing is the sense of control because the process entails the integration of two different organizational structures (Burkholder, 2006). In addition, control issues are complicated by the fact that the external service provider must access the resources of IO Corp., which is a potential threat to privacy and confidentiality of important organizational information. The customer service is a sensitive one, implying that IO Corp. must establish information security and privacy policies in order to protect its customers’ information (Verhoef, 2009). In addition, it is vital to make certain that the external service provider does not use customer information for unintended reasons. Loss of sensitive data can impose negative business implications.
The differences in organizational structure impose significant challenges during the outsourcing process. This is because outsourcing results in the loss of management control relating to the outsourced business function. This means that IO Corp. will not have the capacity to control its customer service operations and its respective deliverables. This implies that checks should be established to clarify the role of the IO Corp. management in the outsourced business function (Engardio, 2006).
Reporting is also a significant issue involving sense of control in the sense that the employees of the external service provider will be reporting to their firm rather than the IO Corp. management. This makes it difficult to monitor their progress when undertaking the customer service activities.
The Steps Involved in Meeting Employee Resistance to the Outsourcing Plan and Rationale of the Plan
Outsourcing is likely to face employee resistance because of the changes in organizational structure and the fear that they might lose their jobs. This implies that careful planning and implementation is needed during outsourcing in order to help in overcoming the barriers associated with employee resistance to outsourcing. The first step to overcome this resistance is to educate the employees on the potential benefits associated with outsourcing the business function. A fact is that outsourcing kills the morale of in-house staff. Therefore, the managers have the responsibility of informing the employees the ways through which outsourcing facilitates the achievement of the business goals and objectives such as a reduction in costs, increase revenue and expansion of domestic operations. Outsourcing can be perceived to increase the level of domestic hiring.
The second step in overcoming employee resistance to outsourcing is to demonstrate the necessity. The fundamental argument is that if outsourcing is viewed as an accepted business practice in the industry, then there is the need to outsource other business functions. Employees should know that outsourcing is increasingly becoming inevitable and a core tool to remain in business. Following up with examples of outsourcing success can be an effective strategy to overcome employee resistance to outsourcing. Managers should highlight success stories of companies that have relied on outsourcing for profitability and expansion of in-house operations. Therefore, managers should always lay emphasis on the positive impacts to the firm and the employees in the case when the business function is outsourced to an external service provider (Verhoef, 2009).
Since outsourcing is somewhat a change implementation process within the organization, overcoming this resistance requires the deployment of effective change management strategies such as employee involvement, change motivation, emphasis on strong organizational culture and gradual implementation. Gradual implementation implies that the IO Corp. engages in knowledge transfer strategies between the external service provider and the employees. As time goes by, there will be no need to outsource since the employee will have acquired the knowledge needed to execute the business operation effectively. The point of argument is that there is no precise methodology to overcome employee resistance to outsourcing; rather, IO Corp. management should adjust their strategies to ensure that the outsourcing process also imposes positive impacts on the employees.
Justification of Why the Employees’ Jobs Should Be Protected
It is essential to note that employees are permanent members of the organization, and their efforts make long-term contributions towards the success of the organization. The argument is that IO Corp. cannot outsource all of its business operations. As a legal requirement, companies are supposed to protect their employees’ jobs in order to avoid any instances of lawsuits that may impose negative consequences on the company.
A justification of protecting employees’ jobs is that it indicates the balance between the staff and business needs. This implies that the protection of employees’ jobs is an effective approach that integrates the interest of the firm with the concerns of the employees. This helps in improving staff morale, which ultimately results in in the long-term employee productivity.
Protecting the employees’ jobs also serves to eliminate the fear factor associated with outsourcing. There is a need to convince employees that they have opportunities in the company. It is vital for employees to be aware that outsourcing does not imply that they will lose their jobs, but rather creates an opportunity through which they can acquire new skills and expertise that can make significant contributions to the success of the company.
Outsourcing is increasingly becoming inevitable in the present business environment; as a result, business enterprises have to consider numerous factors before taking the decision to outsource. The factors that affect the outsourcing decision include cost-benefit analysis, absence of expertise and significant savings in the management time. Employee resistance to outsourcing should be overcome through informing the employees of the benefits associated with the process.
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