Outsourcing the Great American Dream

Integrity, Transparency and Outsourcing
Transparency as part of the outsourcing process could help contribute to workforce stability in spite of the possibility of lay-offs. According to the Deloitte 2008 Ethics and Workplace Survey, most employees believed that leadership openness helped “contribute to a more ethical workplace” (Transparency, 2008, p.23). People tend to respond more positively when they are aware of all of the facts and have an understanding as to why doing something is important. If the steps required are apparent and the reasoning is present, the people involved will better adapt.
If a company behaves responsibly, employees can follow suit. Deloite’s study states that 68% of employees “believed that openness by the leaders created a more values-based organization” (Transparency, 2008, p. 23). Transparency allows the employee to make educated decisions about work. Removing or hiding the truth contributes to the loss of employee autonomy. Remind employees that they are part of what makes the company function and succeed by utilizing transparency during a transition to outsourcing.
References:
Deloitte. (2011). Avoiding the “ditch”: Making an effective transition to outsourcing. Retrieved from http://www.deloitte.com/view/en_US/us/Services/additional-services/Service-Delivery-Transformation/e6500f1ac28ee210VgnVCM3000001c56f00aRCRD.htm
Transparency, flexible work schedules boost employee productivity and ethical behavior. (2008). Journal of Accountancy, 205(6), 23. Retrieved from EBSCOhost.

In today’s hypercompetitive business market, outsourcing is a very common practice for many manufacturing companies. According to Jacobs, Chase and Aquiliano, manufacturing peaked in the 1950s due to increased automation and outsourcing (2009). Since this point, the world has experienced significant growth in the service sector. Technology and company’s desire to create the most efficient processes have forced jobs out of the U.S. Oftentimes, automation and outsourcing depletes valuable human capital that could benefit a company’s future. One way to retain and stimulate employees would be to allow them to present cost cutting measures and solutions to production problems. So, I would give the power to the employees to sustain the business and keep the production domestically. I believe there is no one more knowledgeable about a process or position in a manufacturing facility than the individual directly involved. The U.S. and other countries should focus on keeping manufacturing jobs alive because a strong economy is balanced in agriculture, manufacturing and service.
Reference:
Jacobs, F.R., Chase, R.B. and Aquilano, N. J. (2009). Operations Supply & Management. 12th ed. New York, NY: McGraw-Hill/Irwin.

It helps if the organization will talk to the employees to calm their fears. Simply saying something on a regular basis can help motivate them. Helping to educate your base group of employees is important. According to Micah Issitt, “Concern over outsourcing is heightened during times of financial recession, when the practice is one of several phenomena commonly blamed for the tribulations of America’s job market. Analysts have found that, during the 1990s, outsourcing of American labor created more jobs than it destroyed by allowing companies to increase productivity, to allocate domestic employees to managerial or supervisory roles, and to dismantle unproductive labor divisions. The overall prosperity of a company can ultimately improve opportunities for domestic employment.” This information is good for the workforce to know.
The organization might provide some of the benefits that the upper management enjoys, such as opportunities for professional development. With this incentive employees would at least feel empowered. In the event that they are laid off, they would be ready and may even welcome it.
Reference:
Issitt, Micah “Point: Outsourcing Benefits America and the Global Economy.” Points of View: Outsourcing (2008): 2. Points of View Reference Center. EBSCO. Web. 6 Nov. 2009

According to a recent article focusing on outsourcing by Thompkins, the most important aspect of outsourcing is determining the core and non-core functions. “Identifying core and non-core functions hinges on how you touch customers” (Thompkins, 9). By this he means that businesses must determine which processes would have a significant impact on the profitability of the company if outsourced. For example, a company would not want to outsource a “primary focus” such as those that are visible to the customer that differentiate your business or contribute to creating your competitive advantage.
I feel this is paramount in the decision making process and plays a key role in developing your outsourcing strategy. In my opinion, the most successful outsourcing consists of portraying to the employees that they are contributing to the primary core function that makes the business successful. And as Laura already stated, it doesn’t hurt to be open and honest with them either. Overall, if employees are informed and aware, companies are more likely to maintain a higher morale and avoid the need to continue creating efficiencies. They would already have them.
Reference:
Thompkins, J. A. (2005, November/December). The business imperative of outsourcing. Industrial Management, 47(6) p. 8-13.

Different forms of downsizing generate differences in perceptions and attitudes among workers. Compared to layoffs, outsourcing is seen as potentially less harmful for their jobs and less threatening for their future employment. Kostopoulos and Bozionelos (2010) noted that organizations can stimulate their workers by having open communication by management. It also depends upon whether employees viewed management as ethical. Good ethics provides a counterbalance of the negative influence of outsourcing perceptions of management fairness, empowerment, and work satisfaction. This means that the harmful effects of outsourcing reactions diminish when top management spends time to properly communicating the reasons behind outsourcing. Management action can act to buffer or neutralize some of the detrimental effects of outsourcing, particularly if managers communicate wisely and behave ethically.
Reference:
Kostopoulos, K., & Bozionelos, N. (2010). Employee Reactions to Forms of Downsizing: Are There Any Lesser Evils?. Academy of Management Perspectives, 24(4), 95-96. doi:10.5465/AMP.2010.55206391

Mark (2011) states “It is often assumed that manufacturing workers in developing countries, as recipients of outsourced jobs, would achieve economic benefits and organizational power. The author argues that job growth in developing countries through outsourcing to competing firms has often actually resulted in declining unionization and lower wage rates relative to traditional, integrated manufacturing firms. Using time-series data on union membership from 1980-2003 for Honduras and El Salvador as well as 2004 Household Survey Data for El Salvador, he examines the determinants of unionization rates and wages in the manufacturing sectors. He found out that the competitive outsourcing hurts labor at the plant-level in three ways: first, it reduces labor’s strike leverage by geographically dispersing the production process; secondly, it increases the threat of plant mobility by decreasing plant-level investments; and lastly, it increases labor costs relative to total costs, which creates an incentive for employers to keep wages low and unions out.”
References
ANNER, M. (2011). THE IMPACT OF INTERNATIONAL OUTSOURCING ON UNIONIZATION AND WAGES: EVIDENCE FROM THE APPAREL EXPORT SECTOR IN CENTRAL AMERICA. Industrial & Labor Relations Review, 64(2), 305-322. Retrieved from EBSCOHOST

Outsourcing in the hospitality industry has been around for years and is increasing each year. Services such as payroll, laundry, reservations, grounds keeping, information technology and purchasing are just a few areas that hotels are outsourcing in order to help reduce costs, with many IT projects, revenue management and reservation jobs outsourced abroad. While these areas are effective in decreasing costs for hotels, there is concern about quality, especially when customers need information and are directed to a representative in another country. Not only are there customer complaints of the representative’s inability to help them due to language differences, but there is also concern about guest security.
In order to motivate workers, it is imperative that managers provide additional training and education for on-site workers in order for them to grow and provide personalized customer service. Empowerment is also vital to guest relations, as the associate must be equipped to make decisions instantly that could affect the guests’ stay and perception of the location. The associate owning his/her job equates to quality on-site service.
References:
Simon, E. Y. (2010, April 26). Pros and cons of hospitality outsourcing. Retrieved October 30, 2010, from Hotel News Now: http://www.hotelnewsnow.com/Articles.aspx/3209/Pros- and-cons-of-hospitality-outsourcing

According to Steiner and Steiner, “Statistics on outsourcing lack the power to rigorously define the trend, but suggest that media and scholarly attention may exaggerate its importance.” Perception and understanding is necessary to maintain employee efficiency and effectiveness during a changing global business environment. Outsourcing is usually perceived to be a bad thing for employees—but it doesn’t have to be. Reorganization generally helps a company cut a lot of costs, but hurts morale. Employees need to be aware of reorganization well before it happens. However, an employee that lives in fear of losing their job is unproductive. It is therefore also important to align employees with corporate strategies and provide open communication lines. Employees who understand the financial reasons for reorganization may actually stand behind their company.
Reference:
Steiner, J. & Steiner, G. (2009). Business, Government, and Society A Managerial Perspective. 12th ed. New York, NY. McGraw-Hill/Irwin. p. 517-519.

The key to making an outsourcing transition a success is to move individuals as quickly as possible from the fear and resistance stage to the buy-in and support stage. This can be done by communicating regularly. Fear comes from being kept in the dark. It is important to ask questions, get feedback, and be prepared to provide honest answers. Providing clear guidelines on how future relationships will work and what the implications are going to be is important. Recognize and praise employees. A little word of encouragement or feeling of importance goes a long way, which can be exemplified by the Hawthorne Effect. Finally and most importantly, do not let the communication and motivation diminish once outsourcing has taken place. Motivation needs to be a continuous process if success is desired culturally and profitably.
Reference:
Fitzgerald, J. (2005, December). Keep motivational efforts continuous. HRO Today, 4(10), Retrieved from http://www.hrotoday.com/content/1130/keep-motivational-efforts-continuous

In the article “Downsizing the Company Without Downsizing Morale”, the authors identify two key factors that directly influence downsizing success: (1) the survivors’ level of trust in their organization’s leadership and (2) the survivors’ empowerment (Mishra, Mishra, & Spreitzer, 2009). Through their research the authors found that only if survivors have a high degree of trust and empowerment are they apt to be optimistic and willing to actively participate in solutions to improve the organization (Mishra, Mishra, & Spreitzer, 2009) . In order to promote such an environment, the middle managers of the downsizing company must be well trained to become liaisons between top management and employees. Open lines of communication are critical during hard times and middle managers must be trained to communicate the organization’s vision and mission. They must also be trained in conveying the compassion that top management should be articulating. Middle managers must be well versed in two-way communication and prepared to help reduce the anxiety and uncertainty of their employees.
Mishra, A.K., Mishra, K.E., & Spreitzer, G.M. (2009). Downsizing the Company Without Downsizing Morale. MIT Sloan Management Review, 50(3), 39-44.

One key to employee motivation during uncertain times is for leaders to lighten up, not tighten up. When times are uncertain, as with outsourcing, leaders tend to run tighter – more militaristic style organizations as a measure to offset fewer resources. Leaders make the mistake of barking out orders without mention of vision, direction, or outcomes. In fact, roughly half of the employees surveyed by Gallop over the years indicated they did not know what was expected of them at work. These are the exact opposite of what should happen since the result is even greater stress and anxiety for the remaining workers. Therefore, if reduced stress and greater motivation are the objectives, then the key strategy is to lighten-up and add three simple ingredients to the mix.
1) Set and clarify expectations
2) Provide and Explain a clear vision for each remaining worker
3) Engage employees using recognition programs
Reference:
White, E. How to Motivate Workers in Tough Times. The Wall Street Journal Online. November 7. 2008. Retrieved from http://online.wsj.com/article/SB122531548636981645.html

Specialization has become one of the most important ideals in business today. For your company to be successful it is key that you understand what you do best and focus on succeeding within that. Making sure that the workforce you have is skilled and educated in their specific tasks allows a business to be more agile and innovative. Large vertically integrated companies with complex managerial systems that treat employees as an expense rather than an asset cannot function well in the new economy. Utilizing what are being called network clusters allows several specialized organizations to network and create a final product. For example one company may research and design a product, while a second would engineer and manufacture it, and a third may handle distribution. It is this model that can allow for organizations to stimulate their workers while outsourcing key components. It is the ability of the mangers to integrate knowledge, technology, and communication that will allow this balance to be successful.
Reference:
Coleman, H.J., Miles, R.E. and Snow, C. C. (2000). Technology, Organizations, and Innovation. In Dawson, P., McLaughlin, I. and Preece, D, (Ed.), Managing 21st century network organizations (Vol. IV, pp. 1621-1623). New York, New York: Routledge.

The benefits of outsourcing is that, U.S companies can generate significant savings by outsourcing their back office operations to developing countries where those functions can be performed at a cheaper rate without compromising quality. The primary motive of most corporate outsourcing is to take advantage of huge wage gap between industrialized and developing nations. Organizations can stimulate their workers while outsourcing key components of their business by liberating its highly paid analysts, engineers, from routine tasks to enable them concentrate on innovative technologies and businesses that will enhance core competency, gains in efficiency, productivity, quality and add greater value to the business. Organizations can also motivate their workers while outsourcing by giving the workers increased wages and other benefits from savings generated from downsizing and paying lower wage costs for functions performed in developing countries. Also, outsourcing can result in job creation in the U.S. while obtaining cheap wages abroad. The labor savings from global outsourcing can be substantial. Organizations can use the savings to innovate around their business to create better employment opportunities for the employees while also giving them better incentives to work.
Reference:
Jacobs, R. Chase, R. Aquilano, N. (2009). Operations & Supply Management. New York. McGraw-Hill/Irwin

Your employee is your biggest asset and expenditure. So it makes sense to make sure they are happy, motivated and engaged. And one way to get there is through communication. Communication is essential to motivating staff and keeping them informed. They need to feel they are a vital component to the organizations decision making process and not just someone that shows up to do a job. As stated by Supply Chain Sandard.com, 2009, Good communication with the staff is more than at the floor level, it is from senior management.
Being in healthcare, our market has a sense of uncertainly. No one is sure what impact the healthcare reform will have on our industry, so communicating with employees is huge. Our leadership team believes this as well. Twice as month we have Hospital Update day that is driven by our senior leadership team. This gives all employees the opportunity to not only hear the updates within our organization, but also gives the employees the opportunity to ask those “tough questions”. This has proven to be a huge satisfier. Our employees have a greater sense of ownership which not only motivates but keeps them engaged.
http://www.supplychainstandrad.com motivation in a downturn.html.01.July, 2009

When an organization starts downsizing, the remaining workers are often left with a sense of anxiety and “Am I next?”, resulting in decreased productivity and increased resentment towards their company. Managers can avoid these situations by having open and honest discussions with their employees. As others have previously mentioned, an atmosphere of transparency, coupled with an open-door policy, can help to alleviate many of these feelings of anxiety in employees. “Merely recognizing employee concerns can help alleviate them. Relatively inexpensive employee counseling can become memorable at times like these. These actions, coupled with incentives that elicit new ideas for improving operations can send important positive messages at a time of stress. They can foster “ownership” behaviors — loyalty, high productivity, and referrals of others as potential employees — that enhance the lifetime value of members of the organization,” (Goldsmith 2009).
Reference: Goldsmith, Marshall. (2009, May 29). How to Keep Employees Motivated. Success Television. Retrieved July 23, 2011. Retrieved from http://social.successtelevision.com.

Organizations today face a great challenge in stimulating their workers while outsourcing components of their organization abroad. It is hard to keep positive work ethic while giving jobs to employees in other countries. Most employees feel betrayed or angry and work morale decreases; as a result production can suffer. Companies can try to diffuse these negative ramifications of outsourcing by the following: usually being honest with their workers upfront about their outsourcing practices helps with any feelings of betrayal-while workers may not agree or like the idea, it is better to know up front than find out their company lied to them later on. This act is called “Transparency”. Transparency pays, according to Robert Eccles, author of “Building Public Trust “. Eccles shows that companies with fuller disclosure win more trust .The more companies say about where they are making money and how they are spending their resources; the more confident workers or even investors can be about the company fundamentals. This practice builds more trust within the workplace. Other practices, such as offering more benefits or more appealing retirement options can also help with morale.
McClure, Ben (Oct 24, 2010). The Importance Of Corporate Transparency. Retrieved from http://www.investopedia.com/articles/fundamental/03/121703.asp#ixzz1T5IhqKqE

Outsourcing has become a blame for many American losses of jobs. The effects of outsourcing benefit the company, the area the outsourcing is moved to, and generally the end consumer. It is difficult to see these benefits when a person is let go from a company due to the outsourcing of their previous job.
Keeping employees stimulated while outsourcing key components of the organization is challenging for the company, and for the employee themselves. Outsourcing changes the structure of the company, but also the lifestyles of the employees affected. Companies may encourage their employees to reenter the American educational infrastructure. This benefits the company by gaining a person with knowledge and skills, and it benefits the employee by gaining knowledge and skills that keep them employed during a time of great change.
Bernstein, A., Engardio, P., & Kripalani, M. (2003). Is your job next? Business Week, 50-60. Retrieved from http://www.drummajorinstitute.org

Companies see profit and market dominance, employees are more into increasing income and more benefits. Communication,Transparency, on focusing on values of employees bring more driven and responsibility. seeing eye to eye toward the same goal is the key. Delivering value through efficiency is a primary reason
companies employ outsourcing strategies within their
businesses. As Dr. Maya Angelou says, “I want all my senses
engaged. Let me absorb the world’s variety and uniqueness.”
Businesses should explore all outsourcing options to provide
the most efficient and cost-effective services to their
customers. Developing a multi-source strategy or a domestic
outsourcing model are ways to balance value and risk and
should be explored as approaches to reaching optimal
efficiency. Through the proper outsourcing model companies
can reduce and manage costs, concentrate on key functional
areas of the company and leverage the value of niche
competition in the marketplace As you evaluate your choices and decisions in outsourcing different components of your operations, you will need to consider the advantages of outsourcing. When done for the right reasons, outsourcing will actually help your company grow and save money. There are other advantages of outsourcing that go beyond money. Here are the top seven advantages of outsourcing. (1. Focus On Core Activities,2. Cost And Efficiency Savings,3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.4. Operational Control
Operations whose costs are running out of control must be considered for outsourcing. 5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done.6. Continuity & Risk Management,7. Develop Internal Staff
Having a domestic outsourcing relationship allows your
company to communicate on all levels more frequently,
which reduces your risks and keeps the costs of doing
business lower
reference :
“Lower Cost Domestic Sourcing: A Niche Opportunity for the
US”,
July 2007
Conscient Partners, LLC
“Abroad and back – outsourcing the wrong move for U.S.
fi rm”,
12 May 2004
Ed Parry, News Editor SearchCIO.com
Gartner Research Services
“Having a domestic outsourcing relationship allows your
company to communicate on all levels more frequently,
which reduces your risks and keeps the costs of doing
business lower.”
To
Top 7 Outsourcing Advantages
Outsourcing Advantages: A Back-Office Operations Illustration
By James Bucki, About.com Guide