What Is The Impact Of Outsourcing Business Performance?
In the current business scenario, cost cutting is being given the major concentration by the business organization. This is due to the reason that gaining the cost leadership is important in order to gain competitive advantages in the market. There are various strategies being initiated by the business organizations including the outsourcing strategy. The key advantages that can be gained by the business organizations are the access to the expert knowledge and less cost and responsibilities (Dolgui and Proth 2013). This is leading to the increase in the popularity of the concept of the strategy of outsourcing among the contemporary business organizations. However, initiation of the outsourcing is also having several negative impacts for the business organizations.
In the recent time, Sydney Novatel initiated to outsource their cleaning service following the recommendations given by the accountants. Currently, they are having their own employees in the cleaning services. Thus, it is important for them to determine the advantages and disadvantages of the initiation of the outsourcing and design their outsourcing process effectively.
This repot will discuss about the merits and demerits of outsourcing to be faced by Sydney Novatel. It will also be discussed that what will be the correct options for them in relation to the outsourcing. Six articles will be used from the annotated bibliography in order to critically evaluate the factors of outsourcing.
One of the key advantages to be gained by Sydney Novatel from the initiation of the concept of outsourcing is the less involvement of cost in the process. This is due to the reason that, currently the involvement of the own employees are having more cost incurred by Sydney Novatel. Moreover, having the own employees also involves providing all the employee welfare benefits to them. This will involve added cost for the organization. Thus, initiation of the outsourcing strategy will help in delegating the cleaning job to the third party vendors, which will involve less cost. Organization should have to take the responsibility of any added facilities for the employees (Giustiniano and Clarioni 2013). Thus, the initiative of cost cutting will get succeeded.
Another advantage that can be gained by the initiation of the outsourcing strategy is the access to the expert knowledge. Though it is discussed that the cleaning service of the Sydney Novatel will be outsourced, which is not the core service offering of them, but it is also to be noted that cleaning service determines their service quality among the customers. Thus, it should be done perfectly and with having the experts in place. In this case also, initiation of the outsourcing strategy will be helpful due to the reason that this will enable Sydney Novatel to appoint the expert firm in cleaning service. Thus, the service quality will get enhanced along with the level of customer satisfaction.
According to some theories, the flexibility of the business operation will also get increased with the initiation of the outsourcing strategy. This is due to the reason that outsourcing will delegate the key responsibilities to the third party vendor and Sydney Novatel will only deal with the outsourced agent directly with the service (Hamed MoosaviRad Kara and Ibbotson 2014). The communication will be more effective and efficient due to the reason that they should not have to deal with the individual employees in the cleaning service.
The savings in time from managing the cleaning services can be used by them in their core activities of service offerings. Thus, it will help them to provide more updated service to the customers, which will in turn generate the satisfaction of the customers and will help in gaining competitive advantages in the market.
One of the key disadvantages to be faced by Sydney Novatel from the initiation of the outsourcing is the lack of control in marinating the employees in the cleaning services. This is due to the reason that in the case of the outsourced cleaning service, Novatel will have less control on the management of them. Therefore, in case of any issues, it will not possible for them to overcome those effectively and urgently. This may dent the customer satisfaction in the long run.
Another issue that can be faced by them from the initiation of the outsourcing strategy is the over dependence on the third party vendor for the service offerings. For the hotel industries, cleaning service is one of the key elements and can be treated as one of the core activities of them. Thus, having the third party vendor in the core activities will reduce their upper hand in providing service to their customers (Martinez?Noya Garcia?Canal and Guillen 2013). The outsourced firm will have the upper hand in providing the service and Sydney Novatel will have less bargaining power in the process. Their service quality will get determined by other external firms.
Another disadvantage that will be faced by Sydney Novatel from the initiation of the outsourcing strategy is the resistance from the side of the employees. Though this issue is internal in nature for them but it will have long term and serious implication for them. This is due to the reason that currently the employees working in the cleaning service will resist to make way for the outsourced firm. In addition, it will also create fear among the other employees of Sydney Novatel. They will also be in fear of loss of job and this will reduce their effectiveness and performance in the organization. Thus, initiation of the outsourcing strategy in one department will have negative implications on the entire workforce of them.
Having some sort of mismatch and miscommunication between Sydney Novatel and the outsourced firm will cause huge negative impact on the service delivery. This is due to the reason that in the business operation, there may have issues with the outsource firm and may cause negative relationship with them. This will reduce the effectiveness of the service quality to a great extent and will cause irregularities in the entire system.
The previous sections have discussed about both the negative and positive impacts of outsourcing for Sydney Novatel. However, the benefits of outsourcing cannot be avoided and thus it should be implemented in more sustainable form, which will be acceptable to all the associated stakeholders. The following sections will discuss about some of the recommended steps to be followed.
It is recommended that Sydney Novatel should first determine the requirement of outsourcing the cleaning services. They should first identify whether outsourcing the cleaning activities will have any positive impact on the entire business operation or not (Caruth et al 2013). If it is identified that initiation of the outsourcing will be less or negligible impact, then it should not get implemented in the process.
It is also recommended that prior to the outsourcing the cleaning activities, the outsourced firm should be checked in order to gain the insights about their effectiveness. This is important for Sydney Novatel that the core values and objectives of them and the outsourced firm should get matched in order to prevent any issues in the future (Sardar Lee and Memon 2016). The service quality of the outsourced firm should be checked before assigning them the job.
The current employees in the cleaning service should be relocated to other department and all the employees should be clearly communicated that their jobs will not be outsourced. This will reduce the fear among them. In addition, it is also being recommended that the core activities of Sydney Novatel should not get outsourced due to the reason that it will reduce their effectiveness in the market and their entire business operation will be dependent on the third party vendors.
It is also being recommended that the outsourcing contract should be made yearly rather than contracting for the longer period. This will help in continuing or forfeiting the contract at any point of time depending on the quality of the service. Thus, Sydney Novatel will have some extent of control with them in dealing with the third party vendors.
Conclusion
Thus, from the above discussion, it can be concluded that outsourcing the cleaning services is a good idea for Sydney Novatel. This will help them to delegate the added services and concentrating more on the core services. Moreover, outsourcing the smaller activities such as cleaning services will help them to determine the effectiveness of the strategy. However, it should be considered by Sydney Novatel that there will be various negative factors to be faced from the initiation of the outsourcing. In accordance to those, there are some recommended steps are being discussed in this report. These recommended steps will help them in having an effective implementation process of the outsourcing strategy in the organization. Moreover, effective implementation will also help them to prevent the resistance from the side of the employees. Thus, the decision of outsourcing the cleaning service is correct and it will be beneficial for the organization. From the discussion in this report, it is recommended that they should go ahead with the plan and should implement it sustainably.
Reference
Caruth, D.L., Haden, S.S.P. and Caruth, G.D., 2013. Critical factors in human resource outsourcing. Journal of Management Research, 13(3), p.1.
Dolgui, A. and Proth, J.M., 2013. Outsourcing: definitions and analysis. International Journal of Production Research, 51(23-24), pp.6769-6777.
Giustiniano, L. and Clarioni, G., 2013. The impact of outsourcing on business performance: An empirical analysis. Journal of Modern Accounting and Auditing, 9(2), p.153.
Hamed MoosaviRad, S., Kara, S. and Ibbotson, S., 2014. Impact of international outsourcing on the value adding of industries. The International Journal of Logistics Management, 25(3), pp.463-486.
Martinez?Noya, A., Garcia?Canal, E. and Guillen, M.F., 2013. R&D outsourcing and the effectiveness of intangible investments: Is proprietary core knowledge walking out of the door?. Journal of Management Studies, 50(1), pp.67-91.
Sardar, S., Lee, Y.H. and Memon, M.S., 2016. A sustainable outsourcing strategy regarding cost, capacity flexibility, and risk in a textile supply chain. Sustainability, 8(3), p.234.
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