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Q11-3 What Are the Advantages and Disadvantages of Outsourcing?

 

Outsourcing is the process of hiring another organization to perform a service. Outsourcing is done to save costs, to gain expertise, and to free management time. The father of modern management, Peter Drucker, is reputed to have said, "Your back room is someone else's front room." For instance, in most companies, running the cafeteria is not an essential function for business success; thus, the employee cafeteria is a "back room." Google wants to be the worldwide leader in search and mobile computing hardware and applications, all supported by ever-increasing ad revenue. It does not want to be known for how well it runs cafeterias. Using Drucker's sentiment, Google is better off hiring another company, one that specializes in food services, to run its cafeterias.

Ethics Guide Training Your Replacement Scott Essex sat at his desk looking through the roster of employees he managed. As he flipped through the pages, he felt a sinking feeling in his stomach. Upper management had directed him to cut his team of software developers by nearly 75 percent. This directive came as a result of a recent initiative to reduce costs by outsourcing IT department projects. As he flipped back and forth between the pages, Scott didn't know how to identify which employees to retain and which employees to let go. All the employees brought value to the team—if they didn't, Scott wouldn't have hired them in the first place. Scott flipped to the beginning of the roster and started putting stars next to the names of employees he would consider letting go. Some had worked for the company for many years. But, in spite of their time on the job, they honestly didn't add as much value as they should relative to their pay. Conversely, there were more recent hires who had tremendous potential and were low-cost relative to other employees. Scott paused and looked up from the roster—he wasn't sure how he was going to look these people in the eye when he told them the bad news. But he would have to do it. It was part of his job. Then it got worse. Scott's boss sent him a portfolio of new development projects that had to be completed in the next 3 to 6 months. How could upper management expect the usual turnaround time for these projects when 75 percent of his staff was going to be replaced with new outsourced employees—working on the other side of the planet? These new employees would know nothing about the "vibe" of his team or the intangibles that made the team run smoothly. Letting employees go was one thing. But if he didn't get these projects completed on time, his own position could be in jeopardy. To Train or Not to Train The next morning, Scott walked into the office still feeling discouraged about losing so much of his team. But he felt confident in the selections he had made concerning the employees who would be staying. As long as the remaining team members could move past this process and get back to work, he figured they had a chance at sticking to the new project schedule. He walked down the hall to drop off his proposed personnel changes to his boss, Beth Birman. Beth asked him to close the door and take a seat. Beth started the conversation. "Well, I bet you are wondering how you are going to make those new project deadlines with the employee changeover you will be managing." Scott tried to keep his true feelings from showing on his face. He replied optimistically, "Well, it is going to be a bit hectic, but I think we can manage!"