For A-plus Writer

Accepted Agenda Items
Agenda 1: Outsourcing central services

According to Johnson, Whittington, and Scholes (2012), there are three key evaluation criteria that can be used in making decision with a long list of options, which are suitability, acceptability, and feasibility (SAFe). Suitability helps in assessing whether the strategy meets the opportunities and constraints faced by the company. Acceptability concerns about the expectations of the shareholders in terms of risk, return, and stakeholders reactions in assessing the strategy. Feasibility concerns about the real implementation of the strategy, assessing the availability of capabilities of the company in applying the strategy.

According to Clegg, Carter, Kornberger and Schweitzer (2011, p. 68), outsourcing is “eliminating parts of the production system that do not add value to the product and can be better or more cheaply outsourced to another company that is a specialist in this area”. Using the SAFe criteria, in terms of suitability, outsourcing central services especially for human resource management is a good option that can overcome the constraints that the company faces such as slow global economic growth (see Appendix 1) and high staff costs as stated in the company profile. Outsourcing serves the company’s internal activities to external vendors to look for its successful elements and core competences (Heizer & Render, 2014, p.471). In addition, as argued by Wit and Meyer (2014), outsourcing is a good overall budgeting method to pro-act against excessive costs and improves operating strategies together with the subcontractor. This agenda item is based on strategic issues for a company in order to become more operationally efficient, cut staff costs, and have superior capabilities.

However, in analyzing this agenda option using the SAFe criteria, there should be a consideration of its acceptability in terms of risk and return for the company. Even though outsourcing can give financial benefit in terms of cost saving and provide

superior capabilities in HR functions which can give good return to the business in the long-term, outsourcing has also potential risks for the company.

One of the most important factors that need to take into account in considering the risk of this agenda is the organizational culture. As stated by Wit and Meyer (2014), implementing business decisions usually made on the grounds of the understanding of values within the organizational culture. In WRSX case, outsourcing the HR function is a problematic decision since people are the most valuable assets of the company. However, it causes the company substantial costs. WRSX value is focusing on shareholder value creation and customer satisfaction by delivering differentiated integrated advertising and communication services to its clients through the creative skills of the people. Considering this matter, it should be carefully addressed which HR functions are critical and cannot be outsourced to external company and which HR functions are possible to be outsourced.

Based on the explanation above, option B is the most ideal option. In this option a company only outsources particular HR functions such as payroll and benefits, pay negotiations, training and development, recruitment of administration staff and other non-creative/client-facing staff. In addition, this option states that the critical aspects such as recruitment, training and management of reward systems for all creative and account management staff should be conducted internally by WRSX. This is a best choice since creative staff is one of the company’s values and strengths and crucial for the advertising business. Moreover, in option B, it is stated that the outsourcing will be done on a Group-wide basis. According to Lasserre (2012), central services such as human resources management can be taken at corporate level in order to add value since the centralized action can give sufficient scale to create efficiency. It can be seen that this option will save costs for £1m per decision period with an initial one-off cost of £2m in the six month period.

Making precise selection of which HR functions can be outsourced, such as in option B, is better than deciding to outsource all HR functions such as in option A and C. As explained above, the considerations of organizational culture, company’s value, and strength in its people need to be taken into account. If the company decides to

outsource all HR functions including critical aspects such as the creative and account management, it may cause disruptions that outweigh the financial advantages. Making a trial in particular place which has been offered in option A can be a considerable idea, however it can cost the company more if it compares with the cost and benefit of option B. As stated before, implementation of the strategy in a Group-wide basis can give more efficient result. For option C, other than the potential risk from the disruption of the outsourcing of all HR functions, it costs the company a huge amount of money. Forgoing the outsourcing opportunity as stated in option D is not a good choice since WRSX should make some cost reduction especially in staff cost in order to overcome the constraints as stated earlier.