Implications of Insourcing and Outsourcing for Employment Experiences of Workers
Globalization has caught up with the business world, forcing organisations to find ways of remaining relevant in the global market. Companies are competing with the aim of maintaining a competitive advantage in their market segments (Peng, 2008). One way through which organisations endeavor to remain relevant and competitive in the market is by insourcing or outsourcing. Insourcing is whereby an organization uses its personnel and resources to complete a given task, while outsourcing involves seeking a different organization’s expertise to complete the same task (Kirk, 2015). The motivating factor compelling firms to either outsource or insource is the belief that the company which gets to implement the strategies successfully retains a competitive advantage against its competitors. The strategies mentioned earlier also present advantages to the organizations that carry out the implementation. However, there are disadvantages associated with Insourcing and Outsourcing with regard to the experiences of the workers. When a company implements Insourcing, employees are affected and the same case applies to the implementation of Outsourcing. The aim of this paper is to identify and discuss both the positive and negative impacts of Insourcing and Outsourcing with regard to the employment experiences of workers.
Implications of Insourcing for Employment Experiences of Workers
Insourcing as seen earlier is the situation whereby the company depends solely on its operational infrastructure and personnel to complete tasks. This practice impacts the organization both positively and negatively. When a company decides to go with Insourcing, it becomes expensive as new work processes are introduced in the pursuit of building the new division and more personnel may also be required (Marquis, 2017). There is also an added cost of training the existing employees concerning the department that has been created. Regarding resources, Insourcing becomes advantageous in that the organization uses its available resources such as customer phone support (Marquis, 2017). An organization that applies Insourcing has better managerial control over the company’s operations as compared to that which outsources. Such an organization will also have full control over its employees, and it becomes easier to attend to their needs (Marquis, 2017). If an organization is practicing Insourcing, the location of the new department is either in the same compound as the main premises or just in the vicinity, thus making operations and control of production easy (Marquis, 2017).
Insourcing is a significant boost toward American economic growth as it leads to job creation. According to Slaughter, ‘U.S. subsidiaries of foreign-headquartered multinationals contribute to the U.S economic growth and rising U.S living standards through their operations that are “Insourcing” American jobs’ (2004, p. 4). Insourcing organizations benefit the nation in two major ways, one being through their channel and the other through interactions with domestic American companies (Slaughter, 2004). Through the first benefit, the Insourcing organizations have led to job creation and have contributed largely to the growth of the economy by performing extensively and increasing the amounts of activities that enhance the productivity of workers and the economy at large. The companies also invest in research and development, physical capital, and international trade; all of which contribute towards economic growth and job creation. The workers serving at Insourcing companies are highly compensated as compared to those working in domestic firms (Slaughter, 2004). Insourcing U.S. companies are the highest contributor to the export of goods in the country. The U.S. subsidiaries benefit the economy by means such as enhancing the performance of domestic companies through sharing information with suppliers and customers (Slaughter, 2017).
Insourcing allows the organization to use the same employee for different positions. When an organization decides to set up a new department, they carry out cross-training whereby an employee is trained for the skills required in the new position created (McQuerrey, 2017). Cross-training boosts the morale of the employees as they feel honored by the organization, thus increasing productivity. The employees also benefit in that they become well-versed in various fields. The team can cut its publicity budget, for example, the marketing manager also plays the role of the public relations personnel (McQuerrey, 2017).
When an employee gets to know that their work is receiving appreciation, they feel motivated, thus dedicating their power to improving the organization (Sikula et al., 2010). The latter can only be achieved if tasks and promotions are kept inside the organization. Insourcing allows companies to promote their own, which in turn reduces the cost of hiring and training new employees. Employees remain loyal to the institutions as they are aware that they will grow professionally and improve financially in the same organization for a long time (Sikula et al., 2010). A person is bound to give their best in a group where they are sure to get promoted and receive pay rises.
Most companies in the world are taking on Insourcing and implementing it in their organizations as it is believed to have some benefits. According to Lesonsky, a Deloitte study which was conducted in 2013 showed that 48% of the organizations surveyed had ended their outsourcing contracts before the full term; with 34% of these opting for Insourcing (Lesonsky, 2014). The main aim of defaulting was for the enhancement of customer service but saving on cost and gaining more control were also significant aspects. The other important reason and one that is in line with this paper for the productivity of the employees. Huan Ho who is the co-founder and CEO of the Rally team believe that Insourcing improves the employees’ productivity and the overall performance of the company as they become happier and more engaged (Lesonsky, 2014). Employees get to work in various departments while others get promoted; meaning an increment in their salaries regarding bonuses or overtime.
Implications of Outsourcing for Employment Experiences of Workers
Outsourcing is an act through which an organization takes an activity that was once performed within the organization and delegates it to an organization with which it is not affiliated (Heaney, 2017). Outsourcing is associated with various advantages and disadvantages both for the company and the employees. Outsourcing can be cost-saving, increase competitive advantage, and brings about improved technical competence. Outsourcing has also been observed to reduce the burden of repetitive tasks while increasing flexibility; mostly in IT industries whereby keeping up with the latest technological inventions is a necessity (Heaney, 2017). In the same sector, outsourcing helps employees to concentrate on one central area thus increasing effectiveness. This practice also aids in improving managerial focus and the quality of services provided by the organization (Heaney, 2017).
However, outsourcing comes with risks to both the employees and the organization. The significant risk is the security of the company’s information (Heaney, 2017). Although companies practicing outsourcing have rules and guidelines meant for securing their information, the risk of having confidential data leaked is high. When an organization hands over some of its operations to another organization, they cease to have control of the information that goes along with the outsourced portion (Heaney, 2017). The level of control that the company initially had over its operation also reduces. The organization has to play along with the rules of the contracted organization. Consequently, employees suffer in that some of them get a lay-off, while others are demoted. Such an act affects the staff morale, thus affecting the overall performance of the organization.
In the previous two paragraphs, the practice of Outsourcing has been explained in a nutshell, but the writer wishes to break down the implications of this practice; concerning the employment experiences of workers. Foreign direct investment in America has been going on for a long time now and it continues to attract more people. This practice is however not going down well with people from local U.S communities who feel that their employment positions are getting taken over by outsiders (Jackson, 2013). According to him, U.S based organizations are practicing outsourcing, therefore, seeking to employ foreign workers (Jackson, 2013). This practice negatively impacts the lives of U.S. citizens. Some companies are also investing outside the U.S., and instead of hiring their fellow countrymen, they hire workers from the areas the organizations are situated. Employees who were initially working for such companies lose their jobs and the chances of ever recovering are slim (Jackson, 2013). Shifting of investments to other countries also cripples the U.S. economy. The economy that benefits significantly is whose country the organization has moved to.
Globalization has led the world into becoming a small global village, making it possible for organizations to seek the services of qualified individuals from all over the globe. Both private and public agencies are into the practice of outsourcing which enables employers to hire workers of their choice. As seen earlier, outsourcing could be used as a way of saving costs. Some organizations believe that laying off some of their employees and hiring new ones is cost-saving. However true the latter is, it affects the morale of older employees (Sikula et al., 2010). The employees start to feel insecure and fear the loss of their jobs too. The organization’s output is in jeopardy as these workers become reluctant.
Outsourcing brings about a language barrier. An employee may be taken to an area whereby they do not understand each other the clients (Patricia, 2014). Language barrier creates dissatisfaction among the customers and disappointment in the employee who might end up quitting due to frustrations. Cultural barriers also affect the productivity of the employee and are most likely to result in people resigning (Shukla, 2010). The most significant advantage associated with outsourcing is that one can be hired by any company in any part of the globe, provided they have the required skills. When old workers are laid-off, new employees are hired, and they also get to enjoy their pay. However, the organization practicing outsourcing can maintain its good reputation concerning laying-off employees by ensuring that the permanent employees are not affected by the change of guard. The latter can be achieved by hiring contract workers who can always be laid off after the project is complete (Antonucci, Lordi, and Tucker, 1998).
The organizations that are taking part in outsourcing do so with the aim of increasing productivity and increasing their competitive advantage. However, they forget to acknowledge the importance of the employees whom they are about to lay off (Elmuti, Grunewald, and Adebe , 2010). The work that is outsourced was initially performed by employees who are already in the company, and they have worked towards the success of the organization. Laying off such employees is unethical, and the company should come up with other ways of handling the situation. Such treatment affects the attitude and the performance of the employees which in turn affects productivity (Elmuti et al., 2010). The company may so much concentrate on efficiency and cost containment and in the event forget the integral parts of the organization’s growth, who are the employees. Outsourcing is two-sided; meaning it can lead to the growth of the organization and it can as well ruin it, depending on the treatment the employees receive.
The primary cause of Insourcing and Outsourcing is globalization. The world is developing at such a fast rate that companies have to employ all means possible to keep up with the race. Organizations are looking to maintain a competitive advantage over their competitors even if it means laying off some of their employees. The laid-off workers are replaced with foreigners who are paid less, thus saving costs for the companies. This practice is known as outsourcing, and it has been viewed to have negative impacts on the employees. Insourcing, on the other hand, is having a positive impact on both the employees and their organizations. Employees are retained, and they get to be trained in the skills required for the new department. This act creates loyalty and commitment among the employees to their organizations. The employees are thus committed to giving the best for their organizations. However, Outsourcing could be advantageous if the employees’ interests are kept at heart during the decision-making process.
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