Question One
Controlling costs is one of the factors that a firm will benefit by outsourcing. However, costs control is a general term which is assumed to cover all the costs associated with the outsourced services. Upon analyzing the outsourced component, the hospital may have identified that transferring all the costs through outsourcing all the catering services may not be prudent. In such a case, it could mean that the hospital was transferring part of the catering services. As a result, the outsourced services are offered within the premises hospital premises. In effect, the firm will enhance its budgetary control by only transferring the costs where the hospital will benefit from outsourcing (Contractor, 2011).
Even when a service is outsourced, the firm needs to have a grip of control on the services that are provided. Consequently, it implies that the outsourcing firm cannot transfer all the risks to the provider (Alder, 2010). In order to have a grip of controls, in order to guarantee on the quality, of the services that is provided, a firm may opt to have the outsourced service offered in-house. In the hospital, catering is a very sensitive service which will need close scrutiny thus required tight controls by the hospital. Therefore, this could be one of the reasons that the hospital decided to have the outsourced service provided in the hospital premises. In effect, the Hospital will manage to control risks that may be associated with outsourced services.
Business focus is one of the major reasons for outsourcing when the service being outsources distracts the business from its core business (Alder, 2010). However, when the outsourced service is not affecting the business focus when performed in-house, the business can have the service provided on the premises. In other words, if the location of the outsourced service does not have an effect on the business focus, then it does not matter where the service will be provided.
If a business wishes to have the outsourced services not performed in-house, there are various reasons that could lead to the rationale. If offering the service on the premises causes the firm not to focus on its core business, may interfere with the running of the core business, the firm aims to transfer all the costs and risks, and the firm has absolute trust that the outsourced service does not require a grip of control among others are some of the reasons.
Question Two
Regardless of whether a service is outsourced or insourced, the providers of the services must identify with the organization culture. The organization has six components. The first component is a vision which serves as the guide to company’s values and provides the firm with its purpose. The purpose gained orients the decision made by the stakeholders of the firm. The second component is the values. The vision articulates the purpose of the purpose of the firm while values provide the guidelines on the employee mindsets thus influencing employee commitment to their work. The third component is the firm’s practices. Through the practices, the values are operationalized. The fourth component is the people who must share in values of the company and their practices manifest the values and uphold the vision of the firm. The fifth component is organization narrative where the organization narrates its history which influences how its people act. Finally, the fifth component is the place. The place affects the manner in which the people acts and interacts. A place which promotes smooth interaction between staff at all level promotes productivity and inclusiveness. Therefore, the entire employee will feel part of the organization (Coleman, 2013). As such, when the housekeeping services were outsourced, the providing firm did not facilitate the employee to identify with the organization culture of the hospital. Therefore, these employees no longer felt part of the hospital workforce. The challenge could have been overcome if the employees were not detached from this organization culture even if their management changed hands since they still offered the same services as they did when they were under the hospital management. So long as identification with organization culture is guaranteed, the service can be outsourced or insourced.
Question Three
The primary reason to ask another hospital to join is to enable the creation of economies of scale for the providing firm. Once the economies of scale have been created, the hospital will enjoy lower charges thus increasing their financial benefits of outsourcing (Hornby, Gammie & Wall, 2001). The essence of outsourcing is, among other things, lowering costs thus the creation of economies of scale is a prudent move.
Conclusion
The concept of outsourcing no longer focuses on the financial benefits that will be associated with outsourcing. The concept has widened to consider the nonfinancial components of the firm. As it was the in the case observed, although the decision to outsource was adopted due to financial consideration, the firm failed in one of its outsourced services since it did not fully address a key nonfinancial element, organization corporate culture. In addition, outsourcing can further be enhanced by taking innovative initiatives such as joint venturing to create economies of scale for the provider thus improving on financial benefits.
References
Alder, H. (2010). Outsourcing. Retrieved 2016, from http://www.cips.org/documents/PG_Outsourcing.pdf
Coleman, J. (2013). Six Components of a Great Corporate Culture. Retrieved February 23, 2016, from https://hbr.org/2013/05/six-components-of-culture
Contractor, F. J. (2011). Global outsourcing and offshoring: An integrated approach to theory and corporate strategy. Cambridge: Cambridge University Press.
Hornby, W., Gammie, R., & Wall, S. (2001). Business economics. Harlow: Financial Times Prentice Hall.
