Outsourcing and Layoffs
Outsourcing is one of the oldest business ideas in the world of business, and for the last two decades, business organizations, individuals and firms, have witnessed a significant trend towards ever increasing outsourcing effects in most developed economies. Outsourcing in broad term is the transfer of some business functions or components of business processes to an outside specialized contractor (Bragg, 2006). There are different types of outsourcing categorized as; process type based, objective type based, supplier strategy based, scope based and organizational-service delivery based outsourcing (Wijers &Verhoef, 2009).
There are plethoras of rationales to why organizations outsource and as well layoff employees, withal, the need to save cost, and sell off assets to the supplier (Bragg, 2006). The reasons may include; the need to acquire new skills, ascribed to inadequate in-house skills dedicated to a given function. Thence, the company may handle over the function to a specialized and competent supplier and in turn layoff some employees, with limited skills (Bragg, 2006). This reason is commonly used for outsourcing functions that require high skill levels, for instance, engineering and computer services (Bragg, 2006).
In light with this, company can also outsource, in order to acquire better management, attributed to poor performance (Bragg, 2006). Also, need to enhance controls within the firm can facilitate outsourcing. This reason emanates from the need for the provision of sufficient controls (Bragg, 2006). In tandem to this, a firm can outsource in order to reduce the number of outstanding investment (Bragg, 2006). The investments may involve modernization, and the urge to keep up with the latest technology, which allows reduction of production cost through automation, and hence resulting to some employees. Apart from this, severe business conditions, which include; economic recessions, reduced productivity, and increased cost of production, can also lead to a considerable number of layoffs (Cascio, n. d).
Outsourcing and layoffs have both positive and negative impacts on organizations. The positive impacts of layoffs encompass, a relatively quicker method of reducing cost, and achieve a short-term gain in profits, and it also provides a short term solution to difficult conditions (Jackson, Schuler &Werner, 2011). However, there are hidden costs of layoffs, and they include, fees paid to consultants who assist with the downsizing process, loss of trust in management, and litigation from aggrieved workers (Jackson, Schuler &Werner, 2011). Besides, there is also lack of staffs necessary to work when the economy rebound, loss of trust in management, and the organization may also lose off its reputation in the labor market, making future hiring difficult (Jackson, Schuler &Werner, 2011).
On the other hand, the considerable positive effects of outsourcing in organization constituents increased production at reduced costs (Bragg, 2006). Similarly, there will be the establishment of proficient management and increased performance of the company, thence maximizing the profits (Bragg, 2006). Moreover, through outsourcing, the company possesses the ability to focus more company resources. The negative impacts associated with outsourcing may include: increased hidden costs affiliated with the high rates of layoffs (Jackson, Schuler &Werner, 2011), and loss of confidential and vital information of the company. Further, there is an increase in local responsibility, since the company is unquestionably creditworthy for the quality of work outsourced to the clients (Bragg, 2006). Political fallout and supplier failures are also possible setbacks that can be exhibited by an organization (Bragg, 2006).
Conventionally, the layoffs also have severe impacts on individuals, the core one being loss of job and deteriorated life style (Jackson, Schuler &Werner, 2011). Nevertheless, different companies have come up with programs or services on how to assist employees through layoffs. Practice companies always offer outplacement services that assist employees find a new job (Cascio, n. d). Also, they offer career counseling services to employees, and services that enhance the development or establishment of a personal employment plan (Cascio, n. d). Some companies also offer severance agreement so as to cushion the possible outcomes of the layoff (Cascio, n. d). The severance agreement contains components that allow salary continuation, insurance benefits and uncontested employment benefits (Cascio, n. d). Other useful programs, may also include forgiveness of loans, and issuance of a company cell phone to a laid off employee (Cascio, n. d).
In conjunction to this, there are several facets a company can implement in order to help employees. The company can seek alternatives to layoffs, through allowing their employees to share the remaining work after some jobs are lost, ascribed to recession or economic problems (Business & Legal Reports, 2009). Similarly, the company can decide to reduce the salary or pay, which is highly acceptable to employees if, in any case, their unemployment benefits during the layoff period are less compared to the reduced pay (Business & Legal Reports, 2009). Further, employers can offer attractive incentives to some of their old employees who are about to retire, so as to propel them for an early retirement (Business & Legal Reports, 2009). By the same token, employers can also seek alternatives to outsourcing, in order to reduce the layoffs. This can be achieved through proper training of the staff members, so as to enhance adept management, and acquisition of sufficient skills that can allow efficient production.
Concisely, outsourcing is a key aspect in business that can aid in improving the production processes in the firm, as well as reduce the costs of business. However, the practice of outsourcing, catapults high levels of layoffs, especially during economic recessions, thence rendering a substantial number of employees jobless. Hence it is utterly indispensable for every employer to take into consideration every element in a firm before implementing the outsourcing idea.
References
Bragg, M. S. (2006). Outsourcing: A Guide to Selecting the Correct Business Unit, Negotiating the Contract, Maintaining Control of the Process (2nd Ed.). Hoboken, NJ: John Wiley & Sons, Inc.
Business & Legal Reports, Inc. (2009). Top 10 Best Practices in HR Management for 2009. Old Saybrook, CT: Business & Legal Reports, Inc.
Cascio, F. W. (n. d). Employment Downsizing and its Alternatives. Retrieved from http://www.right.com/thought-leadership/research/shrm-foundations-effective-practice-guidelines-series-employment-downsizing-and-its-alternatives-sponsored-by-right-management.pdf
Susan E. Jackson, E. S., Schuler, S. R. & Werner, S. (2011). Managing Human Resources (11th Ed.). Mason, OH: South Western Cengage Learning.
Wijers, G. & Verhoef, D. (2009). It Outsourcing: Contracting the Partner. Norwich: Van Haren Publishing.
