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Differences between the way work was organized at TCS and at Scotchem
Total Customer Services (TCS) and Scotchem are two disparate organizations with different forms of work organization. TCS is an outsourcing firm dealing with outsourced housing operations while Scotchem is a networked organization which relies on its alliances with suppliers and customers in its chemical manufacturing business. The housing claim processing contract for TCS was seven years and this defined its work organization. The contact between the council and TCS comprised of council workers working on monitoring claims that would have been processed by TCS workers. It was the council which set up weekly targets that TCS had to meet. After going through the outsourcing process,
TCS required a change in management structure.With outsourcing, workers were liberated from bureaucratic control. Grugulus, Vincent and Hebson observed that the liberation from bureaucratic control was supposed to increase individual autonomy and performance. I however had the reverse effect on the organization of work at TCS. Contracting out made tasks more rigid and strictly defined and workers could not exercise discretion.
In terms of work organization, Scotchem was relatively different from TCS because it did not outsource its operations. It is a networked organization. Grugulus notes that networked organizations have a structure that strikes the balance between market and hierarchy. The organization of work at Scotchem shift from structure to spontaneity. It relies on inter-firm networks, worker flexibility and the coordination of knowledge. According to Grugulus, Vincent and Hebson (2006) Scotchem’s organization was more flexible especially when it came to the relationship between customers and suppliers. Formal contracts were relatively short and the company relied on quarterly negotiations to set prices and agree on the levels of consumption. Scotchem had long term relationship with suppliers and customers, even though service contracts were shorter. As observed earlier, TCS had long term contracts but the work arrangement was temporary.
Unlike TCS, individual employees of Scotchem held permanent work contracts and all workers had the discretion to engage in extra activities that benefited the company. Employees were also required to collaborate with customers and suppliers. Grugulus and colleagues observed that inter-organizational collaborations contributed to the success of Scotchem. For example, collaborations with suppliers in the production of bad specifications resulted in maximised benefits for Scotchem and the collaborator. To make organization more streamlined and efficient, collaborations were governed by contracts. This led to generosity playing in a role in successful business operations.
2. Implications of Work Organization on Skill
The TCS case showed that outsourcing led to the reduction of skill training and the employment of more qualified individuals. Workers moved from knowing the whole claim filing process to specialization in a narrow part of the claim. What is observed in the TCS case is the replacement of old bureaucratic hierarchies by networks in the form of outsourced businesses. Salaman argues that the old vertical division of labor is abandoned in the future and its replacement is horizontal coordination. Horizontal coordination has implications on worker skill levels and competence. According to Salaman, the information age produces symbolic analysts who perform duties that are too specific in a way that vertical control can not manage.
The changes in management system at TCS related with outsourcing mirrors the concerns raised by Salaman. What is interesting in the TCS case is that changes from bureaucratic control to horizontal coordination is supposed to remove the old style of management and improve workers skills. This however is not the fact. TCS went on to higher less qualified individuals and invest a little in skill training. This shows that evaluation of changes in management due to technological improvements ignore the effect of innovations such as outsourcing on skill development.
The TCS case shows that outsourcing reduces employee skills. Grugulus and friends note that the decline in employee discretion resulted in significant personnel changes. The first work group that came from the local authorities was very skilled but it was replaced by 25 less skilled individuals out of the initial 110 (2006, p. 169). The new employees of TCS were less qualified. The auditing of workers and high levels of control is argued to have resulted in the reduction of skills base.
Lafferty and Roan acknowledges that labor hire employees generally lack organizational memory. It is true that the skills provided by labor hire companies are more generic as evidenced by TCS’s replacement of highly qualified caseworkers with individuals with limited skills. The quality of employee skills is affected by outsourcing. Scotchem because it allows employee autonomy and the development of skills maintains a great relationship with its suppliers and consumers. It halso has high levels of coordination. Cooke (2006) also analyzed the case of the outsourcing of housing services to TCS. Evidence from her research showed that firms like TCS with “portfolio businesses or multi-establishments have no time to learn or train their managers to take over the new business” (Cooke, 2006, p 276). This means that no skill development takes place and no significant changes in terms of performance can be witnessed.
The case of TCS is critical since it shows the downside of outsourcing in terms skills. Cooke cites a manager from the local authority who was part of the deal to outsource services to TCS who noted that local authorities hire private companies to provide more unique and efficient services. The private companies however go on to recruit from the same government workers pool of workers thereby providing no significant change to the labor skills pool.
Another significant effect comes from the fact that companies like TCS do not specialize in one form of business. Its interests range from housing, betting, catalogue sales and utilities billing, this means that the kind of management skills it desires are more general than specific and workers have to satisfy the bare minimum of qualifications because they can be moved from one section of the business to another. As cooke observes, the organizational form greatly influence the skills portfolio of TCS.
While TCS experienced a reduction in skills base, Scotchem increased the skill base of its workers by making sure that all workers performed extra functions and were an integral part of the whole functional processes and activities of the company. The employees also have freedom to pursue and improve other desired skills. The comment from one of Scotchem employees captures the effect that Scotchem work organization had on skills. The employee says, “ we’ve been left with quite a free role to prioritise ourselves, and sort our own team out, what we do and who does it, left to our own responsibility for thatWe know our responsibilities and organize ourselves” (Grugulus et al., 2006, p. 169). Scotchem unlike the TCS model relies on networks.
The networks that emerge as a result of collaborations enable the workers to gain access to a wider pool of skills. The network system enable everyone who is part of the networks to acquaint themselves with the new desired levels of individual skills that are important to for the completion of a certain task (Warhust & Thompson, 1998). This does not mean to say that networks have no disadvantages. Citing Scarborough, Grugulis argues that networks have a double-edged effect on employment practices. They encourage the acquisition of new skills while putting too much pressure on an individual’s work. In addition to the double edged impact on skill, networks like the ones Scotchem rely on have significant skills drawbacks (Macky, 2008). They are highly exploitative and can lead to the poaching of skilled individuals from little companies to big multinational firms like Scotchem. This is a relatively big advantage for Scotchem but it can affect its suppliers and sometimes consumers when allies fail to perform because they no longer have the necessary expertise.
3. The impact of improved training on TCS and Scotchem
The purpose of increasing training is to improve the employee’s quality of work and rate of production. Improving training for TCS would have no significant improvement on service provision. Keep (1989) argued that training and development is central to all human resources management and for improving a business’ ability to adapt to new challenges. Training is considered a critical investment in a company and the presence of efficient training structures enhances the fulfilling of business goals. Kepp (1989) further observed that business entities that treat their employees as expendable commodities or unnecessary costs are bound to fail if they do not make critical investments in training.
The TCS business model and work organization does not favor high skilled training. The time needed to train employees in subcontract entities can be used to fulfill certain tasks since the labor is often training. Training in contexts like that of TCS can be disadvantageous since workers can use their new skill to a more permanent job. The less skilled the workers are the better it is for TCS model. As observed earlier, general skills also help TCS’ management formula because workers can move from one side of the business to another. An individual can be moved from its housing claims section to the billing section with ease.
One of the reasons for training is the retaining of workforce. Scotchem’s networked organization begs for more employee training and retention. It is however different for TCS whose activities can be temporary hence the lack of need to push employee through training hurdles. Keep argued that “if a company had invested in training its workforce, it them makes sense to develop policies that will help to retain these employees and to motivate and develop them in such a way as to put to best their skills” (1989, p. 111). Human resources literature says that training should not be at the periphery of all human resources activities. This resonate with companies like Scotchem that can see a remarkable improvement in employee performance after training as compared to TCS and its outsourcing model.
Scotchem employees have permanent contracts and that means they have to evolve with technological changes that are happening around them. Thus training is a critical component of Scotchem. If it does not pursue an aggressive training strategy, I can lose out to competitors who stay abreast of all technological and human capital innovations. Taining for Scotchem does not need to necessarily involve improvements in the use of technology. It can also be used in maintain the element of trust that already exist and is important for Scotchem’s relationship with its suppliers and customers.
Research on outsourcing and public organizations has revealed that the subcontracting culture impedes training Lafferty & Roan, 2000). Research on the effect of outsourcing on the building industry in the Victorian State Government found out that training is not made a priority when companies subcontract (Lafferty & Roan, 2000). There is also considerable research that shows that the delivery of training to temporary workers is limited. It is more profitable for companies to milk out best outcomes from semi-skilled or unskilled workers than to invest in the training and development of individuals who are going to leave the organization in the near future.
Lafferty and Roan (2000) examined the effect of outsourcing on the Australian public sector. They found out that outsourcing does not only erode the provision of public infrastructure but also leads to less worker competence as well as the loss of coordination between government entities. This erosion can be seen in TCS where the employee become less skilled and less qualified and job satisfaction goes down.
4. Importance of discretion in the two case studies
Discretion is not important for TCS as much as it is for Scotchem. Bertagna defined discretion at the workplace as employee “freedom to distinguish among the alternative ways of performing their job and possess the authority to decide which path they will take - and do so on their own” (2012 n. p.). Grugulus and colleagues argue that the decline in discretion was inevitable for TCS. It is an essential part of the subcontracting process. With TCS, major tasks are contracted out but the responsibility lies with the local authorities, who are the original organization. Thus trust is an a key component of operations in an outsourcing business like TCS. One critical observation about discretion on TCS is that trust is replaced by bidding contracts and individuals who used to work for the local authority and now working for TCS find the new form checking process cumbersome. There is no more reliance on personal relationships but on the contract. The observed changes in discretion also match changes on personnel. The skilled staff from local authorities were replaced by individuals who were less qualified and who relied on their contract to perform their duties rather than trust. TCS employees do not have the capacity for discretion or independent judgement which means that it is difficult for them to change their positions especially if they want managerial positions. TCS gets its managerial staff from outside rather than from within because it does not train its employees to have independent judgement. Employees who moved from the local authority to TCS are greatly affected since they now have to forget about all the other parts of the work they were competitive at. Since independent judgement is not needed, discretion is not beneficial for TCS’ management.
Discretion is however important for Scotchem because of the company’s need to maintain relationships. Scotchem employees hold permanent contracts and this means that they need discretion more than TCS. Scotchem employees can perform extra functional activities and the importance of discretion is clearly illustrated by the employee who argues that “we’ve been left with quite a free role to prioritize ourselves” (Grugulus et al., 2006, p.169). The fact that contracts at Scotchem were honored more in breach than observation shows that discretion is at the bottom of operations at Scotchem. In addition, it is noted in the case that at Scotchem, the success of projects depended a lot on the generosity of information. Generosity of information demands discretion.
5. The implications of a general increase in outsourcing work
The case of TCS shows that outsourcing makes significant changes to how work is performed. As the case points out, outsourcing changes responsibility for task performance but does not change the task. Outsourcing increases hiring for the organization outsourced but leads to job loss to individuals that were employed by the outsourcing organization. The outsourcing entity manages to get some flexibility by sharing responsibilities (Greene, 1994). Because of the temporary nature of subcontracting work, outsourcing leads to the loss of job security (Rees & Fiedler, 1992). TCS hired less qualified and skilled individuals and let go highly qualified stuff. It is apparent that outsourcing only benefits the bottom like of an organization. It has no skills or personnel benefits.
Outsourcing also results in active management. In the TCS case discretion and trust is replaced by auditing. This is attributed to the reduction of the skills base that existed before contracting out. The argument here is that with outsourcing, skills level decrease and the ability of employees to perform multiple tasks is greatly reduced (Greene, 1994). TCS is argued to have introduced a caseworker training program which was not used train workers with fewer skills because the tasks demanded fewer skills.
The decrease in skill is also a result of specialization. Workers in outsourcing companies are required to focus on one particular skill as compared to many. Versatility is not demanded at companies like TCS. Before contracting housing benefits staff were given the responsibility to go through the entire claim and completing the documentation. TCS changed this process by specialization. This meant that work was organized in a more rigid setting where caseworkers did not have to go through the entire claim process. They specialized in one part of the claim process and spent hours working one that one part.
Specialization also affected personnel in drastic ways. TCS hired new recruits with less qualifications as compared to the original caseworkers. Grugulus and colleagues (2006) argued that changes in personnel were more a result of subcontracting that a clear reflection of changes in the skill base of TCS. The new organization resulted in the reduction of skill base. This is attributed to the new emphasis on auditing. In addition, the agreements were temporary which means there was less incentive to invest in skill development. It is argued that TCS did introduce a training program but they ended up recruiting people who were less qualified than those initially employed by the council. Outsourcing has benefits for the company rather than the employees. It leaves most employees with less skills and abilities.
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