Understanding Job Outsourcing: Key Concepts & Implications

The key concept in this research paper is an in depth explicit analysis of job outsourcing concept in a company, its importance as a policy aimed at cost cutting and improving efficiency while maintaining production at these reduced costs. By definition, outsourcing jobs generally is a term used to refer to those activities a company may involve itself in as such a company contract out either an in house or external function concerning its personnel. For this case, it involves contracting out labor supplier either with full autonomy of an acquired factor of production in terms of personnel or sharing management of such an outsourced production tool. In simple terms, it means shifting company employment opportunity to a relatively low wage contractor, also known as offshore outsourcing should such a contractor(s) originate from outside the company’s country of operations.

In the United States of America, job outsourcing especially in the scale of offshore contracting, has been used a strategy political issue in appealing to the majority of population who are reluctant to acknowledge its benefits. During the run up to 2004 presidential elections, John Kerry, the Democratic Party presidential candidate was quick to criticize firms practicing offshore outsourcing calling them ‘Benedict Arnold corporations’. The opposition to outsourcing has always been associated with the overall cost of transferring productive labor control to a foreign entity.  Besides, media circles constantly criticize outsourcing as a hurting weapon to the economy of America. Companies practicing it are associated with greediness to make extra kill from lesser countries (Congress, 2008).

In practicality, this is not always the case as many companies practicing job outsourcing simply do so due to the aptitude it awards them to substantially free up energy and time of other factors of production within its facets. In moments where there is an extra duty to be accomplished, the company must preferentially allocate time, energy and resources to ensure than the duty is well done within the expected time limits. Many a time, such a project may take a lot form the company in terms of personnel, resources, and daily working hours of other company quarters thus interfering with the steady flow of business undertakings. Fortunately, should the company outsource for outside labor, and then this can be avoided as company will record a notable improvement without interfering with the constant steady flow of operations (Carbaugh, 2010).  

Besides, outsourcing specific work or project(s) is a quick and timely solution towards maintaining flow of entire operation as other departmental facet schedule is not disturbed. Such a project requiring a lot of company’s time, resources and energy is systematically allocated to an entity, located somewhere else to accomplish it. Subsequently, the company will invest relatively little time in ensuring that the outsourced party completes the allocated duty in line with set standards of quality designed for its operations. Though usually unappreciated, outsourcing as long as it allows a company to minimize time and resources in service delivery , is desirable in  aligning such a business entity  to a better position than before .In addition, the  extra saved resources can the be employed productively in other factor of company service delivery role (Congress, 2008).

Job outsourcing models

Many companies in a bid to keep cost of production at manageable levels, have opted for  contracting of relatively cheaper labor in the market than keep relatively expensive factor of production within its ranks. Depending on size of a company, several models are in use to acquire desired cheaper factor of production(s) available within its means and in line with the type of duty the contracted party ids to perform.

For instance, many companies practicing outsourcing prefer the Knowledge Process Outsourcing (KPO) in attracting substantial numbers of highly qualified pool of professionals in Information Technology, chartered accountants, doctors, engineers, lawyers among others who are available online for hire on specific domain duty(s) as required from time to time by a company. It would be very expensive for companies to keep this factor of production full time for its use. Instead, they opt to contract such personnel only for a duty they themselves may spend more resources in terms of time, energy and commitment in accomplishing than what a temporary outsourced party may require to do the same within set quality standards and time.

For example, GE Capital and Accenture companies in the resent past have established a well organized outsourcing mechanism of contracting IT professionals to provide solutions periodically when need be. The contracted party is paid only for a successfully handled duty within set time limits guided by a duly signed contract. In the end, outsourcing becomes very cost effective than permanently employing such high wage earning professionals (Blokdijk, 2008).

Also, relocation of factor of production to regions of low wage is a key factor in outsourcing. The aim is to keep costs low while at the same time achieve desirable output. In continent like Africa and India, the earnings in terms of wage are substantially lower than in the American job market. Multinational or regional companies thus prefer to relocate or spread to such regions to utilize cheaper labor of same quality as in America.GVK Biosciences Company has since relocated to most of its operations to Chennai city in India to reap maximum benefit from the many cheaper but efficient graduates with good analytical skills, IT acumen and superior English(Ching, 2009).

When professionally carried out, outsourcing enhances reduced design-to-market intervals and manages costs of production effectively within enterprises. However, this policy may have a catastrophic effect to the mother economy in terms of employment opportunities lost as relocation becomes a reality especially in off shoring. In the present America, for instance, just recovering from a serious depression, unbalanced off shoring is likely to make total tax returns from wages be worse off at the expense of a foreign entity providing cheaper labor. Fair trade and faith based economics surrounded buy a notion that a good percentage of people who lose these job opportunities outsourced will eventually find a replacement in itself is a vague argument than a religion based faith (Blokdijk, 2008).

Regulations, Ethics and Social Responsibility in Outsourcing Jobs

Unchecked outsourcing practices may have catastrophic middle and long term effects to the general economy. Therefore, in all labor markets, there is policy regulators entrenched in the legal framework controlling fair business relations within and without the market system. Within the American legal system, entrenched is the Trade Adjustment Assistance Act driven towards formulation compensational framework for the directly affected workers as a security agent for affected income should one lose his/her job in the process of company outsourcing cheaper labor. In addition, policies have been put in place to strengthen the public sector to anchor labor markets as a remedy to minimize overall effects of outsourcing .Besides, there exists federal funding in expansion programs such as health care, environmental protection, education and career development as a step towards closing in on job deficits (Hira& Hira, 2008).

Also, the government has instituted a job agenda inclusive of a well expanded community sector rooted and controlled by the people and inclined towards meeting needs of the locals. For instance, efforts are directed towards housing and community-worker owned businesses which are very stable and cannot be outsourced offshore. These local systems provide own growth dynamic much insulated from swings in the global economy. Subsequently, the existing trade unions are by each day reorganized and empowered to restore its members bargaining power .2With the boosted bargaining power in times of depression as captured by the Depression era Wagner Act freeing workers of experimental reforms while observing resent global realities.

In moral considerations, outsourcing regulators concentrates on income redistribution. Economic theory demands that any aspect of balanced globalization should aim at redistribution downwards and not the opposite as a cushion for protection of workers who might lose their jobs while maintaining a minimum wage rate in conformity with a descend living standard for all citizen in the labor market. Even when outsourcing, a company cannot pay the within boarder outsourced party below the set minimum rates. Enticed with subsidies and tax breaks, businesses are encouraged to exhaust within territory outsourced jobs as a policy aimed at keeping loyalty to a brand of employees. In order for a company to qualify for such subsidies, it must adhere to location policy i.e. within the boarders of America to limit number of off shoring engagements. (Carbaugh, 2010).  

With the president Obamas administration, there are efforts to promote labor rights internationally accepted and cutting down on funding of policies contributing to social services privatization. With the reduced debt on regional companies, outsourcing would only aim at accessing skills absent within the personnel and not as a way of cost cutting to service debts and losses. As a partner in community development, an outsourcing business should concentrate efforts to establish centers to temporary support the retrenched workers and guarantee their health insurance. Besides, before outsourcing, considerations should be made on possibility of training personnel inline with the desired skill. A socially considerate company benefiting from outsourcing thus should accept a larger share in cost of insurance cover workers in the home country (Hira& Hira, 2008).

Recommendations to Outsourcing Team

For outsourcing job to meet its goal, the management should actively participate in redefinition and reduction of the scope within which a desired skill is to be sourced.  Constant tests then should follow in quality of service definition levels in order such a company to determine the lowest negotiated prices for accomplishing production goal. Besides, these should be aligned with cost restructuring as the organization endeavors to access labor arbitrage (Morgan, 2009).

In addition, focus should be directed towards primary core business undertaking rather than temporary secondary shortages expected to end in short term. Decisions made should be dependent on available resources such as investment portfolio, infrastructure, personnel size, experience and efficiency for a specialized high skill assignment requiring specific qualification currently lacking within the workforce. (Hubbard&O’Brian, 2007).

When operating leverage, fixed and variable costs of labor should be separated from each other as outsourcing tend to change balancing of this ratio through moving from fixed cost to variable coast t6hus making variable costs predictable in the company. In addition, in contracting an outside source as a factor of production there is needed to improve quality of duty for which such a job is required. This is possible when constituted within acceptable levels of service agreement duly aligned. Before engaging in contractual agreements with a professional in a field of specialization, it is important to have clear understanding of intellectual property laws, knowledge and their application in hiring up of experience and healthy work culture (Nkomo&Fottler, 2010).

A written contract of service provision should accompany the agreed upon terms of services clearly spelt out in the legal framework on labor as a factor of production. Within this legal document, there should be financial terms and any legal redress should one party default in carrying out of duty. Research then should be explicitly carried out to learn and understand various models of best practices which may be too complex for an in house team to comprehend. Besides, it is a necessity to know current relevant operational experiences before engaging in a binding code with a contractor. Consequently, before settling on a particular party as the desired outsource, it is advisable to survey market as a remedy of picking the best among many applicants while keeping cost cutting goal alongside (Morgan, 2009).

Capacity management should be in place as an improved methodology servicing technology alongside risks and uncertainty considerations should the process fall short of company’s expectations. To accomplish this, the supplier should be passed through consistency and performance test mechanisms considered desirable from time to time. Where necessary, the management should apply an independent catalyst for testing and speeding up an impending change often referred to as a change agent. If properly tested, it is possible to predetermine the expected results thus giving room for pre planning any adjustments should any a rise. In line with the company requirement to improve consistent capacity innovation, external professional consultants should be involved as their opinion in many circumstances, is proactive and void of any pre judgment influence. Consequently, this will work alongside in-house capability for product or service innovation. Theorization of job outsourcing implementation should be avoided completely by the management. Each contract, is independent of another, and each supplier of labor my have a unique factor lacked by another (Shaw, 2010).

Recommendations Outcome

When full implementation of the above recommendations are enforced, the company business will certainly be aligned towards a standardized production process, with complete structures for risk management, and short lived reliable scalability before resuming optimal performance. Employees when assimilated into this system with additional contractors available will strive to keep at pace with these unique skills made available by the outsourced party. Specialization is a key component of efficiency. Investments in additional personnel back up in middle term will improve production. Once the production circle becomes predictable, the outcome is certain to the demands of customers accomplished with little strain (Tallant, 2011).

Conclusion

Conclusively, outsourcing jobs in the labor market has become a necessity as competition for highly skilled man power increases day by day alongside an ever increasing cost of doing business. To stay relevant and maintain efficiency in either production or service delivery, it is upon the management team to organize and affect best policies practices of hiring labor at the cheapest cost to the company.