Outsourcing pdf 2010

A second set of national-level institutions that can influence outsourcing decisions is the national industrial relations system. These rights can be important for the implementation of transfer of undertakings rules.

In many continental European counties, employees have additional representation rights on corporate boards which allow them to have prior knowledge and to be consulted on restructuring decisions.

Second, the bargaining power of trade unions can influence their ability to negotiate job security provisions, which make it difficult or costly to lay off workers, or to oppose outsourcing through strikes or other forms of industrial action. In countries where unions are weak, with lower bargaining coverage, membership density, and participation rights such as the US and UK, workers are less likely to have these forms of leverage.

These conditions can be easy to meet, in the absence of strong unions or works councils to inform workers of their legal rights or to contest decisions. A study by Cooke et al. Companies may seek to use new organizational forms to escape or renegotiate strong collective agreements. Today, France has sectoral collective agreements that cover all firms and subsidiaries in major industries like telecommunications and banking, as well as for the contractors that service these industries Doellgast et al.

In Germany, many subcontractors do not have agreements, and firms often form subsidiaries to move work out of stronger sectoral or company agreements Doellgast and Greer This has largely been uncontested following one unsuccessful strike by workers at Citibank facing redundancy Holtgrewe Finally, differences in union strategies may also affect outsourcing decisions.

Worker representatives have distinct interests in keeping work in-house or maintaining a coherent framework of collective bargaining. As representation rights regarding outsourcing are often weak, unions may draw on distinct forms of bargaining power in other areas to try to influence employment restructuring decisions.

For example, in a comparison of call centre outsourcing strategies, Doellgast finds that US unions adopted strategic campaigns and strike tactics to extend agreements to new organizations and protect the working conditions of members, while German unions relied more on the co-determination rights of works councillors. A key question the above discussion raises is to what extent these national differences in institutions influence the strategic choices of firms concerning staff transfer and layoffs, as well as the organizational form adopted.

Although the extent of employment change associated with outsourcing appears to be somewhat higher in the US, with more firms pursuing redundancies or changing HRM practices, these differences are relatively small.

Other studies find more substantial differences in outsourcing decisions within Europe. Barthelemy and Geyer conducted a survey of firms undertaking IT outsourcing and found that 69 percent of these decisions involved personnel transfers and layoffs in France compared to 42 percent in Germany.

They argue this is explained by the greater power of German trade unions, which allows employees to oppose measures disruptive to employees. Grimshaw and Miozzo conducted a similar study of IT outsourcing in Germany and the UK, based on in-depth case studies of 13 outsourcing contracts. They show that all of these contracts involved some staff transfer through direct outsourcing, joint venture, or a captive market subsidiary.

However, national differences in consultation rights and the period of protection against dismissal affected how the transfer was managed in each country. In the UK, they found minimal consultation, little labour influence over the transfer, and, subsequently, substantial resistance — in one case resulting in a strike. These procedural differences also resulted in different organizational strategies: the German firms initially adopted joint ventures between client and supplier to transition workers to the subcontractor, because this was viewed as better for employees; while the UK firms all relied on direct outsourcing, with an immediate shift from in-house to externalized provision.

Together, this research shows that institutional factors which vary across countries, including legal systems and industrial relations arrangements, can influence employment restructuring decisions associated with outsourcing.

Stronger laws protecting employee rights during the transfer of assets or people and more inclusive bargaining systems create constraints on strategic choice, encouraging consultation and discouraging the renegotiation of employment contracts at a lower level.

While these constraints may represent short-term costs for firms, they also can have long- term advantages, in terms of higher levels of employee commitment and cooperation with restructuring plans.

The Grimshaw and Miozzo study cited above found that German client firms were more satisfied with HR practices and service quality of new supplier firms than those in the UK, which they attribute to the more extensive process of consultation in Germany. Coordination of HRM across organizational boundaries A further set of HRM challenges associated with outsourcing concerns the coordination of management decisions and processes between organizations. Here we refer to the firm that outsources work as the client and the firm that performs the outsourced work as the subcontractor.

The following areas of HRM tend to be the focus of coordination efforts. Monitoring practices that track individual and group performance are often important for ensuring that standards are met. This may be most important where employees work with each other across organizations, or in cases where a firm is strongly committed to particular principles of work organization such as lean production historically in Japan.

This can have a direct effect on scheduling practices, with higher requirements for employees to be flexible with their own schedules, more use of part-time or temporary contracts, and lower job security. We then discuss the challenges of coordinating HRM across organizational boundaries. Again, we show that national context can have an important influence on management strategy and outcomes, affecting the costs and benefits associated with coordination.

In addition, the international character of many outsourcing contracts — and the internationalization of subcontractors themselves — create distinct coordination challenges. It is not obvious that a client should seek to intervene in the HRM decisions of subcontractors, or to coordinate these decisions in some way. In other words, one of the attractions of outsourcing might be to increasingly differentiate HRM between occupational groups. First, where the product or service is more intangible or complex, contracting firms may take more interest in management practices used at the point of production.

Second, where the outsourcing contract involves substantial collaboration or joint production with in-house staff, the client may encourage the coordination of practices to facilitate cooperation and harmonize incentives. However, even in more transactional or mixed settings, there can be incentives for developing shared procedures and skills. For example, Rubery et al.

Third, national context can influence strategy concerning HRM coordination. Geographical or cultural distance between the client and subcontractor s may have contradictory influences on the extent and goals of coordination.

On the one hand, a client may be more likely to allow its subcontractors to adopt HRM practices that are consistent with the local conditions and business environment. Companies may also be more likely to offshore the production of products or services that are relatively standardized or easily codifiable, allowing them to engage in more arms-length contracting. On the other hand, cultural distance may increase uncertainty, leading firms to seek tighter control over HRM.

In addition, firms with subcontractors in developing countries are increasingly concerned with the negative effects on their image associated with labour standards violations, and thus may establish codes of conduct with monitoring mechanisms to ensure that suppliers meet minimum terms and conditions see chapter on CSR.

National institutions such as corporate governance, industrial relations, or traditions of corporate organization may also influence the extent and nature of HRM coordination.

For example, Japanese firms traditionally developed close, trust-based relational contracting with suppliers, based on the Keiretsu form of business organization. Core firms sought to influence the promotion, training, and work design practices of their subcontractors, even moving employees across firms to adjust to changing demand in different areas of the business.

In Germany, strong industry- based unions have coordinated HRM to some extent across core firms and suppliers through sectoral agreements, while strong business associations serve to diffuse best practices and establish shared rules and acceptable behaviour of members. In contrast, US and UK firms have pursued more arms-length contracting relationships, explained in part by weaker organization of employers, distinct traditions of law, and more decentralized or disorganized industrial relations institutions.

Helper ; Lane and Bachmann 4. In cases where firms do seek to coordinate HRM across organizational boundaries, a further set of issues concerns the particular challenges clients, subcontractors, and employee representatives face in managing coordination and how these may be overcome. They thus often develop complex systems for ensuring compliance with contract terms; for example, through assigning special account managers to meet regularly with subcontractors or requiring detailed information on success in meeting training goals or quality targets.

Third-party certification through consultants also plays an increasingly important role, with the growing popularity of both general certifications such as ISO and more targeted certification for particular industries or types of work. A second set of challenges is faced by the subcontractors themselves, as they seek to adapt internal HRM practices to the demands of multiple clients.

Contracts with different customers or clients may have widely varying terms concerning quality specifications and flexibility in adjusting the volume of goods or service production at short notice. In addition, clients may provide different variable incentives or offer contract terms that allow vendors to pay certain employees at a higher level. Under these conditions, managers face the potential problem of managing widely varying HRM practices within the firm and often in one location , as well as dealing with possible negative effects on employee motivation of this internal variation.

Third, worker representatives such as unions and works councils face a new set of challenges as they seek to coordinate collective bargaining across organizational boundaries. In many countries, HRM practices are regulated by collective agreements at the industry, firm, or establishment level. Different unions may be responsible for in-house and outsourced firms whose workers carry out similar functions; or, as discussed above, were formerly employed in the same organization.

Improving bargaining coordination between these unions and works councils at different organizations can be quite difficult due to conflicting interests and increased variation in pay and working conditions across in- house and outsourced firms Doellgast and Greer These coordination issues usually have an important international dimension.

Multinationals face particular challenges in coordinating HRM across international borders see chapters 5 and 6. This can be exacerbated by the fragmented ownership structures associated with subcontracting. Performance management and monitoring practices may be particularly important in helping to facilitate coordination, and thus there may be more focus on standardization in a multinational setting. A study by Batt et al. In addition, subcontractors themselves are often multinationals, possibly serving other multinational clients.

This poses multiple coordination issues as firms seek to provide a standardized service across national boundaries. The case study in Box 1 illustrates some of the challenges faced by a multinational call centre subcontractor along these lines, and how they sought to resolve them. This additional focus on coordination and harmonization may be positive, in terms of ensuring a standardized product, but may also have costs as local managers are constrained from adapting to local conditions.

For example, the study by Batt et al. It prided itself on its ability to keep labour costs low through locating in countries such as India and Indonesia, while adopting lean scheduling and intensive performance monitoring practices in higher wage countries. Vendotel had no collective bargaining agreements in most locations.

The one exception was France, where it was obligated to follow the terms of the sectoral agreement for third-party services. Vendotel expanded into Germany, France, and the UK in the late s. There, we have to take on a lot of responsibility for the employee once we hire them on a permanent basis, so we need to find ways around these rules…. For example, the previous workforce had more frequent breaks and more flexibility over when they took them, and these workers refused to negotiate new individual contracts when the new management tightened scheduling.

At the same time, specific incentives and training were also driven by different client demands. Vendotel had also recently joined a quality certification program developed for the call centre industry, in which third- party monitors visited different locations to ensure they were meeting targets for reducing staff turnover, improving training quality, and meeting targets for improving agent performance. This was driving more standardization across the European locations, and managers were convinced the certification process had contributed to improved quality.

How did managers seek to create consistency in HRM across locations, and what challenges did they encounter? Here we refer to the firm that performs the outsourced work as a service provider, consistent with the terminology used in this industry. As we noted in the introduction, firms have long outsourced support services, including HR activities such as recruitment or executive salary and benefit comparisons.

Here, however, we are primarily concerned with the relatively recent phenomenon of the outsourcing of a significant part of HR departments and HR activities. The growth of HR outsourcing has been facilitated by the development of ICT platforms, pressures to reduce support costs, and the growth of provider companies.

In response to these trends, several segments of HR service providers have developed. Second, technology providers supply specialist technological support services such as customized HR software.

These often involve multi-billion pound deals lasting up to 10 years. The recent increase in the demand for such services started with a small number of large firms in the private sector in the US and UK. However, in more recent years demand has grown among smaller companies and public sector organizations across countries. National context again appears to have some affect on strategies: firms in countries such as Germany or Japan have preferred to keep more of their HR in-house, perhaps reflecting greater risk aversion and a willingness to continue to accept support services as a fixed cost.

However, even in these countries firms have recently shown a greater willingness to outsource support services. Despite some reversions to in-sourcing, it is likely that the outsourcing of many aspects of HR will continue Adler ; Gospel and Sako Firms face a number of considerations in managing the outsourcing of HR processes. First, managers should evaluate the pros and cons of moving these activities to a provider.

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The 18C's model for a successful long-term outsourcing arrangement. Industrial Marketing Management, p. Jones, G. Contemporary Management. New York: Mc- Graw Hill. Langley JR, C. Langley, C. Langly JR. Atlanta: Cenage Learning. Lynch, C. McIvor, R. New York: Cambridge University Press.

Managing the risks of outsourcing. Patel, A. Outsourcing Success - The Management Imperative. New York: Palgrave Macmillan. Pearce II, J. Strategic management - formulation, implementation and control. Ravi, R. Razzaque, M. Outsourcing of logistics: a literature survey. International Journal of Physical Distribution and Logistics, 28 2 , pp. Sheffi, Y. Third party logistics: present and future prospects. As our client and service expectations developed over the last decade, He witt needed to build a str onger multi-lingual ser vice capability.

Started operations in Krakow in , with just under 20 people; currently we employ almost people. We started off with a vision of a headcount centre, yet we have almost doubled in siz e. Advice about setting up: I would hire a strong HR Manager who has experience in working in the local market and who can. Employee issues: We currently have assoc iates in Poland. We will continue to g row towards over the coming years. An organization still needs to invest and de velop this talent, as y ou would anywhere else in the world.

This I believe is imperative in setting up successful operations. ASPIRE pr ovides a unique oppor tunity f or organisations to get together suppor t each other to meet c ommon challenges and to help the wider community in terms of CSR activities. Employee issues: We originally had a vision of a headcount center; however due to the success of operations we are almost and will continue to grow further.

Over the last two years I believe the market has stabilized here which in turn allowed our organization to plan f or our f uture growth. Whilst there will always be challenges in securing talent, Krakow provides a unique oppor tunity of a c ity with over 30, graduates per year. Key reasons include the high a vailability of well-skilled talent, espec ially with ec onomic and administration university backgrounds, high availability of foreign language skills, central location in Poland, and an excellent physical facility.

Infosys bought the facility from Philips Electronics in as part of a global deal. F or nonconsumer brands, recruitment might become an issue, so strong PR campaign on the local market.

The center was set up in , g rew to FTEs by the end of and by the end of Polish education system ensur es that they can also get trained and manage quite complex tasks within r easonably shor t timeframe. Also ability to independently propose improvements based on own observations. Language skills are improving, and universities are adapting to suit and train to our needs. Infosys is working with local uni versities.

Negative: general inc entive pr ogram f or BPO companies grants, subsidies, SEZ is very complex to appl y for and very rigorously controlled. Szalaj avon. Accounts receivables management and collections have remained decentralized in the local markets.

State Street established a presence in Krakow to c reate capac ity to suppor t our business pipeline. Advice about setting up: Poland has multiple c ities offering a deep talent pool, high level of education, good language skills and infrastructur e r equired f or multi-national companies to successfully operate.

There are differences fr om c ity to c ity in the le vel of State Funding a vailable and pr ospective c ompanies should research thoroughly. Employee issues: At the moment we employ about employees mainly Accounting Specialists. W e speak her e 8 languages, having English as the base language for communication. Employee issues: State Street has grown from 60 to more than employees and has sec ured real estate for more than employees which we plan to reach over the next two years.

The level of education is extremely high; employees are ambitious, committed to providing a very high standar d of service and ha ve a har dworking culture. There are situations, related to the young demographics of the w orkforce, where ne w employees may have a limited understanding of the requirements of working life.

This c ould be addressed by increasing the level of practical courses and internships offered by universities. Negatives: The pr ocess of appl ying f or and bringing the application process to conclusion for state aid support has been extremely challenging. Poland operations in Szczecin Operations in Poland: UniCredit Business P artner provides f inancial services support to more than 30 banks of the Group.

It supplies services in mobile games and applications development and qualit y assurance services for.

There have certainly been some challenges in starting up and growing so quickly, but we have found very, very good people with exceptional German-language skills. Playsoft started to publish its own games in The Polish subsidiary is the biggest studio of the group with o ver 80 emplo yees. The acti vity in Poland started in , one year after the creation of Playsoft France. During the last f ew months, however, the c ompany decided to star t pr oviding ser vices to P olish clients.

The objecti ve is to de velop the business in Poland with national companies. Advice about setting up: — Choose a c ity well-connected with all Eur opean capitals. Responsibilities include administrati ve pr ocessing of loan and mortgage applications, and checking their completeness. He added that they have also realized improved operational and process efficiencies b y c oncentrating their ser vices in competence centres, such as the one in Szczecin. One of the c hallenges Unic redit had in Szczecin was sorting out office space.

The company currently operates fr om a r enovated section of the S zczecin ship yard Stocznia Szczecinska , in of fices leased fr om Koncepta. Koncepta is the same de veloper behind the planned Baltic Business P ark, whic h will be a modern Class A of fice building to be r eady by end of The number had r eached when our acti vity was focused on porting video games. The studio might g row up again to employees. Poland has been chosen because of the skills of the de velopers who has sho wn g reat qualities such as: fast learning and adaptability capacity to new technologies; outspoken and wellorganized people.

Her job gives her valuable experience interacting intensively with people, and she spends most of her day talking with clients and monitoring the quality of sales projects.

Emea Operations Hub Manager. HQ of parent company: Poland Number of Employees: ca. Andrzej K. She used her knowledge of the Dutch language on a daily basis while speaking with her Dutch customers.