Outsourcing Globally – Nu Leadership Series

Examine outsourcing in the context of a global market.

Men cease to interest us when we find their limitations. The sin is limitations. As soon as you once come up to a man’s limitations, it is all over with him.
Emerson

Today, many organizations feel that by outsourcing key components of their business, they can compete more effectively. However, it can be reasoned that established organizations may be jeopardizing their future. Let me make my case.

Handy, author of the Age of Paradox, calls outsourcing the paradox of work. Hoffman, a leadership guru, argues that values determine the course that an organization takes. Organizations are contracting unproductive work overseas. Managers view profit as increasing. Let’s analyze the consequences to the outsourced organization and the recipient organization.

First, America and Great Britain workers are the most vulnerable to outsourcing because of their open systems. Workers are highly productive but are the least protected workers in the modern civilization. The outsourcing has created low morale, trust issues, and divided societies. Furthermore, Handy predicts that by the 21st century half of the workforce in developed countries will be less than full-time.

Second, outsourcing recipients are seeing the global backlash. Currently, the hot countries in the outsourcing business include India, China, Philippines, Russia, and South Africa. India appears to be the “hot” choice because it is the most employer friendly country. The employees are English speaking and well educated. India’s government policies have also facilitated this transition to a global power. Currently, India controls 44% of the global offshore outsourcing market for software and back-office services.

This outsourcing venture created more wealth in India and has resulted in less developed countries gaining economic powers. However, all is not perfect. A rising number of Indian businesses are now reporting that workers are complaining of stress, panic attacks, depression, relationship troubles, alcoholism, and eating disorders. Increasingly, India workers are becoming victims of hate calls by overseas customers; Indian workers receive rudeness, racial and cultural abuse, and sexual harassment. Because of the long hours and low pay, India workers are quitting these jobs in large numbers. As a result, Indian firms are faced with high attrition rates due to the psycho-social costs to employees.

In order to maintain the proper perspective, authors Nadler and Tushman maintain that managers should adapt in the following ways: (a) develop a rudimentary understanding organization design for an inherent competitive advantage and (b) recognize effective organizational design as ongoing. Badiru, a global expert, explains that if overseas outsourcing is to be successful, both the “source and sink” of two cultures must be amenable to culture enmeshing. Therefore, outsourcing impacts both the outsourced and the recipient organization as it relates culture and organizational structure.

References:

Badiru, A. (1993). Industrial Outsourcing and its impacts enmeshing world cultures. IE Center for Industrial Development Research, Department of Industrial & Information Engineering, University of Tennessee.

Braun, B. (2004). Offshore Outsourcing: Impact on the American Workplace, Braun Consulting News, 7(5).

Handy, C. (1997). The Age of Paradox. Boston, MA: Harvard Business School Press.

Handy, C. (1990). The Age of Unreason. Boston, MA: Harvard Business School Press.

Hoffman, Paul. (2006, July 08). Socio-Technical Systems and Organizational Values. EzineArticles. Retrieved January 09, 2007, from http://ezinearticles.com/?Socio-Technical-Systems-and-Organizational-Values&id=239366

Nadler, D. & Tushman, M. (1997). Competing by Design. New York: Oxford University Press.

Prakash, J. & Abraham, V. (2005). Social and cultural impact of outsourcing: Emerging issues from Indian call centers, Harvard Asia Quarterly, Received on January 8, 2007, from www.asiaquarterly.com.

© 2007 by Daryl D. Green