WOR Had to Retain Their Australian Division and Employees - Case Study Example

WOR Student’s Name: Instructor’s Name: Course Code and Name: Institution: Date Assignment is due: WOR 1. Outsourcing Outsourcing refers to an act of a company contracting another to provide to them services that that might be otherwise be performed by their in-house employees. It occurs due to financial benefits that accrue when the company engages outside experts in performance of their duties rather than hiring, training, and retaining staffs in the company. WOR opted to outsource software engineers owing to the difficulties that accrued in hiring and retaining their own in the company. In the process of outsourcing, they had five options to apply which included: a) Continue with the Australian division b) Outsource the project management software division c) Offshore the project management software division d) Outsource the software maintenance team e) Offshore the software maintenance team In all the three scenarios, WOR had unique cost that had to be incurred. They had to evaluate and adopt the one with less costly. Option 1 In this scenario, WOR had to retain their Australian division and employees. The option is less risky since they wound not engage outside employees. IT has a net present value cost of 621,659.1 per employee. Continue with the Australian division Millions Millions Millions Millions Millions Details 2013 2014 2015 2016 2017 Base salaries 17.1 18.81 20.69 22.34 24.13 Bonuses 2.7 2.97 3.27 3.53 3.81 Total 19.8 21.78 23.96 25.87 27.94 On costs Superannuation / insurance 2.376 2.376 2.376 2.376 2.376 Training and development 1.71 1.71 1.71 1.71 1.71 Office costs 4.356 4.356 4.356 4.356 4.356 Total 8.442 8.442 8.442 8.442 8.442 Total staffing cost for 180 staffs 28.242 30.222 32.402 34.312 36.382 Number of employees required 180 195 205 213 221 Cost 28.242 32.74 36.9 40.6 44.67 Present value factor 0.885 0.783 0.693 0.613 0.543 Present value cost of staff 24.99417 25.63542 25.5717 24.8878 24.25581 Cost per staff 0.138857 0.131464 0.12474 0.116844 0.109755 0.621659 621659.1 Option 2: Outsource the project management software division Outsource the project management software division Details 2013 2014 2015 2016 2017 Hiring cost per staff 2500 2500 2500 2500 2500 Salary cost per staff 30,000 30,000 30,000 30,000 30,000 Occupancy cost per staff 3800 3800 3800 3800 3800 On cost per staff 4800 4800 4800 4800 4800 total cost per staff 41,100 41,100 41,100 41,100 41,100 Number of employees required 180 195 205 213 221 Out sourced employees 270 293 308 314 332 Total cost 11097000 12042300 12658800 12905400 13645200 Redundancy payment 23726250 _ _ _ _ Office expenditure 2178000 2178000 2178000 2178000 2178000 Total cost 37001250 14220300 14836800 15083400 15823200 Present value factor 0.885 0.783 0.693 0.613 0.543 Present value cost of staff 32746106 11134495 10281902 9246124 8591998 Cost per staff 121281.9 38001.69 33382.8 29446.26 25879.51 247992.1 In this option, the company has the choice of outsourcing the project management software division. This option has a net present values cost of 247992.1 per staff. Option 3 Offshore the project management software division Details 2013 2014 2015 2016 2017 Hiring cost per staff 2500 2500 2500 2500 2500 Salary cost per staff 30,000 30,000 30,000 30,000 30,000 Occupancy cost per staff 3800 3800 3800 3800 3800 On cost per staff 4800 4800 4800 4800 4800 Total cost per staff 41,100 41,100 41,100 41,100 41,100 Number of employees required 180 195 205 213 221 Out sourced employees 234 254 267 277 288 Total cost 9617400 10439400 10973700 11384700 11836800 Redundancy payment 20562750 _ _ _ _ Office expenditure 2178000 2178000 2178000 2178000 2178000 Total cost 32358150 12617400 13151700 13562700 14014800 Present value factor 0.885 0.783 0.693 0.613 0.543 Present value cost of staff 28636963 9879424 9114128 8313935 7610036 Cost per staff 122380.2 38895.37 34135.31 30014.21 26423.74 251848.8 In this option, the company opts to use offshore project management software division in place of the Australians employees. This offers them a net present value cost of 251848.8 per employee. Option 4 Outsource the software maintenance team Details 2013 2014 2015 2016 2017 Out sourced employees 270 293 308 314 332 Hiring cost 25,000 25,000 25,000 25,000 25,000 Total cost 6750000 7325000 7700000 7850000 8300000 Annual service fees and on-costs 1635000 1761500 1844000 1877000 73850000 Office expenditure 2178000 2178000 2178000 2178000 2178000 Total cost 10563000 11264500 11722000 11905000 84328000 Present value factor 0.885 0.783 0.693 0.613 0.543 Present value cost of staff 9348255 8820104 8123346 7297765 45790104 Cost per staff 34623.17 30102.74 26374.5 23241.29 137922 252263.7 In this option, the company opts to outsource software maintenance team, which has a net present value cost of 252263.7 per staff. Option 5 Offshore the software maintenance team Out sourced employees 234 254 267 277 288 Hiring cost 25,000 25,000 25,000 25,000 25,000 Total cost 5850000 6350000 6675000 6925000 7200000 Annual service fees and on-costs 1635000 1761500 1844000 1877000 73850000 Office expenditure 2178000 2178000 2178000 2178000 2178000 Total cost 9663000 10289500 10697000 10980000 83228000 Present value factor 0.885 0.783 0.693 0.613 0.543 Present value cost of staff 8551755 8056679 7413021 6730740 45192804 Cost per staff 36545.96 31719.21 27764.12 24298.7 156919.5 277247.5 This option the company uses offshore software maintenance team with a net present value cost of 277247.5 per staff. From all the above scenario analysis, the best would be outsource the project management software division since it offers the lowest net present value of cost per staff. The company should there fore implement it. 2. Stakeholders Stakeholders refer individuals groups and organizations that have either a direct or an indirect stake in the organization since it affect or is affected by organizations own actions, policies, and objectives. In any organization, the key stakeholders include the customers, creditors, directors, employees, shareholders, government, suppliers, union, and society from which it draws its resources. Although are self-legitimizing, all stakeholders in a company are not equal as different stakeholders are entitled to different consideration in the company. Stakeholder involvement in project planning is important since it offers insight in each stage of the project planning and implementation. In the case of WOR, through their extended operation that is more environmental friendly, and accrues many benefits to the community, they are mindful of any negative effect that may accrue to them too. There is fear that through the construction of the dam at the river Araguari and subsequent put up their plant, there could be a significant impact on the local community and the wildlife through relocation. Other than those, the project would have effect on all other stakeholders who may be interested on the company affairs either directly or indirectly. They include: Government The government being custodial of all state resources has a duty to ensure that all activities in the country are conducted in an organized and efficient manner. This will be in its wider duty of defending its citizens from any act that may cause harm and ensuring everybody is at peace with each other for proper coexistence. In the WOR project, government will support it since it is likely to offer benefit to the society and promote the development in that region. Government may be pleased with the project since it is more environmental friendly. WOR should involve the government through out the project from its planning all through its implementation to completion. Government is a very important stakeholder in WOR hydroelectric project. This project is because the government is the custodian f all the resources in the country and anybody who wish to utilize them must get government authorization. Through their involvement, they will be able to get all the necessary permits from the government and all its agencies to be able carry it successfully. The government will be concerned to know how they propose to carry out the project measures that they will put in place to ensure the project will be a success, along with their resource availability. They will also enquire to know how the organization is prepared to take care of any environmental hazard that may arise after the project has been commissioned. To the government the project is a big plus in its development agenda since it is the responsibility of the government to perform development project thus if they invest in this they will relieve the government some of their duties. On the other hand, the project poses a hazardous threat to the government this is through its environmental and ecological effect to the environment. Through the construction of the dam in Araguari River, there could be an effect on the flow of water and animal relocation. Environmental This refers to the surroundings of the project such as vegetation, ecology, water in the river among others. It is in this environment where the project is would be implemented. They are a very significant stakeholder in this project since they surround it implementation and performance. Environment will be interested to know how the project will be implemented without having a negative effect to them but instead benefit them. They will be also having interest to know ho his project will add value to them. To the environment, the project has both negative and positive effects. Positively the project will improve development, which come s together with other development such as infrastructure among others. Negatively the project will be an environmental hazard through its emissions and displacement. Local communities Local communities are important stakeholders in this project.WOR, as an organization does not exist in an island. It has neighbors to whom they share a lot for successive coexistence. As a good neighbor, the company should ensure they inform them of any development project they wish to implement in their region whether or not it affects them or not. As neighbors, local communities will fill appreciated and recognized when a company engages them in the construction of this dam. This would make them feel proud and appreciate their relation with the company. To the company this may act as a marketing strategy as locals will be as ease to buy from company that does its activities with their permission. Locals will need to be assured that the project would not affect their daily life negatively but instead it would add value to their lives. The project has both positive and negative. It will improve their lives and economy and pollute their environment causing dangers. List of References DIY themes 2012, Outsourcing process- outsourcing process strategy, viewed 5 October 2012, . Mind Tools Ltd 2012, Stakeholders analysis, Viewed 5 October 2012, . SlideShare Inc. 2012, Stakeholders analysis, Viewed at 5 October 2012, Sourcingmag.com 2012, Outsourcing- what is outsourcing? Viewed at 5 October 2012, . The guide to managing for quality 1998, Stakeholders analysis, Viewed at 5 October 2012, . Wise Geek 2012, what is out sourcing? Viewed at 5 October 2012, . Read More