Outsourcing and Human Resource Management - Case Study Example

Running head: Outsourcing and Human Resource Management Institution Name Abstract Outsourcing is a situation where an external company provides a service that would be performed within the organization. This essay describes under which circumstance local organizations fail to develop its workers and end up obtaining cheap labors outside Australia. Strategic Human Resource Management ideas have been well described from the two cases (OZ Bank case and OZ Widget case). The two cases points out clearly managerial issues that leads to outsourcing. Internal and external environment influencing employee recruitment have been described stating structural and organization system as the main internal influences while political, cultural and technological as the main external influence. In conclusion, the essay have considered offshore of workers as gambling and most organizations fails in the long-run. Organizations that outsource workers are admitting failure-they take a huge gamble on unknown persons Employees’ importance to the organizational success has made organizations to concentrate much on Strategic Human Resource Management. Over the last decade, research on issues of Strategic Human Resource Management (SHRM) has developed exponentially (Boxall and Purcell, 2003). These issues include how the organization approach human resources and the challenges it faces during this approach with an objective of making employees engage to their responsibilities and make the organization more competitive in the market. As a result, most companies have outsourced employees thus failing in their managerial control. More so, a company that allows an offshore contract is most likely to incur hidden costs as well as being publicly wounded by political environment. Strategic Human Resource Management and management focus on strategy, environment and organization as a whole (Fombrun et al, 1984). HR manager needs to be an employee champion in order to reach the set goals effectively (using minimum resources to maximize output in the organization). He/she should be an administrative expert as well to successfully redesign organizational activities to suit the objectives. Approaches in Human Resource Management take different dimensions depending on organizational goals and objectives. However, the activities involved during these approaches are usually similar. Although different organizations may take several paths, they have the same end that is encouraging growth and affluence as well as retaining and advancing its competitive advantage. This is reached by capitalizing on human resource management and management of the organization. Human Resource Management deals with people directly while management deals with planning, organizing, controlling, staffing and coordinating of organizational activities. Goss (1994) gives four characteristics that differentiate HRM from management; HRM takes responsibility for people while management facilitates, HR planning is proactive and it is usually integrated into corporate strategy of the organization, employees are viewed as basis of potential growth and development and HRM integrates both management and non-management practices to a common interest of the organization. Simply, HR management involves moving executives’ ideas into employees’ hands. There are four key roles of HR manager. HR manager is a strategic partner in the organization. He/she translate firm strategy into action by managing people. HR manager is an administrative expert. He/she redesign activities to meet goals demand. He/she is a champion and a change initiator too whenever change is needed. Therefore any organization that recruit offshore professionals are most likely to miss these corporate roles that creates unique organization behavior. HR managers are involved in HR planning, recruitment, selection, performance appraisal, training and development, motivation, employee compensation, job analysis and industry relation. The organization operating under these core activities is most likely to address itself to the improved management of its human resources (Fombrun et al, 1984) unlike those that recruit from outside. The recent focus on these activities has influenced personality of employees, corporate culture, situations as well as organizational policies. The preliminary experimental study by Jackson and Schuler (1997) shows that as organizations moves from the old culture to the new culture in HR management, there are those policies that reflect the traditional culture and those that reflect adoption of strategic HRM perspectives. Since change is inevitable, the two set of policies are very crucial when it comes to adoption of new culture by employees. Employees in this case need to be guided to understand ‘why’ the change and ‘how’ the change will impact the organizational performance in transforming the organizational behavior. Case study of OZ Bank In this case study, Fiona wants to protect the interest of shareholders, customers, management as well as offshore workers by encouraging outsourcing. This is absolutely management. Laura on the other hand wants to protect the interest of employees, unions and foreign government by encouraging development of employees. This is entirely human resource management. Jason as well clearly points out political concern as major challenge that may be incurred on the way in approaching a successful solution. I agree with Fiona since political environment is involved here. Laura as well is right, though, the organization needs immediate remedy. Relatively, we analyze the most valuable solutions by considering three aspects; 1) the demand of human resources in OZ Bank, 2) the supply of human resources available within the Bank and 3) the external human resources. During the analyses, we will consider whether there is availability of the right talents, labor costs and academics standards of employees. The company needs immediate importation of effective skills (right talents which are cost-effective) and it will get these skills perhaps from global market. In terms of economic development, Australia will not develop locally since its citizens are not given the available opportunities. Outsourcing is the recent Strategic Human Resource Management tool whereby it encourages competitiveness of an organization in an effective way by providing the right talents at a contracted cost (Sharpe, 1997). OZ Bank is currently facing a big loss of $ 300 million, which is not a small figure. For it to increase flexibility and to enter into a competitive ground, OZ Bank should absorb (offshore) employees from the global labor market (India and Philippines) since labor is currently global resource. However, there is a great threat when it comes to outsourcing. From the research by Cloth (2004), 56 % of job applications across all sectors were enclosed with dishonesty. Therefore OZ Bank human resource management should be aware of legal issues that govern employees. Otherwise, if hey fail to follow legal recruitment laws, perhaps the company will incur unexpected poor performance. The company on the other hand should have trained and develop its citizens to reduce uncertainty of performance. Stakeholder interests Shareholders of the Bank will be concerned of stock prices that will affect their company’s profits as well as their dividends; management of the Bank will focus on strategies of reducing cost and improving service. Labor unions will be protecting employees while employees will struggle to keep their job. Customers on the other hand will be looking for improved services with reduced cost and the federal government will be focusing on economic growth. How I will resolve conflicts As a HR manger or a CEO in an organization, board rooms meetings are very significant when it comes to discussion of controversial issues. This will allow me to participate and negotiate for improved strategies. For instance, proactive training of employees in developing their competencies will reduce cost of hiring/outsourcing at the same time employees within the organization will be certain of their future since they have the required skills. Labor Unions in this case will appreciate the organization for meeting the demands of the employees and so there will have limited or no conflict at all. Therefore, if an organization depends on offshore employees, they will not have the ability to synchronize any issue within the system; rather they will fail to solve local conflicts. Workshop participation is another approach for solving these conflicts especially when minority stakeholders are not well represented in the governance. According to Renn and Webler (1995), people that are affected either directly or indirectly by the outcome of organization decisions will need to be inclusive in decisions in order to develop an environmental friendly institution. This will encourage social learning for employees of diverse and common interest and so a collective achievement to solve a problem is reached easily. From these workshops, they will learn as well. Talking of workshops, the organization should import ideas not people. The government should not ban the outsourcing of opportunities to foreign countries, but rather develop more avenues for training its citizens. Clott”s study (2004) explains the numerous strategic benefits of outsourcing to local organizations that outweigh a country with strict regulations on this. For instance, firms reduce production costs, improves asset effectiveness that will lead to profit maximization. However, for employees, outsourcing may result to loss of fixed-employment and this is a limitation for local organizations and federal government. Conversely, outsourcing should be used in case of an emergency but not often. Case study 2. OZ Widget Company As a HR manger, I would design practices that would promote organizational performance and improve employee welfare during the golf exercise. The reason of bringing in these activities is that the company (OZ Widget Company) will be able to guide its employees into a strategic service-oriented organization and achieve business objectives in the long run. This is not a ‘gamble game’ like offshore of employees, but rather it is a positive approach in developing local employees. These activities will be inclined to boost employees’ satisfaction, develop credibility, enhance efficiency and build morale in them. The activities described in this case constitute legitimate job responsibility. There is a chain of command and power structure between Ted Walker, marketing director and Ken Flavell, managing director that leads to clear definition of everyone’s responsibilities in making the event successful. It is true that OZ Widget Company is tied to the financial well-being of Ace Manufactures. If Ace Company terminates the partnership that exists in between Ace and Widget, Widget will absolutely go bankrupt. This is a good reflection of contract outsourcing that will lead to poor performance of organizations involved (Sharpe, 1997). Sometimes outsourced workers fail to quickly adapt to the current organization culture and this may lead to compromised situations. For instance service provision and customer relationship that earns an organization a competitive advantage may not be okay for the outsourced staff. Though we consider outsourcing as an emergency practice, it still remains a gamble since we cannot predict the contentment of new staff in a new culture. Key environmental influence that have significant for employee recruitment Gatewood et al (2010) stated that organization bind recruiting plans to the main goals. If it gains a positive reputation due to its Strategy (plan) and Structure, then, it is most likely to attract more applicants. Therefore HRM will target specific skills defined from certain population or psychological uniqueness (personality) and can be used to embrace diversity. A System with good structural conditions attracts employees with particular attributes. For instance, if the objective of an organization is to serve diverse clients like OZ Bank, then individuals with different demographic backgrounds are recruited thus outsourcing is considered constructive. Through political skills, employees can comprehend and understand well the job environment and can use these skills to exploit the achievement of the co-worker or the institutional goals. Like other markets, an increase in demand while the supply is low will lead to price shoot-up in labor market. Therefore, when the economy is buoyant, recruitment in organizations tend to be buoyant too (Abbott, 2003). Ademik et al (1994) acknowledged that the success of an organization depends on continuous improvement of employees’ knowledge and skills to adapt to the advancing technology. This will give a measurable results that would help an institution know whether to recruit more skilled employees or build the capacity on the staff within. In conclusion, though outsourcing is good in developing a completive advantage of an organization, local citizens are not utilized and they are the ones that improve Australian economy. If organizations embrace Strategic Human Resource Management, at long run they will utilize local labors thus improving county’s economy as well as their performance. Reference Abbott, F., L. (2003). Technological Development in Industry: A Business-Economy Survey and Analysis. Australia: Industrial Research. Adamik, A. Matejun, M. and Zakrzewska-Bielawska, A. (1994). Influence of Socio-Economic Environment on the Development of Small and Medium-Sized Enterprises. Technical University of Lodz: Marek Matejun, Cloth, B., C. (2004). Prospective on Global Outsourcing and the Changing Nature of Work. Business and Society Review, vol, 9, Iss 2, pp 153-170. DIO: 10.1111/j.0045-3609. Fombrun, J., C. Tichy, M., N. and Devanna, A., M. (1984). Strategic Human Resource Management. London: John Willey and Sons. 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