The Ways Which an Organisation Can Use and Benefit from Off Shoring - Example

Executive Summary Organisations are looking for alternatives and opportunities to expand their business. This has laid importance to off shoring. This is true especially for smaller organisations who want to concentrate on specific activities and divulge their activities. This has made more business pay special attention to off shoring. The advantage an organisation gets helps them to concentrate on important areas so that their business units can grow and ensure that profits rises. The report analyzes the various aspect of off shoring. It looks into the history of off shoring. It also presents the advantage organisation get due to off shoring. It also looks into the various aspect of people management involve in off shoring. It identifies the different motivational tools and techniques which will help organisation to ensure that the employees work in tandem. Thus, organisation can benefit greatly from off shoring which is shown in the recommendations column. This report thus present the overall view of off shoring and how organisation can use it to manage their business and work force. Contents Introduction 3 Off Shoring 3 Definition 3 History 3 Advantages 5 Disadvantages 7 People Management 7 Diversity Issues 8 Personality Traits 9 Path Goal Theory 10 Decision making by Delphi Techniques 12 Motivational Tools 13 Recommendations 14 Conclusion 15 References 16 Introduction Every business unit is looking to increase their area of business and is looking for alternatives to grow. It is important that to ensure growth business uses this opportunity. One such area which provides ample opportunity is off shoring. It presents the organisation with a lot of alternative. It can help to concentrate on important areas and the other can be divulged. While using off shoring it is important that business also looks into the different problems this presents and develop strategies to counter those. It needs to use the different motivational tools and techniques to ensure that all employees are motivated and work together for a bigger purpose to ensure that growth prevails in the organisation and the objective is achieved. The following reports tries to present the ways which an organisation can use and benefit from off shoring. Off Shoring Off shoring is “relocation of the companies business process to another country where the company shifts there production, manufacturing, operation and accounting process”. (Stevens & Shi, 2009) The company looks to relocate to other locations to ensure that cost and production improves. Off shoring does help to solve the problem to a certain extent but doesn’t always benefit the organisation. It depends on the strategy and usage adopted by the business units. Still we see that business units have been following the principle of off shoring and ensuring that growth pertains for the business units. Off shoring thereby “looks at substituting foreign labour instead of the domestic ones”. (Penter & Pervan, 2009) This ensures that growth for the business unit is ascertained and cost is controlled. History The history of off shoring dates back to 1950’s. This all started with the decolonization of Asia and Africa. It prompted companies to shift there production houses to other countries. This was further given a boost by development in information technology. “Improvement in telecommunication, transportation and better means to protect goods and services” (Penter & Pervan, 2009) ensured that the growth and development in off shoring goes beyond the stated limits. The following chart shows the off shoring taking place throughout the globe. It looks as follows Source: McKinsey & Company This chart shows the prominent growth in off shoring. It is seen that all the cheap countries around the globe are being used for off shoring. This is making it beneficial for the consumers as they get the products cheaper. This further strengthened due to the “liberalization of the economy and more jobs being created elsewhere which resulted in people moving from one place to another”. (McKinsey & Company, 2001) This thus shows that off shoring started at a very early age and since then with all around development and penetration of technology it has grown and has become a necessity for companies to follow. Advantages Off shoring provides an economy and company with various advantages. The advantages of off shoring are Off shoring ensures that “the non core activities are diverted to other units and concentration is laid on the important ones”. (Flat world Solutions, 2010) This thus helps the business units to differentiate between the two and pay special focus on important areas. “It improves efficiency and productivity of the non core areas”. (Flat world Solutions, 2010) This will help the business units to be able to generate more income from those. This can thereby also transform into a core activity making the business to properly streamline its operation. “It helps to save time, money efforts, training cost, manpower handling and other purpose”. (Flat world Solutions, 2010) This thus benefits the business houses as they can use this time in other areas. It improves flexibility. Business on the basis of it can ascertain the profit earning units. It also helps them to be ready for changes as the circumstances require. This thereby gives an impetus and push and helps in efficient management. “It helps to save on the investment in latest technology and infrastructure” (Flat world Solutions, 2010) as partnering with other will ensure that this burden is passed on. This helps to ensure that funds are not parked into it thereby reducing the holding time. “It helps to ensure that there is free cash flows” (Flat world Solutions, 2010) as the unnecessary investment in infrastructure is avoided. This helps in proper capital management techniques and ensures that risk is reduced to a certain extent. “It helps to reduce the operational cost” (Flat world Solutions, 2010) as this function of non core activity can be diverted towards other units thereby making it easy for the business units to manage their working capital requirements. “It provides price stability” (Advantages of off shoring, 2010) as the business units can produce elsewhere and ensure that the price of the good doesn’t rise thereby enabling to maintain customers. “it helps to develop new business partners which might help in the long run to divulge to different activities and increase the scope for the business houses”. (Advantages of off shoring, 2010) this will bring in flexibility and also provide an opportunity for growth in the future. Thus, we see that off shoring provides various benefits. It can also be seen from the following graph Source: Bivens, MGI, 2003 We see that $1 of off shoring helps to get benefit more than that implying that companies are looking for alternatives so that they can stay ahead of competitors. This will ensure that there are timely goods and services available and building of a better image which supports development. Disadvantages Off shoring despite its advantage also present many disadvantages. This needs to be taken care of and strategies prepared to counter those. The disadvantages are “It might result in out shoring certain business process which renders more profits if conducted in house”. (Flat world Solutions, 2010) This will make business units loose on some income. “Difficulty in managing the off shoring provider” (Flat world Solutions, 2010) with respect to managing the quality, price and other factors. This might tarnish the image. It will also result in loosing customers as the standard might not match with the requirements thereby hampering the image. “The likely risk of the out shoring provider going bankrupt or delaying the process will be harmful for the business unit”. (Flat world Solutions, 2010) this might result in customer switching to other companies thereby making management difficult for the business. “Loosing of control” (Flat world Solutions, 2010) as business will have to rely on the off shore provider for the services. Any delay or discrepancies will have an harmful effect on the business. “Ensuring that the hidden cost associated with off shoring is ascertained before hand”. (Disadvantages of off shoring, 2010) This will else put extra burden and the purpose with which off shoring was done will be defeated. This will thus make off shoring loose relevance and the increased cost will act as a barrier. People Management To ensure that off shoring yields positive results managing the human resource is of prime importance. This will set the framework to be followed and areas where special efforts need to be paid for effective management. Organisations need managers with the requisite ability to perform their duties. With the change business has encountered the way managers perform has also changed. The performance as a result has changed. The change is seen everywhere is “reduction of layers, better communication channel, increased competition, boundaries disappearing, and adoption of more flexible work hours”. (Worral & Cooper, 2001) This change has brought a change in the skills managers should have. Diversity Issues Off shoring involves “people from different culture, religion, perception and traits to come together and work for a common objective”. (William, Kannan & Verma, 2007) This involves mixing with different people and bringing them under a common umbrella requires a lot of work. It is important that all the diversity is managed well so that the benefits that the organisation gets magnifies. “People have different needs and requirements and with different wants it is important that this diversity concept is well managed”. (William, Kannan & Verma, 2007) Since, the production involves different countries so there might be changes in the law and functioning. O business needs to understand it and inculcate those in there scheme of things and design the process such that it reaps maximum benefit. Various research has been conducted which shows that “business units looking for off shoring needs to manage the cross disciplinary challenges and opportunities in a way that reaps maximum reward”. (William, Kannan & Verma, 2007) Thus, business units need to ensure that this issue is managed well. Diversity is a complex and delicate issue. Anything ill managed can back fire. So, business unit needs to manage this diversity issue and ensure that they are able to use it in such a way that the benefit derived from off shoring multiplies. Personality Traits The organisation needs to identify the personality traits of each employee. This will help to determine the areas where they need to work on. It will help the organisation to work on motivational areas so that the techniques can be sued on the basis of it. This will help to ensure that the efforts are directed in the right direction. A research shows that “managers are problem solvers and focus on goals, hard working and analytical where as leaders are brilliant, lonely, and imaginative and risk takers”. (Yukl, 1989) Thus, there is a difference in their style of working. This difference has given opposing views though at the end both are aimed at the same. This personality traits help to identify the factors like “health, relationship, goals, achievement, professional success and spiritual areas which an employee desires to have”. (Laurie, 2007) This thus will help the management to know the areas which are of importance and work accordingly. It helps to find the traits in five areas. They are as “contentiousness, agreeableness, Emotional Stability, Intellect, and Extroversion”. (Laurie, 2007) It helps to identify the traits and characteristics which are shown below Factor Trait Characteristics Inverse Trait Characteristics Extraversion Talkative, extroverted Shy, quiet   Aggressive, verbal Introverted, silent   Sociable, bold Un talkative, bashful   Assertive, social Reserved, withdrawn   Unrestrained, confident Timid, unaggressive Agreeableness Sympathetic, kind Cold, unsympathetic   Warm, understanding Unkind, rude   Soft-hearted, helpful Harsh, inconsiderate   Considerate, cooperative Insensitive, insincere   Trustful, affectionate Hard, uncharitable Conscientiousness Organized, neat Disorganized, disorderly   Orderly, systematic Careless, unsystematic   Efficient, responsible Inefficient, sloppy   Precise, thorough Haphazard, inconsistent   Practical, dependable Impractical, negligent Emotional Stability Un envious, relaxed Moody, temperamental   Unexcitable, patient Jealous, touchy   Undemanding, imperturbable Envious, irritable   Unselfconscious, uncritical Fretful, emotional   Masculine, optimistic Self-pitying, nervous Intellect Creative, intellectual Uncreative, unimaginative   Imaginative, philosophical Un intellectual, unintelligent   Artistic, complex Simple, unreflective   Inventive, intelligent Shallow, imperceptive   Innovative, deep Unsophisticated, inquisitive The above graph shows the different traits which an individual has. The management needs to identify those and while off shoring their work ensure that effort is made to ensure that care is taken towards it. This will help to ensure that there is better result. It will also help to see that off shoring meets the expectations and is able to deliver on better results. Path Goal Theory This theory states that the employee is given a specific goal he has to achieve and the goal is made in such a way that it brings the best out of him”. (Locke, 2008) Since organisation deal with human it is important to realize their importance. This theory helps. Since, the goal is made in such a way “it helps to achieve both the individual as well as the organisational goal”. (Locke, 2008) As what the employee are expected to do is stated there is clarity. Even a research has shown that “when the goal is set then it also helps to achieve difficult tasks which were not possible otherwise as the employee knows what he has to do”. (Locke, 2008) This thus gives direction. It also gives accountability. Setting goals for each employee also helps to evaluate the talent in each. It helps the management to find the prospective employees for the future. It helps the employee to also ensure that they by their efforts are able to get areas of responsibility in the organisation. “This helps to differentiate between the employees who are willing to work and others who prefer not to work”. (Path Goal Theory, 2010) This theory goes in a long way to deal with the future. Organisation relies on this model as it helps to bring the best out of an employee. It helps to deal with situations which are beyond their control and can still if guided well can act as a tool for growth. Employees are looking forward to this theory as it helps them to deal with situations which will help to identify the pattern and training programme which will improve performance. The path goal theory is thereby helping many enterprises. With little cost and benefits exceeding those organisations are favouring those. This has become a pattern for most organisations and this theory helps to deal with the most precarious situations. Setting the goal to be achieved also solves the problem of “clarity and challenges the job requires, the commitment level involved, and the complexity of the job”. (Ghebre, 2010) This helps to find the correct employee for the job who has all the requisite requirements. This will hep in a long way to build a pool of talent employees. This further acts as a tool to motivate the employees as completing the work satisfactorily motivates them. This is vital in off shoring as it will help to improve the efficiency. It will help to bring the best out of each and ensure that growth in the organisation is not hampered. This theory will help the organisation to work on areas where the employees are weak and thus will help the management to see that off shoring acts as a advantageous tool for them. Decision making by Delphi technique The organisation should look forward towards Delphi technique to decide its operation. Since, this method involves “questionnaire for people situated in far off places and doesn’t require face to face interaction this can be beneficial for off shoring”. (Alan, 1994) These techniques involve indirect conversation and arriving to a decision after looking into the matter and deciding it from different perspective. The organisation can benefit greatly from this method as it can be used for far flung areas. “It will help the organisation to come with various alternatives and the one that best suits the organisation can be decided then”. (Alan, 2004) This method also helps to display the group dynamics. Based on this technique “the organisation can find the prospective leader for each location”. (Stuter, 2010) This will thus help to identify the areas which are of importance and work on those to ensure that the problems prevalent in those local areas are taken care off. This technique brings forth the organisation ways which will help them to work on. It helps to find the areas which are of importance to the business units and by working on those the organisation can achieve the motive with which off shoring was done. This thereby will improve efficiency. It will also make the human resource feel a part of the organisation as they know that their inputs are considered. Using, the Delphi technique thus, presents with a lot of alternatives and working on those will ensure that the organisation is able to tap the vital human resourtce. It will help the business unit to work on other important areas and ensure that they can use off shoring to develop themselves. Motivational Tools The organisation needs to use different motivational tools and theories to motivate the work force. Coming for diverse backgrounds and cultures it is important that the motivational theories are used wisely. Some of the ways which will help to motivate the employees are as The organisation should use the expectancy model. This theory says that “employees are motivated to work harder when they know that their hard efforts would lead to good appraisal and this appraisal will result in incentives like bonuses, promotions and so on and this would lead towards the satisfaction of employees as his personal goals will be achieved”. (Robbins, Judge, Millet, Waters-Marsh T, Organisational Behaviour, 2008) Thus, this theory focuses on three important relationships. First is the link between the efforts an employee puts in and how does it reflects in his performance. Secondly, the performance which he has achieved due to the efforts put in by him helps him get rewards which he deserved. Lastly, how satisfied the employee is due to the rewards which he had received. This entire process could “motivate the employee and make work him harder in the future to get better results”. (Robbins, Judge, Millet, Waters-Marsh T, 2008) This theory helps to find out who work in the company and who don’t. If used effectively it helps the company to design their future plans in such a way that employees who are highly motivated are entrusted to work upon the project thus eliminating the free riders. The expectancy model also works very effectively in case of peer evaluation. Today, people have to work in groups to accomplish a task. Some people put in more efforts and some less. So, the organisation can ask the peers to evaluate each one and on the basis of that evaluation the incentives can be decided so that it is fair. This model is widely used today. This helps the employee to understand the importance of working hard. It also ensures that there is a direct link between reward and performance. Organisations as a result of this are able to get the best out of employees. Another tool which can be used in off shoring is the reinforcement theory. This theory states that “a combination of reward and punishment is used to compensate employees to ensure that their behaviour are directed in the correct direction and yield positive results both for the organisation and employee”. (Barnett, 2010) This theory uses two type of tools to motivate. Firstly, “positive reinforcement which will result in the employee to repeat the same performance is paid accordingly to ensure that such behaviour is repeated”. (Maurice, Villere, Sandra & Hartman, 1991) For example, a sales person for Nike after using his efforts ensures the same target is met. The company to reinforce the same behaviour should pay the employee for the target. This will ensure the employee repeating the same behaviour. Secondly, “negative reinforcement where an employee is punished so that a particular behaviour is not repeated and that behaviour of his can be withheld”. (Maurice, Villere, Sandra & Hartman, 1991) For example, suppose sales people for Volkswagen has the desire to sale the product but is given a territory where in spite the efforts the target is not met. The team should ensure that such territories are not assigned and so that the employees doesn’t loose the motivation to sell cars. Recommendations The organisation using off shoring should ensure that it brings together the different diverse culture and requirements of each employee so that the best of each employee can be brought out. Organisation should ensure that they off shore those business unit which are less profitable and divulging those will help the business to perform better and improve their management. Organisation looking for off shoring should ensure that they motivate the employees so that the performance is enhanced. Organisation using off shoring method should also ensure that all employee are heard and employees are allowed to take part in decision making. Organisation using off shoring method should see that every aspect of the business is considered and methods such as Delphi techniques are used properly to ensure efficiency. Conclusion The organisation looking for off shoring should thus ensure that all aspect of management is considered. The management should lay emphasis on employee development and ensure that proper coordination is achieved among the various production centres. This will help to improve efficiency and will see that the objectives of the enterprise are achieved. Organization thus should use various tools and techniques which are important in off shoring to ensure efficiency. They should look at motivation and retaining the work force. This will help to improve the growth rate and will make the employee feel part of the organisation. This will result in better performance and will thereby help the business unit to deliver on the promises made. 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