Learning Outcomes

  • Analyze the benefits and complications of outsourcing

Before we get started, it is important to define outsourcing. Outsourcing is the practice of hiring external assets to provide services to help perform job functions typically done by internal employees. Companies in the United States outsource for a variety of services including but not limited to call centers, information technology (IT), human resources, and manufacturing.

Outsourcing is a hot button topic in America. Keeping jobs within the United States is a big concern for many Americans whom argue the importance of employing citizens before hiring outside of the country. If outsourcing is considered such a taboo practice, then why do companies continue to outsource? For starters, outsourcing can save companies a lot of money. The appeal of increasing profit margins can oftentimes outweigh the value put on hiring American workers. If companies can hire employees to do the same job as their current employees but for a lower cost, why wouldn’t they? This is a controversial topic in today’s business world. Outsourcing effects each level of influence within an organization differently. However, outsourcing, without a doubt, has an impact on a company’s organizational behavior.

The sun rising over the earth as seen from space.

Modern technology has connected every corner of the world. Within seconds, people on opposites ends of the world can “meet” through emails, phone calls, video conferences, etc. This has allowed outsourcing to become a more feasible business practice than in past decades. Employees that once all lived in similar locations are now scattered across the country, or the world, bringing together a wider variety of backgrounds and experiences. Managing international teams can be a challenge and may create a disconnect between managers and employees.

Even company employees whose jobs are not directly impacted by outsourcing may be affected. For example, if a company outsources their human resources division, it may have an indirect effect on the marketing department. While the employees within the marketing department have job security, their interactions with human resources may pose a challenge as there would be lack of familiarity and relatability. This has the potential to lead to frustration and disconnect. While companies may control the outsourcing process, they give up partial control by hiring a third party. Changing company procedures or practices used to be completed in house, but with outsourcing they now have a much lengthier modification process. This new process may cost additional resources, time, and money.

Practice Question

Freelancing is another form of outsourcing that is becoming more popular. Companies use freelancers for a variety of reasons. Sometimes, there are special projects that require an outside perspective or expertise. Other companies frequently use freelancers in order to keep their full time employee count low and to incorporate a variety of backgrounds and experiences. While there are a number of benefits to using freelancers, there are some challenges that accompany them. Hiring too many freelancers (or outsourcing too many positions) can make uniformity extremely challenging. Keeping company standards and/or products consistent with high quality may prove to be difficult when there are too many cooks in the kitchen. Constant turnover or changes in staffing may create a challenging work environment and make it difficult to maintain effective employee relationships.

So, what do you think? Is outsourcing good or bad for an organization? Obviously the answer depends on the situation and circumstances of each company. However, regardless of your feelings or opinions towards outsourcing, one thing is certain: outsourcing impacts organizational behavior.