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An employee may leave an organization for a variety of reason or it could be voluntary turnover where employee chooses to leave. The reasons contain better career opportunities, change of job profile or promotions. On the other hand involuntary include employee, management or office conflicts, stress, salary and poor supervision etc. However, in this research I would like investigate why outsourcing work is affecting staff turnover.
The UK average employee turnover is approximately 15% a year, but it varies drastically between industries. The increasing turnover has negative affects on the economy. Which could benefit some other countries For example in 2005 staff of Gate Gourmet sacked 670 staff due to protecting against company hiring seasonal temporary staff from EU countries. After the strike the firm decided to use more labor from the EU. Which benefited the labor from another countries and disadvantage for home employees.
Over the years most organization are facing many problems but staff turnover has been the biggest concern for the management. My current employment has also been tackling the same issue. Therefore I know believe it becomes my problem. As in result, my aim is to investigate the reasons of staff turnover and the objective to support my aim is why outsourcing work causes staff to leave.
It's vital for organizations to seek to improve their performance because increasing employee turnover can cost the business, financially as well non-financially. Not having enough staff to do the job causes delay in everyday's business activities. Which leads to customer dissatisfaction, as clients feel little attachment revolving with contracts. Customers are more likely to experience delays and substandard in the quality of service each time their representative changes. For example in a food processing company, showing some one how to put jam on bread may take few minutes, so the cost of the training and someone to handle this job would not be high. If however, the manager of the food processing line at the company kept driving away food cookers and quality-control workers. The cost of constantly training employees in this critical area would be high.
On the other hand some organization can benefit from staff turnover as thinking or increased motivation a new employee could bring to a job (Abelson and Baysinger 1984, Mowday et al. 1982). Or not hiring staff could be an opportunity to saving money. Money saved from recruitment process and training replacement workers can be used elsewhere in the business, which is a benefit in the company's income statement. Another benefit the company has is to be able to indentify their loyal employees who will stay in the company. Also additionally some company rely on turnover can cause major obstruction to productivity, quality and profitability of the firm of all sizes different sectors. Smallest companies are always concerned with high turnover, which can mean the firm may not enough staff to accomplish daily duties. However, turnover is also not a minor issue for major companies. A large number of money is spent to meet turnover expenses. As mentioned above staff turnover could lead to customer dissatisfaction and turnover because clients feel minute attachment to a resolving contract. Customers are also likely to experience delays and substandard in the quality of service each time their representative changes.
Outsourcing work has been growing rapidly over the years and is continuing to grow. In 2009 recession increases UK outsourcing as clients seek ways to save money. British businesses spent 12 percent more on outsourcing then what they spent in 2007. The increase in outsourcing is becoming responsible of unemployment. Companies are constantly announcing their plans of hiring from abroad. For example Royal and Sun Alliance announced their plans to outsource 1200 jobs to India on 29th Aug 2009 and are expecting to make a saving of £10m a year. National Rail Enquiries have also outsourced 600 jobs, and HSBC has revealed its intention to outsource 4,000 jobs over 2 years.
Ron Hira, Anil Hira (2005) clearly states and strongly believes outsourcing is responsible for unemployment. "Of course outsourcing does in fact causes unemployment " because if business continues to hire from abroad it will continue to increase problems with the unemployment rate. Not only UK but also many other countries that outsource are affected. The American government is concerned over workers losing jobs to cheaper foreign labor. As in the first quarter of the year nine percent of the population lost jobs due to bulk of outsourcing.
"In the first three months of the year, 4,633 U.S. workers were laid off because their jobs were moved to a foreign country, the BLS said." Increasing unemployment rate is an impact of outsourcing, which affects the economy. For example unemployed people will demand for unemployment insurance, Jobseeker's Allowance or other benefits from the government. Other effects such as low taxes are caused due to high unemployment rate less people working and paying less tax therefore the government will consume less taxes. (Source: Fox News )
Outsourcing affecting the employees
Thea Lee, assistant director of public policy at the AFL-CIO, says outsourcing is a major cause of job loss since 2000. Therefore increase in outsourcing will increase unemployment rate. Forrester analysts 2006 predicted by the year 2015 there will loss of 3.4 million jobs due to outsourcing to foreign countries. In result, unemployment rate will continue to rise. This could not only be the reason of unemployment but can cause staff to take low paying jobs.
India has become a popular destination of outsourcing for IT, HR and for many others. This is because it's developing country with better infrastructure and fast growing economy. It offers a competitive low cost work force and low set up costs and great services. Hence firms prefer to outsource their work as it provides many benefits. Outsourcing can save cost but also allows you to focus on the core business, start new projects and increase efficiency. Relating to management believes it will give the employees more time to focus on their co responsibilities, so they can carry out their work more efficiently.
On the other hand, employees resist to this because it concerns them about their job security. As with outsourcing the jobs are likely to vanish and go to third world country. Perceptibly benefits third world countries leaving people in the first world nations to suffer. I believe this is a major cause for staff turnover because employees feel unrest about their job security.
Trade unions have stepped in against outsourcing to protect employees by keeping jobs in the UK. Trade union in the UK has launched their own investigation to prevent the continuous occurrence of UK companies moving jobs to cheaper labor abroad. Amicus 2004 has announced strike action will be taken against "any organizations that cut UK jobs".
Companies such as Barclays and Unifi have come to an agreement. Where Barclays has ensured to help manage Job security. This will not only help current staff but by matching made redundant and volunteer redundancy doing comparable jobs. In result it will increase the opportunity for redeployment.
Some companies prefer to stay in the UK
There are still many companies who don't prefer to outsource there work and like to keep it within the company. For example Alliance and Leicester is one of the worlds largest bank does not prefer to transfer any call center jobs abroad. As the bank hold many high security details and the geographical distance could create the risk liking information. Also ClientLogic has plans to expand its call centre operations in the UK, creating 500 more jobs. Adam Kolawa's states cutting jobs creates loss of skills, people working together in an organization or in community learn from each other. Therefore moving jobs means moving skills abroad. Which leaves the community to disintegrate.
Consumer reaction towards offshore call centres has deteriorated. A study of Contractbabel January 2004, surveyed 290 UK and 44 Indian contract centres, advised that the Indian call centres provides poor services. This could be because of communication barrier an agent whose first language isn't English dealing with a client from England can cause difficult misinterpretation in understanding the enquiry. The study found UK staff answers 25 percent more call and resolves 17 per cent more calls. British agent is able to achieve more because they are able to understand customer's problems more easily and repeat themselves less. Steve Morrell of Contractbabel has said the cost savings from moving offshore can be outweighed by the loss of frustrated customers.
The advantage to stay in the homeland is it allows them to keep their employees involved in all business activities. But the downside to this is not outsourcing put a lot of pressure on the business and feels the hit once their competitors have taken over the profits by focusing more on specific departments. For example marketing lowering prices to meet the aim of the business of profit maximization. Also to meet there non-profitable goals of good company reputation or good ethical behaviour by giving something back to the community such as providing jobs to the local community.
Other reasons of not outsourcing is poor governance, lack of communication, language barrier, cultural misfit, lack of knowledge and lack of good policies to understand the mission or the purpose of the task or project could lead the business into heavy losses. The drawbacks of outsourcing are dependable on the business activities but increasing its spending structure without its knowledge, appearance of new competitors and loss in the product or service competitiveness.