Essay Instructions: Outsourcing
While the general readings for Module 3 are about International HRM, in the case for module 3 we are going to focus on outsourcing, a major phenomenon of international business that affects employment in a very significant way.
Outsourcing means that companies contract out activities previously performed in-house. We focus on international outsourcing. Companies are increasingly contracting out various functions in order to take advantage of lower labor costs in other countries.
Outsourcing started with manufacturing. Nowadays, IT is being increasingly outsourced to Asian countries, especially India and China. The movie industry has increasingly used outsourcing, by finding less and less expensive movie locations! Companies have also moved "call centers" to other countries, as well as other service-related functions.
Outsourcing is a controversial phenomenon. Companies perceive it as a cost-cutting strategy that enhances shareholder wealth. Opponents examine number of jobs lost in the United States. There is also concern about outsourcing strategic functions, such as IT.
Case Assignment
Write a 4 page paper about outsourcing from the perspective of a multinational firm (Yes, this may be a hypothetical firm), and be sure to answer the following questions:
1. What are the advantages of outsourcing?
2. What are the disadvantages of outsourcing?
Discuss why these are advantages and disadvantages and to whom.
Please read the following articles. Please go to the TUI Library Page, then to ProQuest to find these articles:
? Into Thin Air, Fast Company, Boston, April 2004, Issue 81, Pages 76-83 by Jennifer Reingold.
? A TEMPEST OVER OUTSOURCING American legislators are accusing India of stealing tech jobs Business Week, New York, June 16, 2003, Pages 20-21 by Manjeet Kripalani and Bruce Einhorn in Bangalore and Paul Magnusson in Washington from library portal via coursenet.
? "MOVE OVER, INDIA, China is rising fast as a services outsourcing hub", Business Week, New York, Aug 4, 2003, Issue 3844, Pages 20-21 from library portal via coursenet.
? "Software: Will outsourcing hurt America's supremacy?", Business Week, 3/1/2004 Issue 3872, Pages 84-93, by S Baker, M Kripalani, R.D. Hof, and J. Kerstetter
Case 3 Assignment Expectations
? Write a 4 page report that includes the following:
? State the problem and discuss the +s and -s of outsourcing from multiple views presented in the mod3 materials.
? Illustrate the +s and -s with examples from the module 3 materials and draw conclusions.
? List supporting references and cite sources.
? Use appropriate writing style (organization [introduction, body, conclusion], grammar, & spelling- see Writing Guidelines).
People are the main asset of any organization whether domestic or international.
International human resource management is a very critical function of an international company. While HRM functions generally remain the same as for domestic companies, the challenges become much more complex, due to various cultural differences and international factors such as values and laws.
As a result of such variations, different countries have different perceptions of Human Resource (HR) policies and functions. While some local offices perceive HR as a strategic partner, others see it as a stereotypical "personnel department" that handles routine paperwork. HR in the United States emphasizes payroll and other transactions. In the United Kingdom, payroll is often outsourced; HR focuses on personnel planning, training and other non-transactional processes. Hence, the vision of what HR is will vary from country to country and from company to company.
The Need for Flexibility
As a result, there is a need for flexibility to offset the economies of scale that come from standardization, from common practices, systems, missions, and corporate cultures.
Often something simple, like listing names, can create havoc. In one country using the last name first is considered terribly rude. In another it is considered mandatory HR practice. Some companies, then, decide to use multiple data bases. Flexibility is extremely important.
Laws & Cultural Differences
Laws can differ radically. One of the thorniest issues facing global HR departments is informational privacy. The comfort level for disclosing personal information will vary widely from country to country. Some cultures encourage total openness, others a strict separation between what is work related and what it personal. European Union privacy laws are a great deal stricter than those in the United States.
Differences in culture, expectations, HR functions, and legal requirements make managing human resources on the global level a challenging task for HR managers. When the firm's personnel are highly heterogeneous and diverse, this challenge gets even more complex.
Managing Globalization
HR management is effective if it is aligned with the corporate mission. It follows that an organization with a global corporate mission needs to deploy the various management functions and resources to address the global environment.
Several factors affect global Human Resource Management. They are legal, political, economic, and cultural. Legal and political elements refer to the political climate of a country (from stable to volatile), as well as to HR laws and regulations. Economic factors address the economic system, as well as currency issues. Cultural characteristics denote the system of values and beliefs typical of a group of people, a community, and a country.
International employees fall into three categories:
? expatriates,
? host-country (local) nationals;
? Third-country nationals.
An expatriate is an employee who is a citizen of the country where the headquarters of the company are located but not a citizen of the country where his/her subsidiary or unit is located.
A host-country or local national is a citizen of the country where the subsidiary or the unit is located, but not a citizen of the country where the headquarters are located.
A third-country national is a citizen of a country, who is neither a citizen of the country where the company is headquartered, nor of the country where the subsidiary/subunit is located, and who works for the subsidiary.
HR management must create the individual capabilities and behavior required by that environment. Examples of such capabilities include experience with and knowledge of the conduct of business across national borders. Examples of such behavior include interpersonal effectiveness in general and the display of cultural sensitivity in particular. Knowledge of local laws and business practices may call for hiring local nationals. Whereas, if the language of international clients with whom a firm is doing business is English, then local personnel will need to be bi-lingual or the USA firm will need expatriates.
Capabilities adaptive for the global environment may be assured by actively looking for them during the recruitment, selection, and assignment process. Behaviors useful for the international environment may be nurtured through the design and implementation of suitable performance evaluation and reward systems. In short, all aspects of HRM from selection of personnel to evaluation and pay are influenced by the cultures and places where a firm does business.
For additional information, please read the following articles. They present important aspects of Global Human Resource Management and highlight the increasingly strategic role it plays. The importance of the HR executives is being increasingly recognized globally. The roles and functions of HR in the global context have become increasingly strategic.
NOTE: The following articles can be found by searching Proquest or EBSCO at the TUI University Library!
Required Reading:
"HR issues top of mind for execs worldwide: Study", David Brown. Canadian HR Reporter. Toronto: May 5, 2003. Vol 16, Iss.9 from library portal via coursenet.
"Going beyond hiring, firing and compensation", Anonymous (2002) Human Resource Management International Digest. Bradford: Vol. 10, Iss. 1; pg. 4, 3 pgs. From library portal via coursenet.
n.d. (2006) The Future Of Outsourcing, Business Week, 30 January 2006.
Lowe, K. (2010) The Pros and Cons of Outsourcing: Should you outsource business functions or is it better to keep them in-house? article 49616, Entrepreneur Magazine.
Prahalad, C. K. (2000). Emerging work. Executive Excellence, 17, 5-7.
Cuthill, S. (2000). Guest column: Managing HR across borders. Compensation & Benefits Management, 16, 43-46. from library portal via coursenet.
Anonymous (2003) "MOVE OVER, INDIA, China is rising fast as a services outsourcing hub", Business Week, New York, Aug 4, 2003, Issue 3844, Pages 20-21 from library portal via coursenet.
Baker, S., M Kripalani, R.D. Hof, and J. Kerstetter (2004) "Software: Will outsourcing hurt America's supremacy?"Business Week, 3/1/2004 Issue 3872, Pages 84-93.
