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Problem Solution

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Autor:  anton  22 December 2010
Tags:  Problem,  Solution
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Outsourcing, as a strategic plan to increase profitability and promote international growth, requires skillful intellectual planning and expert relationship building techniques, including the establishment of significant business relationships with all stakeholders. Communication is paramount in retaining talent, maintaining a competitive edge, and creating an environment of trust and loyalty. In addition, systematically and proficiently maneuvering through the decision making process, practicing active listening, and utilizing expert opinions during the developmental phase of outsourcing contracts will generate optimal outcomes, build strong team relationships, and improve career development opportunities for all employees. The following benchmarking study examines the outsourcing processes employed by four companies faced with similar problems and attempts to derive the optimal solution for a company in the planning stages of its outsourcing strategy, Global Communications. Based on the evaluation of the outsourcing processes employed, the authors propose solutions for implementing outsourcing within Global Communications as an effective cost-cutting strategy to increase sales volumes and profitability and achieve long term growth in a competitive market.

Global Communications Benchmarking

Identification of issues and benchmarking discussion

In the Global Communications (GC) scenario, the leadership team developed a two-pronged aggressive approach to address diminishing returns, economic pressures, company stock value depreciation, increasing competition, and the viability of the company and its ability to continue as a Ѓegoing concernЃf. The companyЃfs approach entailed: (1) increasing sales volumes by introducing new services, including video and broadband by partnering with a satellite provider, and (2) improving profitability by using cost-cutting measures, including outsourcing and reductions in force. A total of four companies were used to benchmark their strategies against the strategies employed by GC; these four companies used outsourcing as their strategy to increase revenue and create company growth.

Boeing Commercial Airplanes (Boeing), English Heritage, Hershey Foods Corporation (HFC), and DuPont were benchmarked for their use of outsourcing. Boeing, an aircraft manufacturer, outsourced a high percentage of its 787 Dreamliner aircraft engineering and design work with the primary goal of maintaining stable employment. English Heritage, a company responsible for historical preservation, selected Atos Origin (AO) as its outsourcing provider to improve its delivery of information technology (IT) services to its 130-plus sites across the United Kingdom. Hershey Foods Corporation (HFC) outsourced its logistics functions to manage declining returns and long term growth success. DuPont has continually endeavored to focus on its core businesses and has regularly divested its non-core businesses; therefore it is no surprise that the company opted to outsource its secondary businesses.

Application of the concepts

In the GC scenario, the company failed to include proper employee and union representation in the planning phase of the decision making process which resulted in the union not supporting the companyЃfs strategy and a damaged employee relationship. In contrast, Boeing was successful in its outsourcing plan. ЃgThis 787 outsourcing strategy certainly didnЃft sit well with the Union or Boeing employees following BoeingЃfs September 11, 2001 lay offs of more than 5,000 union members even as Boeing was hiring more than 1,000 Russian aerospace engineers for its Moscow design center. The union leaders were able to support this strategy because Boeing leaders were engaging The Society of Professional Engineering Employees in Aerospace (SPEEA) employees union in discussions over outsourcing and actively listening to their concerns in the planning stages of the decision making process.Ѓh (Holmes, 2006). ЃgAn agreement that can be found that is better for both parties than what they would have reached through distributive negotiations is considered an integrative negotiation which calls for a progressive win-win strategyЃh (Kreitner & Kinick, 2004, p. 504). Boeing leaders realized that in order to succeed, top-level executives must negotiate their ethical vision with all the major stakeholders. ЃgAt Boeing, we look all around the world for the best technology, the best intellectual capability, and for the best manufacturing capability in a serious effort to improve our competitiveness. We keep the best partners in terms of quality, cost, and capability. Boeing and their partners work on the top-level designs together then the suppliers go off and come up with the detail design of parts. More than 70% of the work on the 787 Dreamliner aircraft tasks involved Japanese, Russian and Italian engineers. Boeing did not fear sharing technology and skills with other foreign professionals.Ѓh (Holmes, 2006).

In the GC scenario, the leadership team had difficulty collaborating as a team which resulted in group think and a dominating management style utilized by the team leader. In contrast, the director of English Heritage hired a consulting firm, AO, to act as an advisor in contract negotiations and help the company frame the specifications of its outsourcing contracts. English Heritage established rigorously-enforced penalties to emphasize high performance outcomes in the event that targets were not met. Technical quality assurance experts were kept on staff to test the outsourcerЃfs proposals, and in-house project management teams kept enough work forces in place to ensure adequate supply of work to meet staff ratios. To AOЃfs advantage, English Heritage established a clause in the contract where Atos would supply optional extras when demand dictates allowing Atos to gain extra revenue and served as a training ground for AtosЃh (Computer weekly, 2006). ЃgGroup decision making has several advantages and can improve both the quality and acceptance of the decision. Groups tap a greater pool of knowledge and provide more diverse perspectives than any single individual could generate acting aloneЃh (Gomez-Mejia, 2002, p. 215). English Heritage and AO established a partner relationship with the common goal of a commitment to continuous improvement.

GC did not use an effective decision making process involving sequential steps. On the contrary, HFC began its outsourcing process by establishing a team, consisting of representatives from all the key areas in its organization, such as logistics, engineering, customer service, finance, and information systems (Mazel, 2001); this team was responsible for selecting the outsourcing provider. Initially, the team created a matrix of selection criteria for use in ranking potential candidates based on identified attributes most successful to the project. A list of eight candidates was generated using feedback from consultants, the teamЃfs own experience with third party vendors, and vendors used by large food manufacturers known for excellence in distribution. The team invited each candidate to the companyЃfs facility to view detailed presentations on the way HFC does business and to observe its operations so that the vendors could see first hand and better understand the current processes and the special services that would be expected of them (Mazel, 2001). The candidates were required to sign confidentiality agreements and were given opportunities to present capability presentations to the team. Additionally, the team developed a series of case study questions in which they asked each candidate for both a reactive and proactive approach. Based on the answers to the case study questions, coupled with the capability presentation, the written proposal, and the outcome of formal reference checks of director and vice president contacts of companies serviced by the candidate, each candidate was assigned a score, which was used to select the winner of the outsourcing contract.

In the GC scenario, the leadership team failed to use appropriate organizational communication and relationship building techniques to establish a significant relationship with the union and its employees which led to trust issues and poor team collaboration. Organizational communication encompasses: (1) selecting suitable media for communicating based on information richness; (2) exchanging information between management and employees; (3) limiting unofficial information relayed via the grapevine; and (4) controlling communication distortion (Kreitner & Kinicki, 2003, p. 537). Relationship building facilitates dialogue by establishing understanding, trust, and cooperation among business users and getting all parties engaged. Although there is no clear indication of organizational communication deficiency within DuPont, evidence reveals that the company failed to establish a substantial relationship with its employees and outsourcing provider.

The overall communication methods used within GC lead to misunderstandings and distrust. English HeritageЃfs director worked actively on its relationship with AO. ЃgOne of the curious aspects of success is the importance of communication with internal customers, which can count for more than the speed or the quality of the fix, says McElweeЃh (Computer weekly, 2006). Communication is the key to retaining talent and maintaining a competitive advantage. Communication also encourages loyalty; employees become more loyal when communication processes keep them informed about what is happening in the company (McShane, 2005, p. 128). Additionally, managementЃfs actions should be seamless and transparent to encourage trust; employees identify with and feel obliged to work for an organization only when they trust its leaders (McShane, 2005, p. 128). Enhancing organizational communication will lead to improved employee morale; happy employees make happy customers, and happy customers preserve a companyЃfs profitability and long term growth achievement.

Outcomes of the concepts applied

Boeing remained committed to its primary goal of establishing a stable workforce; the red-hot success of the Dreamliner helps validate the companyЃfs new outsourcing strategy. Without reduced development costs and its ability to sell at competitive prices, Boeing could not maintain a competitive edge or experience business growth. The director of English Heritage moved successfully through the stages of decision making to set up an outsourcing process through AO which proved beneficial to all of its major stakeholders and resulted in positive outcomes for both organizations. HFCЃfs outsourcing process was extremely successful. The detail oriented approach used to select the right vendor consumed a considerable amount of time, effort, and money, but the results achieved by HFC were well worth the expenditures; as a direct result of the outsourcing agreement, the company now has a strong relationship with its vendor, built on mutual trust and facilitated by open and ongoing communication. The outcome of DuPontЃfs decision to outsource and use a core-capability focused framework proved to be relatively profitable. The company realized reductions in costs, increases in various service speeds and flexibility, and improved career development opportunities for its employees; however, not all aspects and uses of the framework were successful. DuPont relinquished too much of its technical and management expertise, and the companyЃfs managers were excluded from critical business discussions and decisions. Additionally, DuPont partially neglected its vendor development capability, and its relationship with the vendor did not evolve to a more strategic level; this lack of development led to limits in the sourcing vision, intra-company learning, and future outsourcing flexibility. The companyЃfs approach could have been more successful by further developing its relationship with the vendor to tap into the vendorЃfs intellectual capital and sufficiently address sourcing needs and changes for the long term; retaining technical and management expertise Ѓein-houseЃf and requiring management involvement for all critical discussions and decisions as a stipulation formally listed in the contract terms; focusing more on strategy and value creation to stimulate innovation for business value; and expanding beyond technical ability to include distinctive mixes of business and interpersonal skills, including skill sets, attitudes, and behaviors of its employees and vendor laborers. In addition, DuPontЃfs plan should have addressed the companyЃfs need for longer term strategic core capabilities, or distinctive human resource-based skills, orientations, attitudes, motivations, and behaviors that have the potential to contribute to achieving specific activities and influencing business performance, instead of Ѓefire fightingЃf and focusing only on the shorter term of the capabilities.


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