Outsourcing: Case analysis

Outsourcing: Case analysis


Controlling cost comprises one of the techniques through which an organisation can transform itself into a new entity (Reilly & Tamkin 1996). Amongst the strategies that can lead to the attainment of this outcome is the elimination of redundancies (Halibozek & Kavacich 2005). One of the techniques that can be incorporated in eliminating redundancy is outsourcing.  In an effort to achieve efficiency and reduce the cost of operation by eliminating redundancy, John Crane Flexibox (JCF) can consider outsourcing some of its HR functions. This move will significantly enhance JCF’s success in becoming one of the integrated entities in the process of mergers and acquisitions. Human resource outsourcing or Business Process Outsourcing (BPO) entails an HR technique through which an organisation subcontracts its human resource functions to an external party (Bragg 2005). Business Process Outsourcing (BPO) enables firms to lower labour costs (Klein 2010).  One of the HR functions that JCF can outsource entails the payroll function. Despite the fact that the payroll function remains an in-house function, JCF can successfully transfer the processing of payment data to an external payroll supplier (Bragg 2005). The rationale of outsourcing the payroll function is to ensure that the employees are accurately remunerated, which constitutes a complex and costly activity.

Undertaking redundant payment presents a challenging undertaking that requires extensive expertise. This view is supported by Fielder (2013), who asserts that ‘payroll operations are made up of multiple sub-processes combined in a consistent value chain’ (p.3). According to Bragg (2005), the payroll function is the most widely outsourced HR activity. Numerous organisations have been established in an effort to provide support to clients on different payroll functions.

 During the merger and acquisition, JCF has a responsibility to ensure that the employees rendered redundant are adequately and fairly remunerated (Rousseau, 1989). This calls for the firm’s management to ensure that HR expertise is integrated into the determination of salaries and wages. To achieve such an outcome, JCF can consider outsourcing the payroll function from well-experienced HR consultancy firms. This move will lead to a significant reduction in costs incurred in undertaking payroll administration.

In addition, JCF is required to ensure that the level of morale and motivation amongst individuals who survive the redundant review process is not adversely affected.  Gandolfi (2006) asserts that merger and acquisition results in a significant change in organisation’s operations such as a change in job roles and responsibilities. To create value, JCF’s management team has a responsibility to ensure that employees are effectively integrated into their new job roles after the merger and acquisition. This aspect is essential in managing survivor syndrome hence improving JCF’s effort to position itself as a new entity (Brockner1992).

            John Crane Flexibox management team can further outsource the performance management function. The merger and acquisition will lead to remarkable strategic changes in the firm’s HR functions such as the creation of new job roles.  Another strategic change that will occur in the organisation entails the redeployment of some employees. In spite of these changes, it is essential for the firm’s management team to ensure that the employees’ performance and productivity are not severed.  To minimise the reduction in the employees’ productivity, the firm’s management team must ensure that the new job roles created or restructured are valuable to the organisation. If adequate expertise and care are not taken into consideration, the strategic change might lead to a reduction in the level of employees’ morale. This underlines the importance of JCF considering outsourcing the performance review function to ensure that adjustment in the job roles and responsibilities is aligned with both the organisation’s need for value and the prevailing market changes.  Outsourcing the performance review function during the merger will remarkably enhance JCF’s competitiveness and productivity. For example, by undertaking market-based outsourcing, JCF will ensure that its employees have the right skills and capabilities. Through this move, JCF will ensure that the employees who remain in the organisation are the most effective. However, in the process of outsourcing performance management, JCF should ensure that an effective psychological contract is created (Rousseau 1990). This move aid in reducing the likelihood of the organisation experiencing voluntary employee turnover  According to McKendrick (2013), the process of a performance review should be fair and equitable so as to minimise the likelihood of the performance review process having a negative impact on the employee's morale.

            By outsourcing the payroll administration function, JCF will significantly reduce the cost of operation. This arises that some of the payroll administration functions will be transferred to a third party. Additionally, outsourcing the performance review function will ensure that the process of selecting employees to downsize is fairly undertaken. 




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