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Foremost, training takes employees away from their work and therefore generates reduced operational efficiency.
Higher costs with benefits
An outsourcing contract will be simple and clear and will generally only state the object of the contract and the sum of money to be paid at established points in time. The American company would only pay the amount of money in the contract, to the manager or representative of the foreign company. The U.S. manager will not have to deal with employees or their demands.
With internal service however, the manager will constantly have to deal with the employees and their demands. He will have to offer medical coverage, leave days, premiums and bonuses and so on. These once more increase the costs and negotiations and meeting have the ability to decrease operational efficiency.
Hiring and retention costs
Considering that the services to be offered to customers are a new line of business for the organization, they will have to recruit, select and hire new staff members. This will imply costs in both time as well as finances. The people in charge of the hiring process will have to take time off from their tasks, resulting then in a reduced operational efficiency.
Once the new employees are hired, the employer has no guarantee that they will like the job they perform and that he will be able to retain them. Ergo, he will have to implement human resource...
He will have to offer various incentives and he will have to ensure that the job is challenging and rewarding for the employees.
The manager of the U.S. based organization may not achieve his human resource objectives at all times and some employees will leave the company. This could generate high turnover rates, which in turn lead to increased costs with replacing the staff members.
Preferring to operate internally has the benefit of supporting the U.S. economy by creating additional jobs and by paying the taxes to the state government. It however also has some disadvantages, materialized in higher costs with employee wages, retention, training and benefits.
The higher costs of operating internally in the detriment of contracting outsourcing operations basically materialize in lower economies. These in turn mean that the company will benefit from fewer additional funds to finance endeavors. Following this line of thoughts, one can easily conclude that the real costs of operating internally in the detriment of outsourcing materialize in a future inability to sustain organizational development.
Works Cited
McDonnel, B.M., 2008, Contemporary Labor Economics, 8th Edition, the McGraw Hill Companies
Thompson, T., 2008, What is Outsourcing? Wise Geek, http://www.wisegeek.com/what-is-outsourcing.html. Ast accessed on December 12, 2008
Works Cited
McDonnel, B.M., 2008, Contemporary Labor Economics, 8th Edition, the McGraw Hill Companies
Thompson, T., 2008, What is Outsourcing? Wise Geek, http://www.wisegeek.com/what-is-outsourcing.html. Ast accessed on December 12, 2008
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