The study sought to investigate the effect of outsourcing strategies of banks and employee job performance. The study was guided by three theories; the resource based theory, transaction cost theory and the core competencies theory. The study adopted a descriptive research methodology. Data was collected with the aid of questionnaires presented to the respondents who were employees of the commercial banks. Data was analyzed using software, a regression model fitted and the relationship between the independent and dependent variables shown by the coefficient of correlation. The mean and standard deviation were used to measure the central tendency and dispersion. The findings revealed that outsourcing has a positive and significant effect on the operational performance of banks. Information technology if outsourced, is capable of handling the most demanding customer requirements. When desired, order information can be exchanged between trading partners. The benefit of fast Information flow is directly related to work balancing. It makes little sense for a bank to accumulate orders at a local branch for a week, mail them to head office, process the orders in a batch, and return them to branch to achieve fast delivery. From the study, a conclusion was arrived at, that outsourcing is a critical element of organizational strategy, as a powerful vehicle to reduce costs and improve performance. There is no doubt that the rapid change will affect today’s business world, in other words it will revolutionize the traditional business and job paradigms. This volatile and changing atmosphere compels commercial banks to adapt their structures and strategies to a greater degree than they used to do. Nowadays, organizations trend to become small core big network forms. Thus, companies choose a limited number of tasks to do and entrust the rest of their tasks to an outside supplier. Therefore, the significance of outsourcing and its key role in illustrating network center organizations is clear.
1.1 Background Of The Study
Outsourcing is a management strategy by which an organisation delegates major or non-core business functions to specialised and efficient service providers. (Rajee & Hammed, 2013).
During the last decades, Nigeria business enterprises came under pressure to restructure and improve their sustainability as organisations face increasingly complex, dynamic, and threatening business environment as globalisation. This quest for efficiency and improved productivity led to a more strategic approach to outsourcing business operation, process and management practices. Outsourcing jobs in Nigeria have become a subject of great concern as more employees continue to groan under the ‘policy of wages reduction’ by the employers of labour without compromising the quality of services provided. In almost all the sectors of the economy of Nigeria, outsourcing of staff has become the order of the day as the employers find the system as ‘the best’ for their businesses and are no longer looking for permanent staff again (Adeleke, Olajide, Shiyanbade, 2014).
Outsourcing of workers into the organisation is a contravention of Section 7(1) of the Labour Act which mandates that an employer should provide the employee with a written contract of employment specifying the particulars of employment not later than 3 months after the beginning of the employee’s period of employment with the employer.
Furthermore, Owoseye and Onwe (2009), noted that in spite of the provision in section 17 sub section 3(e) of the Constitution, which guarantees “equal pay for equal work without discrimination on account of sex, or any other ground whatsoever’’ the discrimination in pay between permanent and casual employees is still in existence. They were of the opinion that the Act recognizes of this form of employment like it did for standard employment. Many outsourced employees do not have letters of employment and many companies do not have records of their outsourced employees in order to evade the law. (Alozie, 2009).
Most criticism concerning outsourcing has been primarily in the areas of changing employment patterns of employment, globalisation of the labor force, and its effect on individual employees and organisation, (Klass, McCleandon & Gainy, 2001; & Dobbs, 2004).
Performance is the extent to which an individual is carrying out assignment or task. It refers to the degree of accomplishment of the task that makes up an employee’s job (Cascio, 2006). Job performance is the net effect of an employee’s effort as modified abilities and roles or task perceptions (Jones, 2003). Organisations outsourced with the prior plan to reduce cost, increase productivity, increase capacity and sometimes can leads to downsizing.
The failure and success of organisation depends on employee performance. The negative influence of outsourcing on job performance of employees has created higher levels of dissatisfaction and has also influenced the employment status of workers, and this has created a minimal job security in which the outsourced employee are denied certain benefits. Due to higher unscheduled turnover that revolves round outsourcing, organisations do not embark on training and development of employees which is part of criteria for higher productivity; which is very important in an organisation. Morale and career development of workers also increase organisational flexibility, sustainability and stability. It is as a result of this background, the researcher seeks to examine outsourcing strategy and employee job performance in the banking industry, ijebu-ode, Ogun-state, Nigeria.
1.2 Statement Of The Problem
There is a growing realisation of the important contribution of outsourcing strategy on organisational performance during the past decades, (Cousins, Lawson, & Squire, 2006). Outsourcing is rising in every economic sector steadily as a result of the rapid advance of technologies, science, globalisation and the constantly increasing competitiveness, companies have established policies of flexibility and adaptation to the economic changes in order to keep profits as high as they can, many organisations consider it more profitable to produce their products and services in-house while others see it more profitable to source from other expert companies(Asiamah, 2013). Organizations use outsourcing for several reasons. It is not surprising that different organizations for different purposes use outsourcing; because every organization’s condition is unique and it differs from other organizations (Hillary, 2011).
The world economic meltdown has bred a dangerous work environment where many desperate job seekers in the labour force are willing to take any job for survival purposes rather than dignity. Labour exploitation is pervasive in many organizations in Nigeria (Kazeem, 2004). It manifests itself in one form or the other including poor salary, wages and salary arrears system, training, promotion, motivation, sense of belonging, job satisfaction and dehumanization of work and workers. Nigeria contact with the post-adjustment economic measures today has been nothing short of the same macroeconomic policies, namely trade liberalization, floating exchange value (market driven), privatization and commercialization, government withdrawal from social provisioning, decreased public sector spending and investment (retrenchments and rationalization of the civil service) (Anugwom,2001). Therefore, in an attempt to maximize profit and keep up with competition, some work organizations have resorted to unethical business practices like outsourcing of workers thereby hurting workers interest and violating some fundamental labour laws (Okafor, 2007).
Globalization and trade liberalization added to competition from imported goods, have forced enterprises to reduce their staff strength and replace them with outsourced workers in order to cut costs of production and remain competitive. It is more likely to find a higher level of commitment among workers with a relational psychological contract (permanent workers) compared to those with a transactional psychological contract (temporary employees) (Fapohunda, 2012).
Outsourcing is therefore, part of a new era of the management of labour. It is an era which fits many workers into the needs of production and service provision by offering only very limited choices to workers. Shorter hours are usually associated with lower pay and lower skilled work. It is primarily undertaken by those with other commitments (e.g. careers for children and the elderly and students) or with no other choice (e.g. blue collar workers seeking any kind of alternative to unemployment) (Buchanan, 2004). Outsourcing is a contemporary and controversial issue in the modern Nigerian industrial relations system. Outsourcing in some ways as a phenomenon in Nigeria, has not been well accepted, this is not unconnected with the way it is practiced in the country.
Therefore, the large proportion of Nigeria’s labour force which falls into this category may be confronted by labour realities determined by globalization (Rasak,2009).
By taking a look at different facets that are subject to change in an outsourcing movement on organisation and employees, outsourced workers are subject to lower pay, poor work conditions, such as poor and unstable wages as well as lack of fringe benefits, no job insecurity, non-title to leave, no gratuity and no accident and death insurance and lack of power to organise collective bargaining but otherwise is the case in the aspect of permanent staff. Permanent staff are entitle to all benefits in the organisation which includes job security, leave, promotion, gratuity, bonuses, pension scheme, social security, allowance and all other fringe benefit. The only means outsource workers can achieve their goal and enjoin benefit as their colleagues does (permanent workers) is to be part of union, but since they are not under the jurisdiction of collective bargaining to form neither join union. The bulk of workers in the telecommunications, banking sectors and other sectors of the economy are outsourced employees. Increasing numbers of workers have found themselves outside the standard purview of collective relations as against advanced countries where the situation has necessitated a readjustment of collective labour relations rules and practices so that the workers concerned can enjoy the fundamental collective labour relations rights of collective bargaining and union representation, as well as protection against exploitation (Fapohunda, 2012).
As previously stated, much has been studied in relation to outsourcing in different sectors of the economy but there is an apparent gap in literature, most especially in the banking sector, concerning the influence of outsourcing on the employee job performance, employment status and their welfare. This study is, thus, an attempt to fill the gap.
1.3 Research Questions
This research study was designed towards providing answers to the following questions:
1) What is the relationship between outsourcing strategy and job performance?
2) What are the influences of workers welfare, employment status and benefit on job performance?
3) What are the implications of outsourcing strategy and job performance in the banking industry?
1.4 Objectives Of The Study
The general objective of this study is to examine the influence of outsourcing strategy on job performance in the bank industry. The specific objectives of the study are to:
(i) Examine the relationship between outsourcing strategy and job performance.
(ii) Determine the influence of workers welfare, employment status and benefits on job performance.
(iii) Explore the implications of outsourcing strategy and job performance in the banking industry.
1.5 Significance Of The Study
The ability of an organisation to achieve stated objectives depends on the performance of employees. It is therefore necessary to examine the influence of outsourcing strategy on job performance in an organisation. The study will be of great importance to many organisations in this country. The findings will bring awareness to them regarding the influence of outsourcing. In particular, organisations and government can use the research findings to lay out strategies for overcoming the influences.
1.6 SCOPE OF THE STUDY
The scope of the study was limited to all the financial institutions at Ijebu-ode, Ogun-state, Nigeria.
1.7 Definition Of Terms
Outsourcing: is a management strategy by which an organisation delegates major or non-core business functions to specialised and efficient service providers. (Rajee & Hammed, 2013)
Job performance: Job performance is the net effect of an employee’s effort as modified abilities and roles or task perceptions (Jones, 2003). An employee’s performance is determined during job performance reviews, with an employer taking into account factors such as leadership skill, time management, productivity and organisational skills to analyse each employee on an individual basis.
Productivity: is the average measure of the efficiency of production. It can be expressed as the ratio of output to inputs used in the production process.
Efficiency: is the ability to avoid wasting materials, energy, efforts, money and time in doing something or in producing a desired result.
Morale: is the mental and emotional issue, when employees are negative about their environment and believe that they cannot meet their most important career and vocational needs at work, employee morale will low.
Profit maximisation: is the ability of organisation to achieve a maximum profit with low operating expenses.
Liberalisation: is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities.
Privatisation: is the process transferring an enterprise or industry from the public sector to private sector.
Globalisation: is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange.
Contravention: an act of contravening; action counter to something; violation or opposition.
Jurisdiction: power or right of a legal agency to exercise its authority over a person or subject matter.
Structural adjustment programme: are economic policies for developing countries. This policy came to being in order to right and wrong the weakness and ineffectiveness of earlier industrial policies. Its aims and objectives include;
- To promote investment
- To stimulate non-oil exports and providing a base for private sector led development
- To promote efficiency in Nigeria’s industrial sector
- Privatization and commercialisation of the economy towards the promotion of industrial efficiency
- To develop and utilize local technology by encouraging accelerated development and use local raw materials and intermediate input rather than depend on imported ones.
Motivation: is defined as the arousal, direction, and persistence of behaviour. It actually describes the level of desire employees feel to perform will be more, regardless of the level of happiness. Employees who are adequately motivated to perform will be more productive, more engaged and feel more invested in their work.(Essien, 2012)
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