THE EFFECT OF OUTSOURCING ON ORGANIZATION PERFORMANCE

CASE STUDY: CROWN BEVERAGES LIMITED

APTER ONE

INTRODUCTION

1.0 Introduction

This chapter presents the background of the study, problem statement, purpose, specific objectives, scope, research questions, significance, limitations of the study and definition of terms.

1.1 Background of the study.

Outsourcing in developed countries, Outsourcing originally started thousands of years ago and when societies began to form, individuals began to develop specialized skills. Certain tasks were given to these individuals, and thus outsourcing was born. Today, outsourcing is an important part of the business world because it helps businesses and individuals worldwide come together to serve customers more efficiently. Although outsourcing began thousands of years ago, it rose in popularity during the Industrial Revolution of the 18th and 19th centuries. During this time, business owners began realizing the power of doing more in the time that they have. They tried to outsource certain parts of their production to other outside firms (Richard, 2009).

In the USA many hundreds and thousands of jobs were outsourced to Mexico after signing of the North American free trade agreement in 1993. Manufacturers in the USA were accustomed to paying $15-25 an hour with health care and retirement benefits to US workers. They were enabled to hire Mexican workers just across the US boarder to do the same job for a dollar or dollar without benefit.

In the early 21st century in developed countries, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as off shoring or offshore outsourcing. Several related terms have emerged to refer to various aspects of the complex relationship between economic organizations or networks, such as near shoring, crowd sourcing, multi sourcing and strategic outsourcing. Outsourcing can offer greater budget flexibility and control. Outsourcing lets organizations pay for only the services they need, when they need them. It also reduces the need to hire and train specialized staff, brings in fresh engineering expertise, and reduces capital and operating expenses (Lucy, 2003)

North America and European Countries employ Outsourcing in populous Countries. If there is an increase in population, manufacturing prices directly decrease because of cheap labour force. Cheap labour force is an important factor in Outsourcing, following this technological and political dimensions come second. When we look at top Outsourcing Countries we find India, Indonesia, Singapore and China. The demand for cheap labour in the market shows an upward trend. In general Outsourcing creates new employment opportunities. In the countries that receive Outsourced enterprises opportunities are becoming more plentiful whereas developed countries are experiencing increasing unemployment rates.

Outsourcing has become a common practice in developing countries like Uganda, Kenya, Algeria, Libya and others. Outsourcing activities particular characteristics predisposing organization to outsourcing include the broad range of activities undertaken, the high labor content associated with many organization activities, and the volatile nature of demand for organization services.

Uganda has opened up a business process Outsourcing (BPO) center and has been training people in internet technology. The whole great lakes region is hoping that foreign companies will move key functions to Africa and bring down soaring unemployment but Uganda’s lack f IT infrastructure could hold the country back. Inspired by the success countries like India which has become a major Outsourcing hub of western companies, Uganda has been subsidizing its fledging BPO by providing free office space and internet in a new BPO incubator in Kampala. The government has trained hundreds of graduates in BPO skills like IT and plans to train thousands more.

Outsourcing in Zimbabwe offers many benefits to that firms undertakes it. Outsourcing is one reason why the importance of purchasing and its processes has grown in the developing countries. Today, the pie chart many firm’s total spend would previously have shown much greater amounts of spend being allocated to people and capital within the organization. Now that a number of areas have been outsourced, this spend have moved to external suppliers to whom activities have been outsourced.

Activities that are outsourced vary from firm to firm even within the same industry due to factors like difference in goals and objectives as well as strategic plans. Examples of outsourced activities include the following: security, clearing, catering, payroll management, computer maintenance and IT management, ware housing, quality assurance and control, staff recruitment and training, transport management, waste disposal and management and records management (Lucy, 2003).

According to Byaruhanga Juliet (Senior Procurement Officer Crown Beverages Limited), Crown Beverages Limited adopted the strategy of Outsourcing and activities outsourced are Security services, cleaning services, catering services and the provision of some materials like glass bottles, crown corks and others. According to Mr. Sengendo Vincent (Assistant Procurement officer Crown Beverages Limited the main reasons for Outsourcing are cost savings, quality, access to more experienced personnel and through Outsourcing all these benefits are got. To reduce on the challenges of Outsourcing in the organization, they set strategies that are always monitored and followed by both Crown beverages Limited and the Outsourced firm. To build the relationship effectively, the relationship manager of Crown Beverages Limited and the Outsourced organization are active in monitoring and evaluating performance and in addressing issues.

1.2 Statement of the problem

Crown Beverages Limited (CBL) has experienced very stiff competition from both local and multinational companies. This has necessitated it to adopt various strategies such as Outsourcing to increase its efficiency and remain competitive. There are number of studies that have focused on Outsourcing Suraju and Hamed (2013) Outsourcing service is recognized as strategic tool for organizational performance, the more the Organization Outsource, the higher its Organization growth and productivity. According to Mr. Sengendo Vincent (Ass Procurement Officer, Crown Beverage Ltd) says that peripheral activities are the most outsourced with cost reduction being the main driver. He also noted that non-core functions are the most Outsourced to enable them focus on core activities of the Organization. It’s not clear on the criteria established by Crown Beverages Limited to determine services as core and non-core and though there is the practice of Outsourcing in Crown Beverages Limited mainly to reduce costs, there are hidden costs which also lead to the increase in the overall costs of the Organization.

1.3   Purpose of the study.

The purpose of this study was to assess the effect of outsourcing on organizational performance. 

1.4 Objectives of the study.

1. To identify activities Outsourced by Crown Beverages Limited.
2. To determine the challenges of Outsourcing in Crown Beverages Limited.
3. To suggest ways of overcoming the challenges of Outsourcing in Crown Beverages Limited.

1.5 Research questions to the study.

1. What are the activities Outsourced by Crown Beverages Limited?
2. What are the challenges of Outsourcing in Crown Beverages Limited?
3. Suggest the ways of overcoming the challenges of Outsourcing in Crown Beverages Limited?

1.6 Scope of the study

The scope of the study included the subject scope, time scope, and area scope

1.6.1 Subject Scope

The study concentrated on the effect of Outsourcing on the organizational performance. The researcher concentrated on aspects like activities outsourced and their impact on the organizational performance 

1.6.2 Area scope

The study was carried out in M214, Nakawa Industrial Area, Jinja Road taking Crown Beverages as the case study.

1.6.3 Time scope

The scope covered a period between May and September, 2017.

1.7 Significance of the study

The research will provide empirical data for policy makers which will assist them towards formulating appropriate policy environment on how to use outsourcing method to help organization achieve its objectives.

Executives in client firms are no longer going to be satisfied with the same level of service delivery through the outsourcing lifecycle. They will seek to achieve business transformation and innovation in their present and future services, beyond satisfying service level agreements (SLAs).

Organizations may be in position to realize the real benefits from outsourcing activities, the study will help the take better control of outsourcing contracts and ensure they are achieving their intended, specified goals.

Future researchers willing to conduct further research on issues regarding outsourcing and performance of firms shall obtain adequate literature that will help bridge certain gaps in their findings. 

1.8 Definition of terms

Outsourcing

According to Johnson (2002), Outsourcing refers to the strategic use of outside resources to perform activities that were previously (traditionally) handled by internal staff and resources. It’s a management strategy by which functions that may be considered non-core are transferred to specialist, efficient external providers. Outsourcing is an arrangement where one company provides services to another company that would otherwise performed its self.

Organizational performance

According to Richard et al (2009), Organizational performance comprises of the actual output or results of an Organization as measured against its intended outputs (goals and objectives). Organizational performance encompasses three specific areas of firm outcomes that is financial performance, product market performance and shareholder return.

CHAPTER TWO

LITERATURE REVIEW

2.0     Introduction.

This chapter consists of related literature about outsourcing. It will include the concept of outsourcing, the reasons for Outsourcing, benefits of outsourcing, the challenges of Outsourcing in Organizations and the ways of overcoming the challenges of Outsourcing in Organization.

2.1    The concept of outsourcing.

Corbet (2002) states that the use of outsourcing is growing stronger, Satisfaction with service providers is strong but there are some concerns only 60% of executives are satisfied with their outsourcing initiatives and only 11% of the executives are very satisfied.

The ranges of services that are outsourced are timeless and these include: waste disposal, research and development, transmission services, asset repair and control, library and cleaning, estate management and catering.

Johnson (2002) defined Outsourcing as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources”. Sometimes known also as “facilities management”, outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers, who become valued business partners. Companies have always hired contractors for particular types of work, or to level-off peaks and troughs in their workload, and have formed long-term relationships with firms whose capabilities complement or supplement their own. However, the difference between simply supplementing resources by “subcontracting” and actual outsourcing is that the latter involves substantial restructuring of particular business activities including, often, the transfer of staff from a host company to a specialist, usually smaller, company with the required core competencies (Peterson, 2005).

Different authors like Bendor, Bona, and Lyssons suggest that the following activities should not be outsourced or if done should be done with great management considerations: management of strategic planning, management of finance, management of consultancy, control of supplies quality and environmental management.

There are many reasons for a company to choose to outsource certain activities and business functions and in evaluation of the success of outsourcing should depend on the review of the outsourcer’s project. Based upon studies by consultants in this field, it should be approached with great caution and care.

Most corporations believes that in order to compete globally they have to look at efficiency and cost containment rather than relying strictly on revenue increased. (Bartlett 2004). As companies seek to enhance their competitive positions in an increasingly global market place, they are discovering that they can cut costs and maintain quality by relying more on outside provider for activities viewed as supplementary to their core businesses.

The growth of outsourcing in the logistics area is attributed to transportation deregulation, the focus on core competencies, reduction in inventories and enhanced logistics management computer programs.

Leenders gave an example that Hewlett Packard (HP) turned over its inbound raw materials ware housing in Vancouver, Washington to Roadway logistics. Roadway’s 140 employees operate a ware house 24 hours a day, seven days a week, coordinating the delivery of parts to the ware house and managing storage. Hewlett-Packards 250 employees were transferred to other company activities. Hewlett Packard reports savings of 10% in ware housing operating costs.

Saturns purchasing management team supported the idea of outsourcing non production purchasing as a way to minimize the number of suppliers, develop partnering relationships, minimizing problems and reduce the accounts and administrative paper work.

Lyssons and Gillingham (2003) states that outsourcing is the strategic use of resources to perform activities that traditionally handled by internal staff and their resources. It’s a management strategy by which an organization outsources major non-core functions to specialized and efficient service providers to help the organization perform best where  it is best capable.

One of the most important factors for successful outsourcing is the way the company strategically positioned its future provider. The company strategically should be in position where it can exert some control over its provider.

Lund (1997) used outsourcing to mean that someone who is not on the organization pay roll manages the whole part of the organization function, employing their own staff and assets. Outsourcing describes how services are obtained.

Maurice F Greaver states that “like marriage, outsourcing is much easier to consummate that is to terminate and recover from if done poorly”.

Ronan MC lvor states that services outsourcing has become an important feature of the global economy. Globalization and advances in technology have allowed companies to transfer information technology, human resource, legal and accounting services to local and foreign vendors.

Greaver ii states that stressing on the importance of a good beginning. He quotes British philosopher Alfred North White Head saying “seek simplicity and distrust it” on other words it takes time to implement an outsourcing initiative and longer to do it right.

Currently one of the most prominent global economic trends is outsourcing of activities previously carried out in-house. Due to economies of scale and scope as well as differences in factor costs, some actors can carry out certain activities more cost efficiently than other actors.   ( Cachon and Harker 2002, Jennings 2002). The outcomes of Outsourcing focus on economic effect for society and financial effects for firms, such as reductions in the number of employees, 

Historically outsourcing was used when an organization could not perform due to incompetence, lack of capacity, financial pressures, or technical failures. But now outsourcing is not the solace of dysfunctional company, but is being practical to restructure successful organization.

Appleby (2000) outsourcing can improve production by eliminating backlogs, insuring significant cost reductions from staff time, space utilities, materials and equipment. outsourcing may also offer expertise that is not available in-house and organization management can concentrate more resources on activities tied directly and mission of the organization. Outsourcing may improve services that have become productive. (Ebbing house, 2002).

Tsiang (2006) cautions that outsourcing is a controversial issue that could affect the future of the organization profession. Those in favor emphasize that outsourcing saves organization budgets and  speeds up cataloguing process help the organization to get specialized services, centralizes organization functions to specialist in the field and goes along with the trends of privatization and globalization.

Pantry and Griffiths (2004) states that tackling outsourcing successfully will not only ensure that organization services are perceived as a strategic asset but will also enhance the user oriented approach. He recommended systematic planning which includes an information audit.

Billington (2001) see outsourcing primarily as the transfer of the production of goods or services that had been performed internally to an external party. Outsourcing means that the company divest its self of the resources to fulfill a particular activity to another company to focus more effectively on its own competence.

Axelsson and wynstra (2002) defines outsourcing as the decision and subsequent transfer process by which activities that constitute a function that earlier have been carried out with in a company are instead purchased from an external supplier.

Outsourcing is the act of transferring some of the organizations recurring internal activities and decisions right to outside providers as set forth in the contract.

Sabiti (2003) says that the organization that outsources is cutting administration cost of maintaining or doing the activity in-house. The overriding factor in outsourcing decision is cost cutting, but whereas this may make business sense in the beginning, in some cases it could bring complications and put the whole exercise at a high risk if all concerns are not adequately assessed.

Antonucci (1998) advised that if the vendor is efficient than the prospective client, organization could reduce its own costs through function considerations and resource optimization. Due to experience in the field and knowledgeable experts, it leads to proper and efficient use of resources yet with good quality work.

Bailey (1998), many organizations today are turning to external procurement, where we even find that functions such as transport, computer services, cleaning services accounts and even purchasing can be outsourced. This gives the company’s employees time to perform their duties to the company satisfaction and this improves the organizational performance which is every company’s objective to achieve competitive advantage.

In an attempt to enhance their competitiveness organizations are increasingly turning to outsourcing. Not only are changes in the business environment drivers behind the rise of outsourcing as a business strategy, also new management concepts such as business process re-engineering, organizational restructuring, benchmarking, alliance management, and lean management have stimulated the trend towards outsourcing.

Outsourcing can be described as a transfer of activities that were previously conducted in-house to a third party. (Ellram, 2006).

Outsourcing involves the sourcing of goods and services previously produced internally with in the sourcing organization from external suppliers. The term sourcing can cover many areas including the outsourcing of manufacturing as well as services. The term outsourcing is commonly used in relation to the switching of the supply of product or service activities to external suppliers. 

Outsourcing can involve the transfer of an entire business function to a supplier. Alternatively, outsourcing may lead to the transfer of some activities associated with the function whilst some are kept in-house. Outsourcing can also involve the transfer of both people and physical assets to the supplier. According to Hesterly, W, (2007) Outsourcing is defined as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources”. 

According to Griffiths D., “outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers, who become valued business partners”. He adds that a company may choose to in source or outsource and sourcing means that a company makes internally a particular material that it needs for its operations. Outsourcing means that it buys the material from an external supplier. In sourcing and outsourcing occur when the decisions are made to reverse past buy-or-make decisions Gottfried son (2005). 

Procurement managers have to use a variety of knowledge for the in sourcing-outsourcing decision. Their essential approach is to analyze and compare the benefits of in sourcing and outsourcing and the sourcing decision is important because it affects costs, but it also defines the boundaries that a company draws around its operations. Companies are likely to retain internally those operations that are considered part of their core activities, while they are more likely to outsource activities considered rather marginal. Nevertheless, for this important decision, managers should also consider a variety of other factors which go beyond costs, such as supplier’s competency, quality, delivery time, risk mitigation, technology, reliability and continuous improvement, Hesterly, W, (2007).

Companies have always hired contractors for specific types of work, or to reduce their workload, and have formed long-term relationships with companies whose capabilities complement or supplement their own. An important part of managing outsourcing is the consideration of potential exit strategies. There are many instances where outsourced services have been taken back in-house clear evidence that even if companies outsource they can eventually retain long-term control, (Williamson, 2008).

Strategic objectives, such as outsourcing initiatives, must come from the top levels of a company. It is essential that both the company and the supplier have a clear and shared understanding not only of the specification but also of the goals and objectives, and that this understanding is translated into a workable strategic plan. Following the careful and rigorous procedures necessary for appointing an external supplier, the contract should be well-designed and mutually acceptable. Managers are looking ahead and are aware of the responsibility for guaranteeing the success of their company’s outsourcing initiatives, making sure that it does not stop when “the ink has dried on the contract”. Unfortunately, this has not always been the case. A mixture of uncertainty combined with a lack of attention to critical details has created a scenario where 25% of outsourcing contracts was re-negotiated or cancelled (Prahalad,& Hamel, 2001).

On-going relationship management is important and top management must stay involved during the implementation of the contract. Not only should there be a clearly defined escalation procedure, but management should meet at appropriate intervals to discuss the outsourcing relationship. Meetings should also be held at the operational level to address the workings of the outsourcing contract in practice, to identify and resolve any issues along the way and agree on changes to ensure continuous satisfaction, (Williamson, 2008). 

2.2 Activities Outsourced in a manufacturing Organization.

Daina (2014), Companies hear that by Outsourcing their non-core activities, they can improve their performance of their core activities. Retain what is core and Outsource what is non-core. For Organizations to determine which activities are best suited for Outsourcing can use two main types of business strategies that is Generic strategies (growth, globalization, entering new markets, and retrenchment). Competitive strategies deal with differentiating products and selling goods at a lower price. When deciding what to Outsource, it’s important to understand how Outsourcing fits with the overall goals of the company and what its use is expected to achieve fits with the overall goals of the company and what its use is expected to achieve.

According to “Linking Outsourcing to business strategy” by Richard (2009) its more helpful to decide which activities deserves to be outsourced by evaluating: the likelihood a task will bring competitive advantage (strategic), the strength of the internal capability for conducting a task (internal).

Customer support.

Daina (2014) one of the most Outsourced business tasks is customer support. The cost of employing, providing office space, training and paying taxes can be quite high, where as an Outsourced call center in another country can frequently do the job for a fraction of the cost. The decision to outsource customer support is a tradeoff. 

Accounting.

Lucy (2003), Overseas workers are routinely trained in American Accounting practices making it easy and convenient for American business to outsource their financial statements and other book keeping tasks. Given the sensitive nature of the work however it’s important for business to ensure that they are working with competent qualified teams (Johnson, 2002).

Web design.

Roberto (2001) Overseas teams are often quite skilled in web design and some providers even offer businesses their choice of ready-made website templates that the team can customize to their liking. However, not all well design jobs are appropriate for Outsourcing. In general, Outsourcing is preferable for standard corporate web design jobs for which time is of essence. If your web design job requires significant creativity or innovation, it’s probably best handled by an in-house designer who you can monitor throughout the project’s life cycle. 

Computer programming.

Prahalad and Ttamel (2001) Computer programming is commonly outsourced for similar reasons. A relatively standard programming project like a message board, calculator or data base can be quickly and easily completed by outsourced teams for pennies on the dollar in relation to what experienced American programmers would charge for the same work.

Research and development

Lucy (2003) all types of research and development projects are outsourced by today’s businesses. Everything from market research, customer demographics, financial research and even pharmaceutical research is handled by overseas teams trained in various methodologies of each field. The most important task from the company’s stand point is locating an Outsourcing firm that specializes in the unique type of research needed for the project in question. Like any other field will specialize in different things. 

Engineering

Daina (2014) virtually any kind of engineering task-be it mechanical, electrical, architectural can be efficiently and effectively outsourced. This includes sketches, auto CAD designs, modeling and consulting. Remember however the criteria for intelligently outsourcing web design because it applies equally to engineering. Williamson (2008) When in doubt, its best to outsource only standardized, paint-by numbers projects that rely more on commonly known methods than any unique vision you or your fellow executives uniquely possess.

2.3 Challenges of Outsourcing in an organization

Kotabe (1998) argues that there could be challenges of outsourcing resulting from a company’s dependency on independent suppliers. Such reliance on outsourcing may make it inherently difficult for the company to sustain its long term competitive advantage without engaging in the development activities of the constantly evolving design and engineering technologies. 

Decline in customer satisfaction

Hannah (2001) states that poor post purchase customer service can mean a loss of revenue as consumers go elsewhere the next time they need to buy. Mullin (2006) A study conducted by professors at the university of Richmond and the university of Michigan showed that outsourcing office duties does result in decrease in customer satisfaction. Researchers had expected to find that language barrier from offshore companies was a culprit but the study concluded that customer loyalty was affected whether the company was a domestic provider or based overseas.

Hidden costs

Hannah (2001) also states that although companies see an immediate benefit to the bottom line when outsourcing, there are often hidden costs that can negate any of those savings. Outsourcing almost always means job eliminations, which can have a negative effect on morale, loyalty and productivity among employees who remain. A difference in time zones particularly when outsourcing to offshore companies can severely affect the productivity of employees who oversee and manage that piece of business. All travel and related expenses can pile on these employees as they travel back and forth for training and other meetings (Chatzglou, 2009). Jaris (2012) little or no support from client leaders receiving services is another significant factor that limits Outsourcing since it involves hidden costs and there is no support. Although outsourcing most of the times is cost effective at times the hidden costs involved in signing a contract. When signing a contract across international boundaries may cause a serious threat. Elizabeth Sparrow.

Minimal job security

Outsourcing creates minimal job security for the new employees because the organization was not committed to these employees beyond the three year contract. There are also very limited opportunities for training and development as well as promotions (Hemmington, 2009).

Jaris (2012), the prospect of Outsourcing also creates uncertainty for existing employees who may decide to look else were for employment. 

Dramatic changes / change management

Outsourcing entails dramatic changes in the nature of work, control, and organizational design (Klass et al, 2001). The outsourcing process usually results in the loss of productivity. Such lower productivity can exasperate an already unacceptable performance level and inspire additional outsourcing. 

Jaris (2012), the very first challenge that companies are likely to experience when embarking on Outsourcing certain functions is that of a possible lack or buy-in from people inside the company which may take the form of active or passive resistance. 

Williamson (2008) Outsourcing has significant social implications for an organization for example it can lead to the redeployment of staff with in the customer organization or the transfer of staff to the supplier organization. The demands associated with outsourcing transcend organizational boundaries, and there for the approach to managing the change process must ensure that complementary activities and behaviors are exhibited within and between organizations. Frequently organizations fail to engage in the process whereby time, money and efforts are invested in bringing about change in culture, structure and reward systems. 

Decline in the level of participation of workers

Roberto (2001) as outsourcing strategy continues, employees begin to feel insignificant and level of participation in their respective work groups gradually declines. This might cause increase level of anxiety and stress.

Workforce reductions

Baruch and Hind (2009), outsourcing entails a series of complex psychological process and subsequent behavioral responses. Feelings of fear, anger, grief, guilt, insecurity, unfairness, depression, reduced risk taking and motivation are expression of survival syndrome. Beside “survivors” are expected to bring result soon, cover the extra work and come up with the new ideas. This additional pressure may lead to high turnover.

Employees are affected from the unilateral “violation of psychological contract” which is the unwritten agreement between the employer and the employee in which the employer offers job security and stability at the exchange for loyalty and commitment (Sahde 2004). Unless this situation is addressed immediately with an effective retention strategy, it will bring additional loss of productivity, confusion and stress.

Dissatisfied workers, after the implementation of outsourcing strategy are more likely to leave organizations than their satisfied colleagues are (Charara, 2004). This is because the outsourced workers fill their positions and they decide to leave the organization.

Loss of skills

Outsourcing can lead to the loss of skills and the potential of innovation in the future. In the long term an organization needs to maintain innovative capacity in the number of key activities in order to exploit new opportunities in its respective market. If an organization has outsourced a number of critical activities its ability to innovate may be severely diminished (Earl, 2006).

Johnson (2002) these impacts can become more pronounced when the objective of the outsourcing company and the suppliers are conflicting. For example the customer organization may decide to establish a short term contract with the supplier in order to obtain the lowest price and keep the supplier in a weak position.

Cultural differences

Jaris (2012), when embarking on offshore Outsourcing, cultural differences shouldn’t be ignored. Two types of cultural differences cause difficulties between companies and their Outsourced providers: Corporate differences and national or regional differences in terms of national culture. There may be differences of language, religion values and others.

Merril (2012), an example is the fact that so-called high-context values, value politeness and respect more than clarity and will minimize confrontation in order “not to looseface”. So called low-context cultures such as American or Australian cultures focus more on figures and closing the deal and can be perceived as aggressive. 

Unrealistic expectations

Jaris (2012), another shortcoming of Outsourcing is the expectations by clients that the Outsourcing service provider will take care of everything if the expectations of Outsourcing especially by the management of the company are too high. This will lead to over critical feedback and disappointment.

Bucki (2000) it’s important that the company’s executive management team is informed about the reasonable risks of an Outsourcing project, the potential costs and the mitigation strategies. Equally employees, customers and other stake holders should also be kept informed as the project unfolds. 

Intellectual property

Jaris (2012), the intellectual property of companies include business plans, trade secrets and other proprietary knowledge. Outsourcing presents a considerable risk of theft or hacking of the property to client companies

GeryMenegaz (2012), there is a challenge of securing the confidential information of company’s customers.

Thomas (2010) used a point of security risk and explain in essentials of business process Outsourcing that “mitigating risk is a primary concern for initiative. Client companies also share information with their Outsourcing partners that may be of great interest to their competitors. International innovations in data security have to a large degree helped to mitigate the risk of sharing sensitive data with service provider companies 

Linda (2009) When an organization outsources human resource, pay roll and recruitment services, it involves a risk of exposing confidential company information to a third party since the third party performs the internal activities of an organization on a day to day basis there by getting exposed to confidential information of an organization.

2.4 Ways of overcoming the Challenges of Outsourcing in an organization.

Establishment of a comprehensive communication program

Jaris (2012) to solve a problem change management, a comprehensive programme should be developed and disseminated to all stake holders who was affected by the Outsourcing process. The message should be personalized for different levels of employees. Employees should be given the opportunity to ask questions and be heard.

Implement your corporate strategy

Gottfriedson (2005) postulates that if you understand your company’s purpose then you can start implementing the process necessary to achieve your objectives and ensure that every contributor to the business is engaged in achieving these goals. In essence, corporate objective setting should relate to key factors for business success such as profitability, market share, growth, cash flow, customer satisfaction or quality of the firms products.  It is fascinating that the growth of Google was the focus on product and customer satisfaction and not on profitability, the principal being if we can develop a superior product to the likes of Yahoo then market share, revenue and profitability will follow, Lacerda (2012). The corporate objectives require specific unit objectives, such as increasing your number of customers by 10% or reducing the length of time in producing the product or delivering the service. By decidinrg on the most important or primary objectives then all else will follow.  Trade-offs between objectives will occur, for example a company’s objective of achieving significant profit growth may be at the expense of the quality of the firm’s product or marketing expenditure for future year’s sales, LaForge, (2007).

Multi-cultural training programme

Bucki (2000) diversity multi-cultural awareness training programme will assist the employees and the client company to understand the culture of the service provider employees’ norms and customs. Often Outsourcing service providers already have such awareness training in place for their own staff and was happy to share materials and content with their clients. The Outsourcing provider on the other hand may be trained in the corporate culture of the client (Jaris, 2012).

Educational seminars and workshops

NSW Business Chamber regularly runs educational seminars and workshops around topical business issues which are impacting businesses around our state.  These events are not only a source of practical and useful business information for owners, operators and managers of small to medium sized business, but are also a wonderful opportunity to network.  Setting goals without specific plans to reach them is like taking an address with you on a trip without looking up the directions to get there. Goals and objectives are important to help take small businesses to the next level, but each department’s strategy should be supported by specific tactics LaForge, (2007). 

Intellectual property

Jaris (2012), in order to mitigate this risk it is necessary to develop stringent safe guards and protocols governing access to information, physical safe guards will protect buildings and equipment from unauthorized access and administrative safe guards stipulates policies and procedures for operation, the conduct of employees and  the use of security controls. An Outsourcing service provider should adopt an information security risk management strategy that complies with the best. 

Set Specific Objectives

Marcia (2015) The more specific you can make your goals, the easier it was to develop plans to achieve them. For example, setting a goal of increasing sales is too general to help you plan the strategies and tactics to do so. Even setting an objective of increasing sales by 15 percent is too vague. More specific goals would include increasing online sales, increasing sales among a specific target customer group, increasing sales of specific items in your product line or increase sales through the use of a referral or rebate program.

Create Individual Plans

For each objective you set, create a step-by-step plan to reach it. For example, if your goal is to increase online sales, create a plan that includes updating your website pages, improving your online order processing software, boosting your social media and search engine optimization efforts and creating advertising and promotions specifically targeted to get customers to your website, LaForge, (2007).

Track Results

Setting an end date for reaching your objective is only one deadline that’s important in achieving goals. Set chronological benchmarks that help you track your results. This will help you determine whether you are meeting your short-term goals or whether you need to adjust your strategies and tactics. Hold weekly department meetings and review monthly sales, production and financial reports (Hesterly, 2007).

Motivate Stakeholders

What’s good for the company is obviously good for employees, but if meeting a goal puts extra money into an individual’s pocket, your key staff was more motivated to get and stay involved in helping you meet your objectives. Create a bonus system that rewards workers who help you reach your goal. Be specific about how and when bonuses was paid, and set the benchmarks low enough that there is no question employees will earn the bonus if you succeed. When creating a bonus program, set your budget by taking the attitude that you want to pay the maximum because it’s worth it, in terms of the benefits you’ll receive, (Boone, 2002).

Use Experts

Gottfried son (2005) stipulates that do not be afraid to admit you don’t know everything. Hire consultants who can help you develop tactics for achieving your objectives. You don’t need to hire contractors long-term. Meet with financial, sales, marketing, human resources, and production and information technology experts to review your goals, set realistic objectives and create specific plans for reaching them. This might require buying new equipment or software or training your staff to handle added responsibilities (Abell, 2009).

Security control

Thomas (2010) explain that client companies have to ensure that their service providers adhere to the client’s security policies and that all work done adheres to up to date security procedures and therefore the issues of security should be addressed in contracts with service providers and in service level agreements

They advise that both client and service provider should review their internet security policies keeping in mind the following principles: Limiting access, developing a secure password policy and implementing an  external audit by a professional auditing company which should also be on call in case of security breach.

In conclusion Outsourcing has a positive effect on a firm to achieve its objectives. However firms must follow a systematic approach to analyzing the context of the outsourcing activity. The firm should examine, including the overall goal, how critical the service is to competitive advantage, how dependent the service is on other inputs from the firm, how work was codified and monitored (and the precision of the metrics) and how mature the firm is in managing outsourcing arrangements. Outsourcing would increase flexibility and responsiveness, increase speed to market, improve quality, reduce customer response time, grow revenue and gain access to markets. It leads to increased speed, access to skills and talent which all translate to increased progress in its pursuit to achieving its objectives.

Conclusively, by studying all possible and accessible literature it can be drawn that there is a linkage between Outsourcing and organization performance.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

The chapter indicates how the study was organized and conducted. It presented the methods the researcher employed and the instruments that were used in data collection and analysis. It described the research design, study population, sample size, sampling techniques, Data collection sources, Data quality control, Data analysis processing and presentation and procedure of data collection.

3.1 Research design and procedure

The study employed a descriptive research design. The researcher employed both quantitative and qualitative approaches of data collection. A qualitative research design aimed at describing phenomenon; therefore a descriptive research was used to measure the relationship between the variables, Quantitative research designs was used to present numerical data. According to Mbendi and foster (2007), the best design depends on the research questions as well as the orientation of the researcher. The reason for this choice of design was to increase the reliability of the report. This design was used for profiling, defining, estimating, predicting and examining associative relationships.

3.2 Area of the study.

Patton (2006) describes that the study setting begins with the physical environment and providing sufficient information that the reader doesn’t have to speculate what or where the study was obtained from. This study was conducted at Crown Beverages Limited located at M214, Nakawa Industrial Area, Jinja Road. The researchers chose this location because it has an accessible population of interest that’s convenient for the researcher to collect data. 

3.3 Study population

 The study involved a study population of 68 and a sample size of 40 respondents’ the table below shows the representation. 

Table 3.4.1: Population and sample size.

Source: primary source

3.4 Sampling technique.

The study used simple random sampling as the main sampling technique. A simple random sampling technique was used because each and every member in the sampling frame has an equal and independent chance of being selected for the sample. Every item in the population was chosen on a chance basis to remove any possibility of bias that could arise. A lottery method or a table of random numbers was applied to ensure the unbiased selection of the sample. This method was also used because it is appropriately applied in homogeneous populations and is best applicable to definite populations.

Purposive Sampling was also used depending on the judgment or discretion of the researcher. The sample selected reflected the researcher’s personal interests and judgment. The researcher targeted a group of people believed to be reliable for the study 

3.5 Data collection sources.

The data was collected from primary and secondary sources. 

3.5.1 Primary sources.

Primary sources of data include first hand evidence and data collected by the researcher or his assistant from Interviews and questionnaires which was the major source of primary data. According to Roston (2001), primary data is that kind of data that has been gathered for the first time and has never been reported anywhere, short comings of secondary data sources such as out datedness and inadequacy in terms of coverage, necessitates the use of primary sources first.

3.5.2 Secondary sources. 

Secondary sources was obtained from reviewing the information previously written by researchers and scholars in text books, journals, encyclopedias, Dictionaries, handbooks, Articles, literature reviews, abstracts, commentaries, other research and Criticism of works of literature on out sourcing nationally and internationally so as to get the clear extent of the problem globally

3.6 Data collection tools.

The researcher used the following tools for collecting data.

3.6.1 Questionnaires.

The researcher used both formal and informal methods to elaborate information in the questionnaires. Questionnaires were the main instrument to be used in the study. The researcher used both open ended and closed ended questions to gather information from the selected respondents. Closed questions was used to create greater uniformity of responses while open questions give respondents a chance to give their own opinions that are outside the closed questions. A scale showing the degree of agreement and disagreement of responses from the respondents was used to present some of the questions. The instrument was appropriate because it saves time and the respondents was given chance to answer questions at their convenient time. 

3.6.2 Interviews.

The researcher also collected data from respondents by the use of face to face interviews. This helped get responses from questions that couldn’t be accommodated in the questionnaire. An interview guide was prepared and focused on fulfilling the objectives of the study. This method was used because it is flexible, accurate and faster in yielding information needed for the study. 

 3.7 Data quality control. 

This section ensured that the data collected conforms to reliability and validity.

Validity

To ensure validity, the data collection instruments were discussed with supervisor, lecturers and colleagues for accuracy and consistency before the study begins. The tools were designed so that each question on the scale is linked with the objectives or research questions and covered the full range of issues that was measured. The researcher personally administered the instruments to ensure accuracy and timely collection of the data from the different respondents. The researcher ensured validity and truthfulness of the research through creating provision for accuracy.

Reliability

The instruments were pre-tested by selecting a few staff members, reviewing and improving, to ensure reliability before they are really applied in the study. This ensured that the instruments were free from ambiguity and that they were easy to fill. The researcher checked the questionnaires to ensure that all the questions were appropriately answered.  The researcher attained reliability of the study findings by employing different measures that ensured consistency of the research.

3.8 Procedure of data collection.

Recognizing the importance of formality in this study, the researcher obtained a letter of introduction from School of Management and Entrepreneurship Kyambogo University, and presented it to the relevant officials at Crown Beverages Limited, upon being granted permission; the researcher identified and select respondents and prepare a sampling frame, after the respondents are chosen, the researcher administered the instruments and gave appropriate time before collection. The data collected was then processed, analyzed and a final report was presented to School of Management and Entrepreneurship, Kyambogo University.

3.9 Data processing, analysis and presentation.

3.9.1 Data processing. 

After data collection, the next step was to process the data and this simply involved making it more meaningful and presentable, organized, and easy to analyze by the researcher and any other interested group of individuals.

Data was edited, coded and sorted for accuracy, consistency and summarized using the simple descriptive tables. Data processing involves coding, editing and frequency tabulation using data entry software including; SPSS and Microsoft excel 2010.   

Editing; after gathering the data, it was checked and edited to verify its competencies and accuracy. 

Coding; Coding is an interpretive technique that both organizes the data and provides a means to introduce the interpretations of it into certain quantitative methods. The researcher will make sure that the data collected from respondents is logical, clear, consistent and relevant to the study. There was the  use of code numbers other than that respondent’s real names for security purposes in order to ensure free interaction of respondents, use of codes avoided exposure of any record  or individual.

3.9.2 Data analysis.

The tools for classification of data include the use of cumulative frequency distribution and pie charts. Further analysis of Quantitative data was done using computer software called Statistical Package for Social Scientists (SPSS). 

3.9.3 Data presentation.

Processed data was presented using tables showing percentages and frequencies of the data collected. 

3.10 Ethical consideration.

The researcher equally and sensitively respect the ethical standards that apply to the society and other concerned parties. Therefore these ethical conditions represent a stated code of conduct creating a baseline on which the research was conducted. The researcher therefore applied the following in regard to the research ethics;

Informed Consent. The researcher made sure that the respondents clearly understand the purpose of the study and its outcomes and that participation is voluntary. The researcher was in position to inform the respondents and allow them room for making informed consent, either to participate or withhold their participation in a goodwill rather than coercion. 

Confidentiality. The researcher also made sure that maximum secrecy and confidential cases are carefully handled at the respondent’s request. The researcher ensured this by avoiding exposure of any record  and use of code numbers other than that respondent’s real names for security purposes in order to ensure that free interaction and opening-up to the researcher.

CHAPTER FOUR

ANALYSIS, PRESENTATION AND INTERPRETATION OF RESULTS

4.0. Introduction  

This study aimed at assessing the effect of outsourcing on organizational performance. The study is purposed to find out whether the organization’s profitability has improved, stagnated or declined due to the use of outsourcing. This chapter was presented basing on the research objectives. 

4.1 Background Information on Respondents 

This section of the study discusses the various socio demographic characteristics of the respondents selected for the study. The major socio demographic variables discussed include; sex, age, level of education, department and year of service. The results are presented in Tables below.

Table 4.1: Showing Sex of respondents

Source: Primary Data

From Table 4.1, out of the total number of respondents in the study area, majority (72.5%) were males whereas 27.5% were also females. Males were found to be more active in participation which explains their highest number. However, both were considered since it was important to get views of women in the study.

Table 4.2: Showing Age of respondents

Source: Primary Data

The majority (50%) of the respondents were predominantly between the ages of 31 and 40years. A significant percentage (25%) of the respondents was also 41 and 50years. 31-40years had the highest number because these are the most active age group hence they are actively involved in area of study, therefore they had rich experiences and could also appreciate the importance of the study. 

Table 4.3: Showing Highest Level of Education

Source: Primary Data

According to the study findings, majority of the respondents had attained Degree, Diploma and Certificate with 20 (50%) and 14 (35%) and 6(15%) respectively. The tendency of older employees with higher levels of education, longer organisational tenure showed firstly, older employees who are well educated are likely to receive higher organisational rewards, and sometimes less work load, than less educated employees and/or younger people do. Secondly, the longer tenure employees tend to show higher levels of organisational commitment than shorter tenure employees, because they have been associated with their organisations for some time and, thus, may have ascended to better positions, or simply have enjoyed working there. 

Table 4.4: Showing Department of Respondents

Source: Primary Data

From the table above, majority of the respondents (17.5%) were of the warehousing department, 15% of them finance, another 15% were from administration. 12% of the study respondents were in the operations department and respondents from procurement, sales and marketing and human resource each made 10% of the study population. 

Table 4.5: Showing Years of Service

Source: Primary Data

The study sought to identify the years of service of respondents and results show that majority (42.5%) had spent 1-5years, 30% of them had spent 6month – 1year, 17.5% of them had worked in the organization between 5-10years and only 10% of them had worked in the organization between 1-6months. This implies that information provided was based on experience acquired with in the time the respondent spent at the organization.

4.2 Activities outsourced

The study sought to know the activities outsourced. The results were obtained and are presented below;

Table 4.6: Activities outsourced 

Source: Primary Data

The study sought to identify activities that the organization outsources and result shows that, majority of respondents (42.5%) strongly agree with customer support, 35% of them agree and only 10% of the respondents disagree. Since the majority of the respondents were positive implies that the organization out sources customer support.

Results also show that most (37.5%) of the respondents agree with accounting, 30% of them were not sure, 20% of the respondents strongly agree and only 12.5% disagree. From findings majority were positive on accounting implying the Crown beverage ltd outsources accounting services since it is vital for the businesses to have skilled personnels.

Table also indicates that a majority of the respondents (75%) strongly agree with web design, 25% of them agree. No respondent was not sure, disagree, or strongly disagree.  This implies that the organization always outsources external web designers.

Also findings indicate that, 87.5% of the respondents strongly agree with computer programming while 12.5% of them agree. All respondents were positive with the statement implying that the organization always outsources computer programmers. This means that the organization does not have internal computer programmers.

Results also indicate that majority of the respondents (62.5%) strongly agree with research and development, 37.5% of them agree. This implies that the organization also outsources its research and development.

Most of the study respondents (50%) strongly agree with engineering, 47.5% of them agree while only 2.5% of the study respondents disagree. This implies that Crown beverage ltd always outsources any engineering services be it electrical, mechanical, architectural or any other. However, disagreement (2.5%) implies that the organization has some aspect of engineering that it does not outsource.

On security, majority of the respondents (97.5%) strongly agree while 2.5% of them agree. This implies that security services at the organization are always outsourced.

Also results as shown indicate that majority (50%) disagree with cleaning, 32.5% of them strongly disagree, 12.5% of the respondents strongly agree, while 5% of the respondents agree. This implies that the organization does not entirely outsource cleaning services since the majority of the respondents disagree. However there are some areas of cleaning where the organization always outsources according to the study findings.

4.3 The challenges faced while outsourcing

The study sought to identify the challenges faced while outsourcing. The results were obtained and are presented below;

Table 4.7: The challenges faced while outsourcing

Source: Primary Data

According to table above, majority of the study respondents (100%) agreed that poor post purchase customer service can mean a loss of revenue as consumers go elsewhere the next time they need to buy. This implies that poor post purchase customer service can mean a loss of revenue as consumers go elsewhere the next time they need to buy.

Majority of respondents (97.5) strongly agreed that there are often hidden costs that can negate any savings, 2.5% agreed, none of them opposed implying that there are often hidden costs that can negate any savings.

Few respondents (12.5%) opposed outsourcing creates minimal job security for the new employees as compared to 57.5% who agreed while 30% were not sure. This implies that outsourcing creates minimal job security for the new employees.

Also majority of respondents (100%) agreed that outsourcing entails dramatic changes in the nature of work, control, and organizational design as compared to none of the respondents who opposed or were not sure. This means that outsourcing entails dramatic changes in the nature of work, control, and organizational design at Crown beverage ltd.

Furthermore, findings in table above indicate that most respondents (100%) agreed that employees begin to feel insignificant and level of participation in their respective work groups gradually declines while no respondents opposed or were not sure. This implies that at Crown beverage ltd, as a result of outsourcing employees feel insignificant and level of participation in their respective work groups gradually declines.

Fewer respondents (40%) opposed the statement that outsourcing can lead to the loss of skills and the potential of innovation in the future compare to those who concurred (52.5%) while only 7.5% were not sure. This implies that in most cases, outsourcing can lead to the loss of skills and the potential of innovation in the future.

4.4 Strategies of ensuring effective outsourcing

The study also sought to suggest strategies for effective outsourcing. Results were obtained and are presented in table below;

Table 4.8: Strategies of ensuring effective outsourcing

Source: Primary Data

From Table above, findings show that fewer respondents (0%) opposed the statement that a comprehensive programme should be developed and disseminated to all stake holders who were affected by the outsourcing process compared to those who concurred (100%) while no respondent were not sure. 

Fewer respondents (12.5%) opposed the statement that multi-cultural awareness training programme will assist the employees and the client company to understand the culture of the service provider employees’ norms and customs compared to those who concurred (57.5%) while only 30% were not sure. This implies that, multi-cultural awareness training programme will assist the employees and the client company to understand the culture of the service provider employees’ norms and customs at crown beverage ltd.

No respondents opposed the statement that attending educational seminars and workshops compared to those who concurred (100%) who agreed. This implies attending educational seminars and workshops can improve outsourcing at crown beverage ltd.

Fewer respondents (2.5%) opposed the statement create a bonus system that rewards workers who help reach company’s goal compared to those who concurred (97.5%) while no respondents were not sure. This implies that sometimes, creating a bonus system that rewards workers who help reach company’s goal can improve outsourcing at crown beverage ltd.

Fewer respondents (2.5%) opposed the statement that client companies have to ensure that their service providers adhere to the clients security policies compare to those who concurred (85%) while only 12.5% were not sure. This implies that in most cases, client companies have to ensure that their service providers adhere to the client’s security policies.

No respondents opposed the statement that hire consultants who can help the organization develop tactics for achieving its objectives compared to those who concurred (100%) who agreed. This implies attending hire consultants who can help the organization develop tactics for achieving its objectives can improve outsourcing at crown beverage ltd.

CHAPTER FIVE

DISCUSSION OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction

The data was analyzed using description and percentages. This chapter therefore presents the discussion of the study in sub-sections on the basis of the specific objectives set to achieve as analyzed in chapter four, the conclusion, and recommendations. 

5.1 Discussion of findings

5.1.1 Activities outsourced

The study findings as indicated in the table 4.6 identified activities that the organization outsources, which included customer support, accounting services, web designers, research and development, engineering services and security services. However cleaning services are not always outsourced Crown beverage ltd. The finding of customer support agrees with Daina (2014) who argued that one of the most Outsourced business tasks is customer support. The cost of employing, providing office space, training and paying taxes can be quite high, where as an Outsourced call center in another country can frequently do the job for a fraction of the cost. The decision to outsource customer support is a tradeoff (Roberto, 2001). Also Lucy (2003), overseas workers are routinely trained in American Accounting practices making it easy and convenient for American business to outsource their financial statements and other book keeping tasks. Given the sensitive nature of the work however it’s important for business to ensure that they are working with competent qualified teams (Johnson, 2002).

5.1.2 The challenges faced while outsourcing

Study findings in table 4.7 indicated that poor post purchase customer service can mean a loss of revenue as consumers go elsewhere the next time they need to buy, there are often hidden costs that can negate any savings, outsourcing creates minimal job security for the new employees. It also entails dramatic changes in the nature of work, control, and organizational design, employees begin to feel insignificant and level of participation in their respective work groups gradually declines and can lead to the loss of skills and the potential of innovation in the future. These findings are in agreement with Chatzglou (2009) who stated that although companies see an immediate benefit to the bottom line when outsourcing, there are often hidden costs that can negate any of those savings. Outsourcing almost always means job eliminations, which can have a negative effect on morale, loyalty and productivity among employees who remain. A difference in time zones particularly when outsourcing to offshore companies can severely affect the productivity of employees who oversee and manage that piece of business. All travel and related expenses can pile on these employees as they travel back and forth for training and other meetings. Jaris (2012) little or no support from client leaders receiving services is another significant factor that limits Outsourcing since it involves hidden costs and there is no support.

Hemmington (2009) established that outsourcing creates minimal job security for the new employees because the organization was not committed to these employees beyond the three year contract. There are also very limited opportunities for training and development as well as promotions. 

5.1.3 Strategies of ensuring effective outsourcing

According to study findings in table 4.9 indicated that to endure effective outsourcing, a comprehensive programme should be developed and disseminated to all stake holders who was affected by the outsourcing process, multi-cultural awareness training programme will assist the employees and the client company to understand the culture of the service provider employees’ norms and customs, attending educational seminars and workshops, create a bonus system that rewards workers who help reach company’s goal, hire consultants who can help the organization develop tactics for achieving its objectives all would improve outsourcing at crown beverage ltd.

These findings Gottfried son (2005) stipulates that do not be afraid to admit you don’t know everything. Hire consultants who can help you develop tactics for achieving your objectives. You don’t need to hire contractors long-term. Meet with financial, sales, marketing, human resources, and production and information technology experts to review your goals, set realistic objectives and create specific plans for reaching them. This might require buying new equipment or software or training your staff to handle added responsibilities, Abell, D., F., (2009).

James Bucki, diversity multi-cultural awareness training programme will assist the employees and the client company to understand the culture of the service provider employees’ norms and customs. Often Outsourcing service providers already have such awareness training in place for their own staff and was happy to share materials and content with their clients. The Outsourcing provider on the other hand may be trained in the corporate culture of the client.Jaris (2012).

Jaris (2012) to solve a problem change management, a comprehensive programme should be developed and disseminated to all stake holders who was affected by the Outsourcing process. The message should be personalized for different levels of employees. Employees should be given the opportunity to ask questions and be heard.

5.2 Conclusion

Study findings indicated activities that the organization outsources included; customer support, accounting services, web designers, research and development, engineering services and security services. However cleaning services are not always outsourced Crown beverage ltd. 

Study findings in table 4.7 indicated that poor post purchase customer service can mean a loss of revenue as consumers go elsewhere the next time they need to buy, there are often hidden costs that can negate any savings, outsourcing creates minimal job security for the new employees. It also entails dramatic changes in the nature of work, control, and organizational design, employees begin to feel insignificant and level of participation in their respective work groups gradually declines and can lead to the loss of skills and the potential of innovation in the future. 

To ensure effective outsourcing, a comprehensive programme should be developed and disseminated to all stake holders who was affected by the outsourcing process, multi-cultural awareness training programme will assist the employees and the client company to understand the culture of the service provider employees’ norms and customs, attending educational seminars and workshops, create a bonus system that rewards workers who help reach company’s goal, hire consultants who can help the organization develop tactics for achieving its objectives all would improve outsourcing at crown beverage ltd.

5.3 Recommendations

The researcher has made the following recommendations that can be applied to improve on profitability of Crown beverage limited;

There is need to understand terms and conditions in contract that can shift with the changes in the preferences of the organization positively. This must be built by the organization orientation with the intention of proving and extracting information to guide the both parties how to improve through cooperation for quality products and services. This also leads to cost reduction and hence profit maximization is realized. 

The researcher suggests that outsourcing should be done only when the company can handle work load that is when external staff can take part. The management should critically analyse the external staff will to take over the contract whether it has the ability and the potential to handle the task that matches with standards set to ensure operational effectiveness. 

There is need to use outsourcing to champion the operation effectiveness through interaction in the design process, decision marking and procurement. Outsourcing must be greatly integrated with management for better negotiation with the company to allow the products and services to be more designed relevantly plus also giving more room for more external linkages to be active in the product/service value chain process. This is very necessary and productive in business setting. 

5.4 Areas for further study

The researcher presents the following areas for further study:

The role of human resource management systems, impact on operational effectiveness. The human resource management system is an integral part of many organizations, its impact and proper administration on the operational effectiveness remains unexplored. 

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APPENDICES 

APPENDIX I: QUESTIONNAIRE FOR RESPONDENTS

Dear respondents,

I am Kyakuhaire Sanyu Sandra, a student of Kyambogo University pursuing a Bachelor’s Degree in Procurement and Logistics Management.  I am carrying out research on the effect of outsourcing on organizational performance, A case study of Crown Beverage ltd. I humbly request you to spare some few minutes of your time and answer these questions below. The study is strictly for academic purposes and was treated with utmost confidentiality. Your cooperation is highly appreciated. 

Section A: Background information

Note: For each of the questions, tick against your response or write your response in the blank space provided.

1.Gender

1. a) Female b) Male
2. Age range
3. a) 20yrs – 30yrs b) 31-40yrs c) 41-50yrs
4. d) 51-60yrs e) over 60yrs
5. Level of education
6. a) Secondary b) Diploma
7. c) 1st Degree d) Masters
8. Period you have served in this organization 
9. a) Less than 2 years b) 2-5 years
10. c) 6-10 years d) Over 10 years

5. Inwhich department do you work?

a)Production b) Finance c) Sales

1. d) Stores d) Procurement

Section B: Activities Outsourced by Crown Beverages Limited.

6. In your opinion, what activities are outsourced by Crown Beverages Ltd? Please tick (√) the appropriate alternative where SA-strongly agree, A- agree, NS- Not Sure, SD-strongly disagree D-disagree

Section C: Challenges of Outsourcing in Crown Beverages Limited.

7. In your opinion, what are the challenges of outsourcing? Please tick (√) the appropriate alternative where SA-strongly agree, A- agree, NS- Not Sure, SD-strongly disagree D-disagree

Section D: Ways of overcoming the challenges of Outsourcing 

8. In your opinion, what are the challenges of outsourcing? Please tick (√) the appropriate alternative where SA-strongly agree, A- agree, NS- Not Sure, SD-strongly disagree D-disagree

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