Offshoring

Offshoring

Off shoring, or outsourcing, means that a company gives out contracts to people in other countries to complete a part of their jobs. This means that the company gets the work done through people who are not part of the company but are independent workers. The opposite of outsourcing would be hiring regular employees that would be on the payroll on the company and would register in the books as part of the company’s workforce. Outsourced employees, however, are not regular employees and even though they are being paid by the company, they are not on the regular payroll. One of the biggest trends that have come up these days is that many companies are giving a lot of work to third party vendors. For example, a manufacturing company does not handle its own distribution, rather it outsources it to some distribution firm. Similarly, many Western companies are outsourcing jobs to foreign countries in order to save up on costs. These jobs include customer service calls, manufacturing of some smaller parts of a larger item, etc. The main reason is that outsourcing such jobs means lowered costs for the Western companies. Thus, it would be right to say that organizational initiatives benefit the management more than the workers.

If we were to view the staffing and delegating methods in their simplicity, we would find that it was traditional to hire employees and to have a company’s own departments regarding a certain specific job. For example, employees would be hired to work in factories and a marketing department would handle the marketing activities of the product produced. These days the trends are changing and many companies are looking to have certain jobs done by third parties in order to save costs. This outsourcing is usually being directed outwards to foreign countries from for example America or some other Western country, including hiring of temporary employees as well as contracting a certain departmental job.

There is a very fine line between hiring employees or setting up your own department, and outsourcing a contractor. To tread on this means to understand what is meant by the right to control. As we have already established, a person is buying services to the end. If the independent contractor has to be told exactly where to get the material from etc, it brings him closer to being an employee. “The Internal Revenue Service has developed a 20-factor test to determine whether you have the right to control. It includes who sets the hours of work, where the work is performed, who provides the tools necessary to do the work, who controls any assistants, how much training is given, and how regularly the person has to report the progress of his or her work as determining factors. To the extent that you as the hiring person tell the person where to be and when to be there, require weekly reports, provide training, control the assistants-all those things show whether you're exercising control over the means. The more control you have over the means, the more you look like an employer” (Flynn, 1997).

It is important to realize that certain models of management, leadership, and motivation that work well for companies in certain countries do not work as well in other countries. This can be because of the different labor laws that a country might have or the various organizational norms and practices of the country. For e.g. in the British Virgin Islands, companies do not have to file annual accounts or hold annual meetings, decreasing environmental and financial accountability and transparency (Dauvergne 1998). This means that the motivation for the employees will not work the same way it does in the US. Employees in , say, the British Virgin Islands are not likely to be motivated by fringe benefits that offer tax deduction etc because there is virtually no tax that the employees have to pay in BVI.

The effects of offshoring and the interaction between the management and the workers can be best understood by the ideas of globalization. The debate over globalization is dynamic and has at many times become violent, polarizing people into two groups all over the world. One group believes that globalization will bring unprecedented prosperity to everyone while other criticizes it on the basis that it is unfair and that the management is the one that disproportionately reap the benefits. This second groups has another extreme end that entails critics that denounce every facet of globalization and associate countless problems with it. Although globalization does create a number of serious problems, it is also good in some ways and has had positive effects on both management as well as the workers. The countries that have achieved sustained economic growth and reductions in poverty, such as those in East Asia, have made certain