Hostname: page-component-848d4c4894-ndmmz Total loading time: 0 Render date: 2024-05-19T17:01:37.666Z Has data issue: false hasContentIssue false
  • English
  • Français

Outsourcing, Organisational Performance and Employee Commitment

Published online by Cambridge University Press:  01 January 2023

John Benson
John Benson*
Affiliation:
Department of Management, University of Melbourne
Get access Rights & Permissions [Opens in a new window]

Abstract

A growing trend in work organisation in Australia is for firms to outsource many activities that had been previously performed in-house. Outsourcing these activities, it is argued, will free up human and capital resources as well as allow for increased flexibility in the way labour is employed. Although the extent of outsourcing and other approaches to flexibility have been well documented in Australia, little attempt has been made to evaluate such practices. The purpose of this paper is to review the existing research and to evaluate the effect of outsourcing on firm performance and employee commitment. The research findings, which are based on four manufacturing companies, shows that employee commitment among contractor employees is generally high, although the economic benefits to the firm may take several years to realise.

Type
Symposium on Outsourcing
Information
The Economic and Labour Relations Review , Volume 10 , Issue 1 , June 1999 , pp. 1 - 21
Copyright
Copyright © The Author(s) 1999

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

This research was made possible through the cooperation of the management and employees who participated in the study. I would like to acknowledge the financial support of the Australian Research Council and thank an anonymous referee for insightful comments and criticisms.

References

Abraham, K. and Taylor, S. (1996) ‘Firms’ Use of Outside Contractors: Theory and Evidence’, Journal of Labor Economics, 14 (3): 394–424 CrossRefGoogle Scholar
Atkinson, J (1987) ‘Flexibility or Fragmentation? The United Kingdom Labour Market in the Eighties’, Labour and Society, 12 (1): 87–105 Google Scholar
Baglioni, G (1990) ‘Industrial Relations in Europe in the 1980s’, in Baglioni, G. and Crouch, C. (eds), European Industrial Relations: The Challenge of Flexibility, Sage, London, 1–41 Google Scholar
BCA (1989) Enterprise Bargaining Units: A Better Way of Working, Business Council of Australia, Melbourne Google Scholar
Benson, J (1998) ‘Dual Commitment: Contract Workers in Australian Manufacturing Enterprises’, Journal of Management Studies, 35 (3): 355–375 CrossRefGoogle Scholar
Benson, J. and Goff, D. (1979) ‘The 1977 Latrobe Valley SECV Maintenance Workers’ Strike’, Journal of Industrial Relations, 21 (2): 217–228 CrossRefGoogle Scholar
Benson, J. and Leronimo, N. (1996) ‘Outsourcing Decisions: Evidence from Australia-based Enterprises’, International Labour Review, 135 (1): 59–73 Google Scholar
Bergstrom, R (1993) ‘The Heart of New Reality’, Production, January: 40–44 Google Scholar
Bettis, R., Bradley, S. and Hamel, G. (1992) ‘Outsourcing and Industrial Decline’, Academy of Management Executive, 6 (1): 7–22 Google Scholar
Blaxill, M. and Hout, T. (1991) ‘The Fallacy of the Overhead Quick Fix’, Harvard Business Review, 12 (4): 93–101 Google Scholar
Blyton, P. and Morris, J. (1992) ‘HRM and the Limits of Flexibility’, in Blyton, P. and Turnbull, P. (eds), Reassessing Human Resource Management, Sage, London, 116–130 Google Scholar
Boyer, R. (ed) (1988) The Search for Labour Market Flexibility, Clarendon Press, Oxford Google Scholar
Brockner, J., Grover, T., O’Malley, M., Reed, T. and Glynn, M. (1993) ‘Threat of Future Layoffs, Self Esteem and Survivors’ Reactions: Evidence from the laboratory and the Field’, Strategic Management Journal, 14 (special issue): 153–166 CrossRefGoogle Scholar
Brunhes, B (1989) ‘Labour Flexibility in Enterprises: A Comparison of Firms in Four European Countries’, in Labour Market Flexibility: Trends in Enterprises, Organisation for Economic Cooperation and Development, Paris, 11–36 Google Scholar
Cannon, D (1989) ‘Keeping Outsourcing in Hand’, Chief Executive, November-December: 38–41 Google Scholar
Cappelli, P (1995) ‘Rethinking Employment’, British Journal of Industrial Relations, 33 (4): 563–602 CrossRefGoogle Scholar
Chandler, M (1964) Management Rights and Union Interests, McGraw-Hill, New York Google Scholar
Clarke, O (1992) ‘Employment Adjustment: An International Perspective’, in Koshiro, K. (ed), Employment Security and Labour Market Flexibility, Wayne State University Press, Detroit, 218–244 Google Scholar
Cordova, E (1986) ‘From Full-time Wage Employment to Atypical Employment: A Major Shift in the Evolution of Labour Relations?’, International Labour Review, 125 (6): 641–657 Google Scholar
Davis, E (1992) ‘Global Outsourcing: Have U.S. Managers Thrown the Baby Out with the Bath Water?’, Business Horizons, 35: 58–65 CrossRefGoogle Scholar
Deery, S., Erwin, P. and Iverson, R. (1995) ‘Union Management Co-operation, Dual Allegiance and Organisational Performance’ Working Paper No. 89, Department of Management and Industrial Relations, University of Melbourne, Australia Google Scholar
Deery, S., Iverson, R. and Erwin, P. (1994) ‘Predicting Organisational and Union Commitment: The Effect of Industrial Relations Climate’, British Journal of Industrial Relations, 32 (4): 581–597 CrossRefGoogle Scholar
Department of Industrial Relations (1992) Workplace Bargaining - The First 100 Agreements, AGPS, Canberra Google Scholar
Deavers, K (1997) ‘Outsourcing: A Corporate Competitiveness Strategy, Not a Search for Low Wages’, Journal of Labor Research, 18 (4): 503–519 Google Scholar
Edwards, M (1994) ‘Why Governments are Pursuing Outsourcing’, Perspectives, January: 4–5 Google Scholar
Fenwick, C (1992) ‘Shooting for Trouble? Contract Labour-hire in the Victorian Building Industry’, Australian Journal of Labour Law, 5 (3): 237–261 Google Scholar
Goldman, S., Nagel, R. and Priess, K. (1995) Agile Competitors and Virtual Organisations, Van Nostrand Reinhold, New York Google Scholar
Green, R. and MacDonald, D. (1991) ‘The Australian Flexibility Paradox’, Journal of Industrial Relations, 33 (4): 564–585 CrossRefGoogle Scholar
Harrison, B. and Kelley, M. (1993) ‘Outsourcing and the Search for Flexibility’, Work, Employment & Society, 7 (2): 213–235 CrossRefGoogle Scholar
Hirsch, P (1987) Pack Your Own Parachute, Addison-Wesley, Reading, MA Google Scholar
House, J (1981) Work Stress and Social Support, Addison-Wesley, Reading, MA Google Scholar
Hunter, L., McGregor, A., Maclnnes, J. and Sproull, A. (1993) ‘The “Flexible Firm”: Strategy and Segmentation’, British Journal of Industrial Relations, 31 (3): 383–407 CrossRefGoogle Scholar
Hyman, R (1988) ‘Flexible Specialization: Miracle or Myth?’, in Hyman, R. and Streeck, W. (eds), New Technology and Industrial Relations, Basil Blackwell, Oxford, 48–60 Google Scholar
Iverson, R., McLeod, C. and Erwin, P. (1995) ‘Employee Commitment and Trust: Implications for Effective Marketing’, Working Paper No. 92, Department of Management and Industrial Relations, University of Melbourne, Australia Google Scholar
James, D (1992) ‘Outsourcing: The New Gospel’, Business Review Weekly, 13 November: 46–52 Google Scholar
Johnson, D. and Johnson, N. (1991) ‘Bottom Line and Beyond: A Recession is the Right Time to take Advantage of Contract Manufacturers’, Industrial Management and Data Systems, 7: 12–13 CrossRefGoogle Scholar
Kessler, I., Coyle-Shapiro, J. and Purcell, J. (1999) ‘Outsourcing and the Employee Perspective’, Human Resource Management Journal, 9 (2): 5–19 CrossRefGoogle Scholar
Kochan, T., Smith, M., Wells, J. and Rebitzer, J. (1994) ‘Human Resource Strategies and Contingent Workers: The Case of Safety and Health in the Petrochemical Industry’, Human Resource Management, 33 (1): 55–77 CrossRefGoogle Scholar
Kosters, M (1997) ‘New Employment Relationships and the Labor Market’, Journal of Labor Research, 18 (4): 551–559 Google Scholar
Lacity, M. and Hirschheim, R. (1993) ‘The Information Systems Outsourcing Bandwagon’, Sloan Management Review, Fall: 73–86 Google Scholar
Maher, P (1991) ‘Need Hired Help? No (Union) Trouble’, Australian Business, 2 October: 29 Google Scholar
Mathieu, J. and Zajac, D. (1990) ‘A Review and Meta-analysis of the Antecedents, Correlates and Consequences of Organizational Commitment’, Psychological Bulletin, 108 (2): 171–194 CrossRefGoogle Scholar
Mayhew, C., Quinlan, M. and Bennett, L. (1996) ‘The Effects of Subcontracting/Outsourcing on Occupational Health and Safety’, Industrial Relations Research Centre, Monograph no. 38, University of New South Wales Google Scholar
Mayhew, C. and Quinlan, M. (1998) ‘The Effects of Outsourcing upon Occupational Health and Safety: A Comparative Study of Factory-based and Outworkers in the Australian TCF Industry’, Industrial Relations Research Centre, Monograph no. 40, University of New South Wales Google Scholar
McCune, J (1993) ‘Thin Is In’, Small Business Reports, May: 30–40 Google Scholar
Miles, R. and Snow, C. (1992) ‘Causes of Failure in Network Organizations’, California Management Review, Summer: 53–72 CrossRefGoogle Scholar
Morris, T., Lydka, H. and O’Creevy, M. (1993) ‘Can Commitment be Managed: A Longitudinal Analysis of Employee Commitment and Human Resource Policies’ Human Resource Management Journal, 3 (3): 21–42 CrossRefGoogle Scholar
Mowday, R., Steers, R. and Porter, L. (1979) ‘The Measurement of Organisational Commitment’, Journal of Vocational Behavior, 14 (2): 224–247 CrossRefGoogle Scholar
OECD (1986) Labour Market Flexibility, Organisation for Economic Cooperation and Development, Paris Google Scholar
Organ, D (1988) Organisational Citizenship Behavior: The Good Soldier Syndrome, Lexington Books, Lexington, MA Google Scholar
Pearce, J (1993) ‘Toward an Organisational Behavior of Contract Laborers: Their Psychological Involvement and Effects on Employee Co-workers’, Academy of Management Journal, 36 (5): 1082–1096 CrossRefGoogle Scholar
Perry, C (1997) ‘Outsourcing and Union Power’, Journal of Labor Research, 18 (4): 521–533 CrossRefGoogle Scholar
Piore, M. and Sabel, C. (1984) The Second Industrial Divide: Possibilities for Prosperity, Basic Books, New York Google Scholar
Plunkett, S (1991) ‘Outsourcing: A New Way to Save’, Business Review Weekly, 1 November: 8–10, 14Google Scholar
Porter, M (1990) The Competitive Advantage of Nations, Macmillan, London CrossRefGoogle Scholar
Porter, L., Steers, R., Mowday, R. and Boulian, P. (1974) ‘Organisational Commitment, Job Satisfaction, and Turnover among Psychiatric Technicians’, Journal of Applied Psychology, 59 (5): 603–609 CrossRefGoogle Scholar
Prahalad, C. and Hamel, G. (1990) ‘The Core Competence of the Corporation’, Harvard Business Review, 11 (3): 79–91 Google Scholar
Price, J. and Mueller, C. (1986) Absenteeism and Turnover of Hospital Employees, JAI Press, Greenwich Google Scholar
Quinn, J (1993) ‘Strategic Outsourcing’, Paper given at Templeton College, Oxford University, 23 JuneGoogle Scholar
Quinlan, M (1998) ‘Labour Market Restructuring in Industrialised Societies: An Overview’, The Economic and Labour Relations Review, 9 (1): 1–30 CrossRefGoogle Scholar
Rees, G. and Fielder, S. (1992) ‘The Service Economy, Subcontracting and the New Employment Relations: Contract Catering and Cleaning’ Work, Employment & Society, 6 (3): 347–368 CrossRefGoogle Scholar
Rimmer, M (1991) ‘Enterprise Awards - Are They More Flexible’, Asia Pacific HRM, 29 (1): 71–81 Google Scholar
Rimmer, M. and Zappala, J. (1988) ‘Labour Market Flexibility and the Second Tier’, Australian Bulletin of Labour, 14 (4): 564–591 Google Scholar
Rojot, J (1989) ‘National experiences in labour market flexibility’, in Labour Market Flexibility: Trends in Enterprises, Organisation for Economic Cooperation and Development, Paris, 37–60 Google Scholar
Rousseau, D. and Wade-Benzoni, K. (1995) ‘Changing Individual-Organization Attachments: A Two-Way Street’, in Howard, A. (ed), The Changing Nature of Work, Jossey- Bass Publishers, San Francisco, 290–322 Google Scholar
Schor, J (1992) The Overworked American, Basic Books, New York Google Scholar
Sharpe, M (1997) ‘Outsourcing, Organisational Competitiveness, and Work’, Journal of Labor Research, 18 (4): 535–549 CrossRefGoogle Scholar
Smith, J (1991) ‘Corporate Little Helpers’, Australian Business, 7 August: 44–46, 48CrossRefGoogle Scholar
Smith, V (1994) ‘Institutionalizing Flexibility in a Service Firm: Multiple Contingencies and Hidden Hierarchies’ Work and Occupations, 21 (3): 284–307 CrossRefGoogle Scholar
Stalk, G (1988) ‘Time - The Next Source of Competitive Advantage’, Harvard Business Review, 9 (4): 41–51 Google Scholar
Stewart, A (1992) ‘Atypical Employment and the Failure of Labour Law’, Australian Bulletin of Labour, 18 (3): 217–235 Google Scholar
Stewart, A. and Spatz, L. (1993) ‘Flexibility in the Workplace: Some Preliminary Findings’, International Journal of Employment, April, pp. 102–114 Google Scholar
Strassman, P (1995) ‘Outsourcing: A Game for Losers’, Computerworld, 21 August: 1–3 Google Scholar
Teresko, J (1992) ‘Outsourcing: Tie It to the Right Objectives’, Industry Week, 1 June: 42–44 Google Scholar
The Economist (1991) ‘Manufacturing - The Ins and Outs of Outing’, 31 August: 54–56 Google Scholar
Thomas, T (1992) ‘Help Wanted: 4000 at Your Service’, Business Review Weekly, 17 July: 54 Google Scholar
Tully, S (1993) ‘The Modular Corporation’, Fortune, 8 February: 106–115 Google Scholar
Underhill, E. and Kelly, D. (1993) ‘Eliminating Traditional Employment: Troubleshooters Available in the Building and Meat Industries’, The Journal of Industrial Relations, 35 (3): 398–422 CrossRefGoogle Scholar
Venkatesan, R (1992) ‘Strategic Sourcing: To Make or Not to Make’, Harvard Business Review, 13 (6): 98–101 Google Scholar
Walton, R (1985) ‘From Control to Commitment in the Workplace’, Harvard Business Review, 6 (3): 60–66 Google Scholar
Way, N (1993) ‘Melbourne Water Flushes Out Costs’, Business Review Weekly, 24 September: 31–32 Google Scholar
Williams, L. and Hazer, J. (1986) ‘Antecedents and Consequences of Satisfaction and Commitment in Turnover Models: A Re-analysis Using Latent Variable Structural Equation Methods’, Journal of Applied Psychology, 71 (2): 219–231 CrossRefGoogle Scholar
Womack, J., Jones, D. and Roos, D. (1991) The Machine That Changed the World, Harper Perennial, New York Google Scholar
Wooden, M. and VandenHeuvel, A. (1996) ‘The Use of Contractors in Australian Workplaces’, Labour Economics and Productivity, 8 (2): 163–194 Google Scholar