The Social Effect of Outsouring
An explanatory research on the positive and negative effects of outsourcing on employees
Astrid Joosten
Business Studies
The Social Effect of Outsourcing
An explanatory research on the positive and negative effects of outsourcing on employees
Name: Astrid Joosten
Student Number: 0563439
Telephone: +31 6 41 96 73 40
E-mail: joostenastrid@hotmail.com
Supervisor 1: Mw. Dr. A.E. Keegan Supervisor 2: Drs. E. Dirksen Supervisor ABN Amro: Dhr. W. Walhout
PREFACE
`Personnel collective ING wants to go to judge because of outsourcing`
Amsterdam – Hundreds of discontented ING employees prepare a trial to extort the same working conditions when their work is outsourced. That is been said by their lawyer Simon Tan. ING is going to outsource the work of thousands of IT’ers and administrative workers. This concerns around 800 employees, largely two hundred are united in a personnel collective. This collective has resisted against every deterioration of the working conditions from the announcement of the outsourcing. ….. ……. Other big financial institutions, like ABN Amro, have been outsourcing lots of work before. That did not lead to trials. According to Tan, because the employees were not well informed. “who doesn’t know, who doesn’t care”, he says. (Volkskrant, January 2007, Appendix 1)
During this study I have tried to examined the effect of outsourcing on employees in an administrative function at ABN Amro. I also tried to explore which characteristics of the process and working conditions are of importance and influence the feeling of job (in)security according to literature and employees. With the information gathered from both sides I wanted to find out whether it is possible to speak of a fit between the characteristics found in the literature and mentioned by the employees in order to contribute to the current understanding of the social effects of outsourcing on employees. During this study I learned a lot about the impact of outsourcing and the tough position in which employees are situated over and over again, which can provide valuable insights into the research on outsourcing and particularly the current under-explored aspect of social effects.
It would not be possible to do this research without the help of a number of people. First, I would like to thank my supervisors Anne Keegan and Erik Dirksen. They have kept me on the right track during my research. Second, I would like to thank my manager at ABN Amro, Willijan Walhout for his support during the research. Third, I would like to thank all the employees, who were willing to cooperate. Without their help it would not have been possible to accomplish this study. I have learned so much from hearing and talking about their feelings and experiences during the outsourcing and I enjoyed every interview held. And last but not least, I want to thank my boyfriend, who have supported me throughout my study and this research.
TABLE OF CONTENTS
Preface 3
Table of Contents 4
Figures and Tables 6
Abstract 7
Introduction 8
1 Literature Review 10
1.1 Define Outsourcing 10
1.2 Reasons for outsourcing 13
1.3 Effects of Outsourcing (perspectives) 13
1.4 The social aspect of outsourcing 15
1.5 Outsourcing and Job (In)security 17
1.5.1 Outsourcings Process and Job (In)security 22
1.5.2 Job Conditions and Job (In)security 25
2 Introduction to the Case Study 29
2.1 ABN Amro Bank 29
2.1.1 Services Operations NL 30
2.2 ABN Amro Services Operations NL and Outsourcing 31
2.2.1 Outsourcing Process Services Operations NL 32
2.2.2 Altajo 33
2.3 Outsourcing and the Collective Agreement 33
3 Methodology 35
3.1 Qualitative Research 35
3.2 Data Quality Issues 36
3.2.1 Threats to Validity 37
3.2.2 Managing the Threats 38
3.3 Data Collection 41
3.3.1 The participants 42
3.3.2 Semi-structured and in-depth interviewing 43
3.3.3 Audio-recording 45
4 Analysis 48
4.1 Characteristics of the employees 48
4.2 Perception regarding the outsourcing 49
4.2.1 Outsourcing Objective 50
4.2.2 Advice 51
4.3 Perceptions regarding job insecurity 53
4.3.1 Outsourcing Process 57
4.3.2 Job conditions 60
4.4 Perceptions regarding ABN Amro 64
5 Conclusion 67
5.1 Answering the sub questions 67
5.2 Answering the research question 70
6 Discussion and Possible Future research 71
6.1 Limitations 71
6.1.1 Research Model 71
6.1.2 Case Study 71
6.2 Future Research 72
6.2.1 Demographic backgrounds 72
6.2.2 Personal home situation 72
6.2.3 Changeableness of employees 73
6.2.4 Trade unionists 73
6.2.5 Employer brand 73
FIGURES AND TABLES Figures
Figure 1 The relation of the outsourcing process and job conditions in the feeling of job security 8 Figure 2 Integrated model of job security (Sverke and Hellgren, 2002) 20 Figure 3 Summary of the Cause, Nature, Effects, and Organizational Consequences of Job Security
(Greenhalgh and Rosenblatt, 1984) 21
Figure 4 Organization Structure ABN Amro 30
Figure 5 The preliminary End State Analysis per product chain for Services Operations NL 31 Figure 6 Outsourcing Process in main lines (Services Operations NL) 32 Figure 7 Return guarantee ABN Amro after outsourcing (till January 1st 2008) 34
Tables
Table 1 Define outsourcing 11
Table 2 Facets of Change in Outsourcing, Mergers and Downsizing (Roe et al., 2005) 12
Table 3 Outsourcing Objectives 13
Table 4 Summary of research scopes (Jiang and Quresh, 2006, p.46) 14
Table 5 Define Job Security 18
Table 6 Changes in perceptions of HR practices 27
Table 7 Employee expectations and fulfilment 27
Table 8 Activities Services Operations NL 30
Table 9 Advantages and disadvantages of audio-recording the interview (Saunders et al., 2007) 45 Table 10 Coding Table with the perceptions regarding outsourcing 49 Table 11 Perception regarding the outsourcing objective 50
Table 12 Advice of the employees 52
Table 13 Feeling of insecurity of the employees of the cash centres 54
Table 14 Codes regarding job security 54
Table 15 Ways to enhance own feeling of job security 57 Table 16 Relevant information according to the employees 59
Table 17 Coding table regarding job conditions 61
Table 18 Occurrence of the codes 61
Table 19 Feelings about no longer employee of ABN Amro 64
“What are the positive and negative effects of outsourcing on employees’ feeling of job security.”
ABSTRACT Instead of focusing at the strategic and economic effects of outsourcing, this study focuses on the social effect of outsourcing. This research underlines the relevance and importance of outsourcing processes and the reaction of employees during this process. The research begins with a literature study, from which the variables of outsourcing and job security have been defined. Besides, the outsourcing process and job conditions have been related to the variable job security.
The research has been conducted at the “cash centres”, a former part of ABN Amro that has been outsourced in 2006. On the basis of 21 in depth interviews with employees of the cash centres the data has been gathered. Trough this data an answer has been formulated on the following research question:
Employees’ feeling of job security depends on the personal situation. In case of the cash centres 50% of the employees felt insecure about their jobs, while the other 50% did not feel insecure about their job. It can be said that outsourcing has a social impact on employees of the cash centres. However, the social impact can influenced by the outsourcing process and the change in job conditions. The execution of the outsourcing process has influence on the effect of the feeling of job security. The positive or negative trend of the effect, depends on the way the process has been carried out by the management. Especially in the domain of communication, the management can influence the effect on employees’ feeling of job security.
Furthermore, the changes in job conditions because of the outsourcing of the cash centres, influences employees’ feeling of job security. Less changes in job conditions strengthen the feeling of job security in the case of the ex-ABN Amro employees. Particularly the terms of employment are important for the employees. In this study the ‘’golden chain” emerged, which means that the employees are personally dependent on these terms of employment. This dependence has influence on their reaction on outsourcing and so on their feeling of job security. However, this is not generalizable to all outsourcings.
The results of this study are valuable, however these results can not be generalizable for all outsourcings. This study broadens recent literature and strengthens the need for further research.
“What are the positive and negative effects of outsourcing on employees’ feeling of job security?”
INTRODUCTION he concept of outsourcing can not be thought away from modern economy. Increasing competition, rising power of shareholders and globalisation are forcing companies to look at their strategy and cost structure. To stay ahead of competition companies outsource parts of their non-core activities. Organisational changes, like outsourcing, have different consequences. What are the consequences for the employees?
Recent literature of outsourcing concentrates on the strategic and economic effects of outsourcing. Whereby the social effect of outsourcing is currently under-explored. Therefore, this study focuses on the social impact of outsourcing and notably on the feeling of job insecurity. The intention of this study is to broaden recent literature and emphasize the importance of further recent in this area.
The research question of this study is:
According to the literature different variables are related to the feeling of job security. Because of the limited research period it was not possible to study all these variables, instead two variables have been chosen. This study will explore which characteristics of the outsourcing process and job conditions are of importance for the feeling of job (in)security. Besides, the study will examine in what way the variables influence the feeling of job (in)security.
Feeling of Job Security Job Conditions +/-Outsourcing Proces
+/-Figure 1 The relation of the outsourcing process and job conditions in the feeling of job security
- Do changes in job conditions affect perceptions of job security?
- What aspects of the process of outsourcing influence perceptions of job insecurity? Sub questions of this study therefore are:
Aim of this study is to examine the influence of the two variables on the feeling of job security and to see if this is comparable with the theory. Through this study, the importance of including characteristics of the outsourcing process and the job conditions within the social effect of outsourcing could be recognized. Moreover, the study will try to ground and broaden the recent literature. Besides, the aim of the research is the possible added value for ABN Amro Services Operations NL. If Services Operations NL is familiar with the effect of outsourcing on employees, this can be taken into count by further outsourcing activities.
To answer the research question and the sub question, the first chapter will give a description of outsourcing and job (in)security. Besides, the relation of the variables outsourcing process and job conditions with job (in)security according to the literature will be explained. Chapter two will give an introduction into the case study. This exploratory case study is held within the cash centres, that has been outsourced from ABN Amro. In the third chapter the setting of this study will be explained and the use of qualitative research method will be discussed. To gather the data, the researcher conducted 20 interviews. With the interviews a lot of valuable data has been obtained and so this type of research has a strong impact from the perspective of this study; to answer the research question. Chapter four will give an analysis of the 20 interviews (cases) executed. In chapter five these results are compared with the literature and will give an answer to the research question and to the sub questions. In chapter six the process of this study, the limitations and possible future research will be discussed.
1 LITERATURE REVIEW owadays outsourcings seems to have become the new trend. According to Jiang and Qureshi (2006) outsourcing is now one of the most recent management strategies to emerge in response to demands for more efficient ways to address organizational competitiveness. Instead of looking at the advantages of outsourcing like cost reduction and quality improvement, in this research the focus is on the social effects of outsourcing. When the decision is made to outsource an activity, the company has to think about the execution of the outsourcing. What to do with the employees? More interesting, how do the employees feel about the outsourcing, in other words what are the social effect of an outsourcing. Salient questions include “do the employees feel insecure about their jobs?”.
In the following chapter recent research about outsourcing and moreover the social effect of outsourcing will be described. The literature gave insights in recent research and possibilities for this and future research. On the basis of the literature this research is composed; the various variables like outsourcing and job insecurity are explained. Besides the literature was the source for composing the interview questions. Before directly go into the social effect of outsourcing, in the first paragraph outsourcing is defined. In the second paragraph the reasons for outsourcing, the objectives, have been described. After which different effects of outsourcing have been described in the third paragraph. Then in the fourth paragraph, the social effect of outsourcing have been explained. The fifth paragraph job security have been defined and the relation between outsourcing and job security have been explained. In the sixth paragraph job insecurity and the relation with the outsourcing process have been described. The relation between job security and job/work conditions have been pointed out in the last paragraph.
1.1 DEFINE OUTSOURCING
Before going into the process of outsourcing it is important to know what outsourcing is. There are different definitions of outsourcing (Table 1). According to Belcourt (2006, p. 270) outsourcing occurs when an organization contracts with another organization to provide services or products of a major function or activity. Work that is traditionally done internally is shifted to an external provider (Belcourt, 2006; Van Dale dictionary). In other words “finding new suppliers and new ways to secure the delivery of materials by utilizing the knowledge, experience, and creativity of
new suppliers not used previously” (Kraker, 1995). Just like Elmuti and Kathawala (2000), they define outsourcing as the strategic use of outside resources to perform activities that are traditionally handled by internal staff and resources. Turnball (2002) emphasizes the change of the responsibility, “placing responsibility for various elements with a third party”. According to Quinn (2000) outsourcing includes the “relatively permanent purchase of goods or services in a particular category from a single source of multiple sources”.
The essence of these definitions is that outsourcing refers to the concept of expertise to handle certain business functions outside the existing firm. In other words, there are two general characteristics that return in each definition. In the first place, outsourcing is always about the relationship between two or more companies. This relation is of contractual nature. In the second place, outsourcing concerns an external service. So, an organization will reimburse the services that the service provider or vendor delivers. In today’s business environment it is possible to outsource any aspect of the business (Embleton and Wright, 1998).
van Dale (dictionary)
"uitbesteding door bedrijven en instellingen van bepaalde activiteiten aan derden"
M. Belcourt (2006)
"a contractual relationship for the provision of business services by an external provider"
Turnball (2002)
"placing responsibility for various elements with a third party provider"
J.B. Quinn (2000)
“outsourcing includes the relatively permanent purchase of goods or services in a particular category from a single source of multiple sources"
Elmuti and Kathawala (2000)
"Outsourcing is the strategic use of outside resources to perform activities that are traditionally handled by internal staff and resources"
Kraker (1995)
"Outsourcing is finding new suppliers and new ways to secure the delivery of raw materials, goods, components and services, by utilizing the knowledge, experience, and creativity of new suppliers not used previously"
Wikipedia.com
"the delegation of non-core operations from internal production to an external entity specializing in the management of that operation"
There are various forms of outsourcing, from the perspective of relation with employees. In some outsourcing arrangements employees are terminated before activities are transferred to an external provider, an in-house department is transformed into an independent company that subsequently provides services to its “mother”- company, or both activities and employees are transferred to a service provider (Logan, Faught and Ganster, 2004). At the last form, the employees remain subsequently involved in delivering services to their former employer (Roe, Smeelen and Hoefeld, 2005). According to Belcourt (2006) the employees are often transferred to the service provider. Kessler, Coyle-Shapiro and Purcell (1999, p.5) emphasize that the form taken by outsourcing may have an important effect on employees reactions.
Embleton and Wright (1998, p.94) stated that outsourcing is not a synonym for contracting out. Contracting out refers to work assigned to an outside supplier on a job-by-job basis, usually involving a cost-plus arrangement (Embleton and Wright, 1998). Outsourcing on the other hand, entails a long-term relationship between supplier and beneficiary, with a high degree of risk-sharing. Roe et al. (2005) compares outsourcing with downsizing and mergers. It should be kept in mind that downsizing is a more dramatic event from the perspective of the employee as the contract unexpectedly ends without any view of alternative employment (Roe et al., 2005). Besides, mergers tend to be less incisive because the employment is generally maintained, and job content, work contracts and work location remain unaffected (Roe et al., 2005). In table 2 the comparison between the content of the changes between outsourcing, mergers and downsizing is visible. No / Yes implies that the change will or will not have an effect, both are possible. Roe et al. (2005) conclude that outsourcing is different although there are obvious similarities as well.
Changes Outsourcing Merger Downsizing
Forced termination Yes No Yes
Employer Yes Yes
Salary and fringe benefits No No / Yes
Career Yes No / Yes
Job content No / Yes No
Work methods Yes No
Work contracts Yes No
Work place No / Yes No / Yes
Culture Yes Yes
1.2 REASONS FOR OUTSOURCING
According to the literature there are various reasons for outsourcing. Even if outsourcing seems to be the most powerful trend, organizations have always outsourced some functions. For decades, most organizations hired firms to operate their cleaning or restaurants functions. And in today’s business environment it is now possible to outsource virtually any aspect of the business. But what are the objectives to outsource activities (Table 3).
Table 3 Outsourcing Objectives
Roe et al. (2005) mention three aimed-for objectives. The first objective of outsourcing is improving financial performance, mainly through cutting costs (Roe et al., 2005, p.4). The argument is that outside firms specializing in support functions can work cheaper because they benefit from economies of scale (Gupta and Gupta, 1992), offer up-to-date expert knowledge (Greer, Youngblood and Gray, 1999), and apply the latest new technologies (Due, 1992). The second objective is enhancing operational flexibility. Service contracts with outside suppliers offer the opportunity for purchasing services according to variable needs, which can also save costs (Due, 1992). The third objective, especially relevant for technology intensive business activities is to avoid replacement cost for obsolete technical equipment (Gupta and Gupta, 1992).
According to Belcourt (2006, p.271) there are at least six major reasons that organizations outsource: financial savings, strategic focus, access to advanced technology, improved service levels, access to specialized expertise, and organizational politics.
1.3 EFFECTS OF OUTSOURCING (PERSPECTIVES)
Most of the academic literature has looked upon outsourcing from a strategic perspective (Roe et al., 2005). This means that the emphasis is on the aimed-for objectives and the outcomes obtained (Roe et al., 2005). Jiang and Qureshi (2006) studied the current literature on outsourcing. One objective of their study was to synthesise the research of outsourcing. Jiang and Qureshi (2006)
Objectives
Financial improving financial performance Strategic focus on core business
Organizational reduces headcounts Technical avoid replacement cost
Service level enhancing operational flexibility Expertise access to industry expert
identified the research scope by three areas: outsourcing determinant, outsourcing process, and outsourcing result. The outsourcing determinant-oriented research studies the drivers behind a firm’s outsourcing decision, in other words the “why” issues. The outsourcing process-oriented research studies contract negotiation, partner selection, implementation and so on, in other words the “how” issues. The outsourcing result-oriented research studies what an outsourcing decision brings to the firm. Jiang and Qureshi (2006) concluded that within the last decade, most academic studies have focused on understanding outsourcing decision determinants and outsourcing process control (See table 4).
Table 4 Summary of research scopes (Jiang and Quresh, 2006, p.46)
According to Embleton and Wright (1998, p.96) it can been seen, then, that outsourcing results from economic climate where the emphasis is on cost savings and increased profit. At the same time, the technology of the late 1990s has provided a new window of opportunity for the provision and the purchase of outsourcing services (Embleton and Wright, 1998).
The objectives of outsourcing (paragraph 2.2) are mostly strategic and economic, but the impacts of outsourcing are not limited to the economic domain (Roe et al., 2005). There are also organizational implications. Roe et al. (2005) stated that managers tend to focus almost exclusively on economic aspects, ignoring the human and social impacts. A significant development within current debates on the ‘changing world for employment’ has been the apparent break-up of the integrated organisation and the outsourcing of non-core activities and their workforce. Utilising employees as the key to ‘competitive advantage’ and the search for employee commitment to the organization (Storey, 1992), the discarding of workers raised major questions about how such moves are perceived by those affected (Kessler et al., 1999, p.5). However, our knowledge of the
Research Topic Approach frequency Percentage
Determinant 97 36,9
Process 114 43,3
impact of outsourcing on employee attitudes and behaviour remains extremely limited (Kessler et al., 1999, p.5). Purcell (1996: 22) notes, ‘We lack the research to make definite statements on the effect of outsourcing on employees.’
Depending on the chosen outsourcing form, the effect on employees will be different. Especially in the situation that both activities and employees are outsourced to a third party it is crucially important that the outsourcing process goes well in order to ensure that employees are committed and motivated to perform (Roe et al., 2005, p.5). Unwillingness to change, distrust and lack of commitment may seriously undermine the feasibility and success of the outsourcing operation (Roe et al., 2005).
The ‘outsiders’ perspective is a common feature of much of the research to date. It deduces the likely consequences, draws on proxy indicators and uses harder, objective data on terms and conditions of employment. Conspicuously missing is the ‘insiders’ perspective – the employees’ ‘voice’ (Kessler et al., 1999). Roe et al. (2005) mentioned that further research will be needed to determine in which respects change management can be improved and how the overall effectiveness of outsourcing – in the eyes of the employees can be enhanced.
1.4 THE SOCIAL ASPECT OF OUTSOURCING
Thus far, limited attention has been paid to the human resource aspects of outsourcing and the impacts on employees (Roe et al., 2005). In the literature published from 1995 till know, three studies were undertaken to research the social impact of outsourcing. In 1999, Kessler et al. studied the employee responses to outsourcing. Kusel, Kocher, London, Buttolph and Schuster (2000) studied the effects of displacement and outsourcing on woods workers and their families. Roe et al. (2005) studied the employee perspective in outsourcing and organizational change.
According to Kessler et al. (1999) recent research has generated two streams of material. The first has drawn attention to the negative and potentially destabilising effect of outsourcing on employees. Recent empirical work has stressed the manner in which outsourcing in certain sectors such as cleaning, catering and security has ushered in a new regime of ‘precarious employment’ (Allen and Henry, 1996). Elsewhere attention has been drawn on the impact of outsourcing on substantive terms and conditions, especially in local government where the need to compete for contract has been seen to undermine established agreements on pay and hours (Walsh, 1995).
Willcocks, Fitzgerald and Feeny (1995) in their discussion of outsourcing information systems, note that two of the largest such contracts signed during 1994 both experienced strikes among the staff affected.
The second stream of materials draws greater attention to the complexities surrounding the potential impact of outsourcing on employees. More specifically, it implies that the effect is likely to be contingent on a number of factors. Willcocks et al. (1995), for instance, highlight the importance of the process of change involved in outsourcing in dealing with employee concerns (paragraph 1.5.1). Others have indicated that the impact on employees is likely to be related to some important technical differences in the character of outsourcing; like the tightness of contract specifications (Colling, 1995) and the form.
Kusel et al. (2000, p.130) noted that outsourcing may appear to be an appropriate, and even necessary, short-term company strategy to ensure company competitiveness, but effects on labor, families and communities must also be recognized. Kusel et al. (2000) focused in their study in the manufactory sector on both the workers and their households. Studies in this industry have linked job loss and replacement with workers’ and families’ psychological and social health (Kusel et al., 2000, p. 117). The workers and their partners made it clear that displacement had implications far beyond their loss of income. The outsourcing resulted in the reemployed working more hours in generally less stable jobs where they lost an average 25% of their predisplacement wage (Kusel et al., 2000, p. 129). These findings were consistent with research in other industries and with rural workers in general (Belous, 1989; Podgursky, 1989).
According to Roe et al. (2005) outsourcing can have a range of effect on individual employees who are directly involved in it. First, outsourcing is readily perceived as a breach of the psychological contract with the original employer and can therefore lead to a drop morale. Second, it evokes job insecurity and concern about deterioration of working conditions. Third, employees may consider outsourcing plans “as an underestimation of their talents and credibility”. Fourth, employees may experience a loss of identity as they lose their original position and the link with the first employer. Fifth, as a result of all this, employees may show a decline in trust and commitment.
However, not all the effects of outsourcing on employees are negative (Roe et al., 2005). Outsourcing also brings new training and career opportunities in a specialized environment.
Evidence for this was found in a study in the ICT-sector by Pinnington and Woolcock (1997) and in the case study of Kessler et al. (1999). Roe et al. (2005) note that the limited evidence available in the literature shows a mixed picture, with mainly negative and some positive consequences. The outcomes seem to depend on the way in which the outsourcing process was handled (Kessler et al., 1999). This is consistent with the organizational justice literature where it has been shown in terms of the introduction of changes the procedural justice (how the procedure is handled) is usually more important in terms of employee reactions to events that outcome justice (what happened) or distributive justice (how rewards/punishments etc. are distributed).
Roe et al. (2005) concluded that the change process in the case of outsourcing appears to be more complex and seemingly contradictory. On the one hand it forces employees to leave the organization they are part of and give up their job, work role and identify; on the other hand it offers a new perspective of employment with another organization, other work roles and a different career perspective (Roe et al., 2005, p.19).
However, most employees do not understand what outsourcing means, they view the process as synonymous with losing their jobs (Ransom, 1996). With attitudes like this, it is obvious that management’s job is not complete once the outsourcing contract is signed (Embleton and Wright, 1998, p.102). Studies suggest that employees fear, in other words, there is a relation between outsourcing and job insecurity. In the following paragraph job insecurity will be defined and the relation between outsourcing and job insecurity will be explained.
1.5 OUTSOURCING AND JOB (IN)SECURITY
As described above, many organizations changed in order to improve the organisational effectiveness and reducing costs. As a consequence, millions of jobs have been eliminated. For many employees, the changes in working life we have witnessed over the past two decades have caused feelings of insecurity concerning their nature and future existence of their jobs (Hartley, Jacobson, Klandermans and Van Vuuren, 1991). According to Sverke and Hellgren (2002), it can readily be assumed that employees will react to the gradually changing characteristics of employment conditions and jobs. The situational uncertainty from changes such as downsizing, mergers and outsourcing has been evident in the inherent uncertainty regarding the continuation of
one’s job. During major organizational changes such as downsizing and mergers, the most threatened set of employee expectations is job security (Davy, Kinicki, Kilroy and Scheck, 1997).
Job insecurity refers to employees’ negative reactions to the changes concerning their jobs (Sverke and Hellgren, 2002). Job insecurity has been defined as an individual’s “expectations about continuity in a job situation” (Davy et al., 1997, p.323), “overall concern about the future existence of the job” (Rosenblatt and Ruvio, 1996, p. 587), “perception of a potential threat to continuity in his or her current job” (Heaney, Israel and House, 1994, p.1431), and powerlessness to maintain desired continuity in a threatened job situation” (Greenhalgh and Rosenblatt, 1984. p.438), to give a few examples (Table 5).
Sverke and Hellgren (2002)
"employees' negative reactions to the changes concerning their jobs"
Davy, Kinicki, Kilroy
and Scheck (1997) "an individual's expectations about continuity in a job situation" Rosenblatt and Ruvio
(1996) "overall concern about the future exictence of a job" Heaney, Israel and
House (1994)
"perception of a potential threat to continuity in his or her current job"
Greenhalgh and Rosenblatt (1984)
"powerlessness to maintain desired continuity in a threatened job situations"
Table 5 Define Job Security
Most of the definitions focuses on the continuity of employment as the main core of job security. Also Herzberg, Mausner and Snyderman (1959, p.41) focuses on continuity of employment. They define job security “to include those features of the job situation which lead to assurance for continued employment, either within the same company or within the same type of work or profession". Herzberg et al. (1959) also suggest that their is a useful distinction between organizational security and occupational or professional security. Davy et al. (1997) noted that job security goes beyond concern over continuation of employment with an employer. It includes concern over loss of desirable job features such as lack of promotion opportunities, current working conditions, and long-term career opportunities.
Sverke and Hellgren (2002) emphasize that an individual’s reaction will depend on a number of factors, such as family responsibility, age, gender etc.. For instance, employees who feel
easily get other jobs may view the changing nature of work positively. On the other hand, those who have economic responsibility for their family or who feel that they would have difficulties finding new jobs may react negatively (Sverke and Hellgren, 2002, p.25).
One general theme underlying the various definitions is that job insecurity is a subjective phenomenon (Sverke and Hellgren, 2002), that is based on the individual’s perceptions and interpretations of the immediate work environment (Greenhalgh and Rosenblatt, 1984). In contrast to actual job loss, job insecurity refers to the anticipation of this stressful event in such a way that the nature and continued existence of one’s job are perceived to be at risk (Sverke and Hellgren, 2002). This implies both that the feeling of job insecurity may differ between individuals even if they are exposed to the same objective situation, and that individuals may differ in their reactions to perceptions of jobs at risk (Sverke and Hellgren, 2002, p.27). Hartley et al. (1991) argued that job insecurity, in its most general sense, reflects the discrepancy between the level of security a person experiences and the level he or she prefers. An organizational change like outsourcing can have a range of effects on individual employees who are (in)directly involved in it. However, the limited evidence available in the literature shows a mixed picture (Roe et al., 2005).
However, according to Sverke and Hellgren (2002, p.27) it appears that the definition of job security is broad enough to encompass different aspects of such uncertainty perceptions. Also other aspects than threats of imminent job loss, such as loss of valued job features and career insecurity, may be central aspects of employees’ uncertainty perceptions (Sverke an Hellgren, 2002). Thus, a significant distinction in this line of inquiry is that between insecurity about the continuity of one’s job or aspects of one’s job (Hartley et al., 1991, p.32). Depending on the outsourcing form the continuity of one’s job can be at stake. As mentioned by Roe et al. (2005) outsourcing evokes job insecurity and concern about deterioration of working conditions. Although these aspects may be covered in the outsourcing contract, it also happens that not all employees are hired by the new employer or remain on the pay role for a longer time (Due, 1992) which leaves tangible risks for some employees (Roe et al., 2005, p.5).
Sverke and Hellgren (2002) argue that it would be meaningful to make a distinction between at least two different aspects of job insecurity: quantitative and qualitative insecurity. Quantitative job insecurity is similar to the global conceptualisations of the construct. Qualitative job insecurity pertains to perceptions of potential loss of quality in the employment relationship, such as
deterioration of working conditions, demotion, lack of career opportunities, decreasing salary development and concerns about person-organization fit in the future (Sverke and Hellgren, 2002, p.30).
It appears that job insecurity is associated with impaired well-being, but also with work attitudes and behaviour and on the long run, on the vitality of the organisation (Sverke and Hellgren, 2002). However, the relationships between job security and employee reactions may not be as clear-cut (Sverke and Hellgren, 2002). Sverke and Hellgren (2002) note that a related issue concerns the causality. Sverke and Hellgren (2002) summarized their conclusions from the literature review in an integrated model of job security (Figure 2). The model describes job security as a subjectively experienced, multidimensional phenomenon, which may arise as a function of the interaction between the objective situation and subjective characteristics, a phenomenon which may have detrimental consequences for employee attitudes and well-being, where such consequences may be mitigated by a number of potential moderators (Sverke and Hellgren, 2002, p.37).
Objective situation * Labor market characteristics * Organisational change * Employment Contract
* Uncertain future for the organization
Subjective characteristics * Perceived employability * Perceived control * Family responsibility * Need for security
Job security * Threats of job loss * Threats to job Consequences * Well-being * Job attitudes * Organisational attitudes Moderators * Individual differences * Fair treatment * Social support
Figure 2 Integrated model of job security (Sverke and Hellgren, 2002)
This model is complementary to the model of Greenhalgh and Rosenblatt (1984) (figure 3), in which show individuals’ responses to organizational situations in which continuity is threatened. In general the model was a starting point for further investigation. In their model of job insecurity, its antecedents and consequences, Greenhalgh and Rosenblatt (1984) tried to reproduce the process of
job insecurity. Besides, they postulated that individual differences could be expected to moderate the relationship between the experience of job insecurity and the employee’s reaction to it.
Individual differences - Locus of control - Conservatism - Work Orientation - Attribution Tendencies - Need of security Intended Organizational Messages Objective Threat to Individual Unintended
Organizational Clues Subjective Threat Reactions to Job Security
- Severity of Threat - Effort
Rumors - Powerlessness - Propensity to leavel
- Resistance to change Social Support Dependence Occupational Mobility Economic Insecurity Reduced Organizational Effectiveness - Productivity - Turnover - Adaptability
Figure 3 Summary of the Cause, Nature, Effects, and Organizational Consequences of Job Security (Greenhalgh and Rosenblatt, 1984)
According to Greenhalgh and Rosenblatt (1984), job insecurity can be split up into two basic dimensions: the severity of the threat to one’s job and the powerlessness to counteract the threat. The severity of the threat to continuity in a work situation depends on the scope and importance of the potential loss and the subjective probability of the loss occurring. Important distinctions to jobholders include: (1) whether the anticipated loss is temporary or permanent; (2) whether the action causing the loss is layoff or firing (these are subjectively different forms of job loss in that they probably involve different patterns of attribution); and (3) whether the change represents loss of the job itself or loss of job features. The sense of powerlessness is an important element of job insecurity because it exacerbates the experienced threat (Greenhalgh and Rosenblatt, 1984, p.442). According to Greenhalgh and Rosenblatt (1984) powerlessness can take four basic forms: lack of
protection, unclear expectancies, the culture of organizations and the employee's beliefs about the organization's standard operating procedures for dismissing employees.
In can be said that workers react to job insecurity (Greenhalgh and Rosenblatt, 1984) and their reactions have consequences. According to Sverke and Hellgren (2002), job insecurity can be described as a function of both the objective situation (e.g. labor market characteristics, organisational change) and the individual’s subjective characteristics (e.g. family responsibility, employability). In their view (Greenhalgh and Rosenblatt, 1984; Sverke and Hellgren, 2002), more research is warranted to unravel the characteristics of those individuals who react with job insecurity to specific objective situations. In this study job insecurity will be examined in a outsourcing situation. According to Embleton and Wright (1998), outsourcing an existing function can affect staff in one of the three ways: they will leave the firm, they will be transferred to the supplier company or they will stay on. A lot of uncertainties for the employees.
Now job security is defined and the relation with outsourcing is explained, it is time to look at the variables that can influence the feeling of job (in)security. Different characteristics were mentioned that can influence the feeling of job insecurity. In this study the positive or negative influence of the outsourcing process on the feeling of job (in)security will be investigated. Besides, in what way do job conditions deteriorate or ameliorate to job security will be examined. In the following sub paragraphs both relations according to the literature will be discussed.
1.5.1 OUTSOURCINGS PROCESS AND JOB (IN)SECURITY
The impact of a decision to outsource a certain business activity on the employees and the organization of which they are part of is brought about the implementation process (Roe et al., 2005). Roe et al. (2005) note that outsourcing, like other strategies, can only be expected to achieve its objectives through a successful organizational change process. Willcocks et al. (1995) highlight the importance of the process of change involved in outsourcing in dealing with employees.
Outsourcing is a process that runs trough two organizations and it forces employees to leave the first one and become part of the second one (Roe et al., 2005). According to Roe et al. (2005) there is not much literature on how to manage the change processes of this specific kind. Some lessons may be drawn from publications on organizational changes in downsizing and
mergers, which emphasize the need for early and open communication, the value of supporting individual employees in coping with emotions and concerns, and the importance of fairness (Dempsey and McKevitt, 2001; Gutknecht and Keys, 1993). The complexity of the change combined with its voluntary nature (Barger and Kirby, 1995) may be a reason why the change management process as experienced by employees involved in outsourcing falls short of their expectations (Roe et al., 2005, p. 20).
The general literature on organizational change provides some insights into factors enabling successful change that may also operate in the case of outsourcing (Roe et al., 2005, p.8). Among them are: (1) top management support, as to underline the importance of the change, give direction, legitimize actions of lower management, facilitate access to resources, help align organizational processes etc.; (2) open communication with employees at an early stage of the process, in order to create awareness of the necessity of change, establish an image of the aimed-for goal and the planned route towards the goal, the implications for work routines and consequences for individuals; (3) opportunity for participation of employees to gain their involvement, use their knowledge, and avoid resistance to change; (4) attention and support for the individual (Roe et al., 2005).
However, Roe et al. (2005) assume that an organizational change in outsourcing has some specific other characteristics, which make above factors difficult. First, outsourcing involves multiple parties, and it is difficult to inform and treat all employees in a consistent way. Second, organizations that tend to opt for outsourcing are relatively inexperienced and lack the professional expertise to deal with the complexities of outsourcing, especially those related to human resources. Third, the strong focus on economic objectives leads to an overemphasis on ‘hard’ financial and legal aspects at the expense of ‘soft’ social aspects. Fourth, the decision and implementation process is under time pressure and is partly conducted in a mode of secrecy, which hampers open communication and involvement.
While there was no published evidence on organizational change in outsourcing, Roe et al. (2005) found it worthwhile to take a closer look at how outsourcing is carried out, and to analyze it from the point of view of organizational change. Roe et al. (2005) developed a checklist with aspects that could be important for employees in the outsourcing process, segmented into three phases: Pre Phase, Transition Phase and Post Phase. The employees were asked whether they found the facets
important and whether they had experienced the facet in the outsourcing project. The (five) items with the highest perceived importance in each section of the checklist are presented in a table (Appendix 2). Looking what employees find important Roe et al. (2005) note a great need for information and a strong emphasis on issues of interactive and procedural justice. These are also the aspects in which shortcomings of actual practices are perceived in the study of Roe et al. (2005). The way in which information was presented, gathered and communicated is one of the three dimensions Kessler et al. (1999) mention as important in the outsourcing process. According to Roe et al. (2005) certain shortcomings regarding the information supply may be hard to avoid because of strategic reasons. The strategic interests which are at stake when exploring options for outsourcing and negotiating with potential service providers may preclude early communication with employees, even though they feel the need for it. On the other hand, it should be recognized that gaps perceived by employees – whether avoidable or not – may produce disappointments that can undermine the employees’ motivation to perform and commitment to the new employer (Roe et al., 2005).
Roe et al. (2005) note that it is important to consider both the direct and indirect human impacts of outsourcing, because they can complicate the outsourcing process and undermine its outcomes. The outcomes, the negative and positive consequences, for the employees seem to depend on the way in which the outsourcing process was handled (Kessler et al., 1999). Depending on the way in which the outsourcing process is managed, survivors may also respond with perceptions of uncertainty, distrust and reduced commitment, similar to what is known from the literature on downsizing (Allen, Freeman, Russell, Reizenstein and Rentz, 2001; Mishra and Spreitzer, 1998).
According to Embleton and Wright (1998, p.105) management must ensure that all employees are aware of the overall situation. Developing a policy on how you communicate an outsourcing move is key to a successful transition (Navran Associates, 1996). According to Yankee Group (1996), 80 per cent of employees will initially view outsourcing extremely negatively, because they experience anxiety about the unknown and the potential effects on their jobs in terms of continuation and/or threats to valued job characteristics. The anxiety and the negative thought will have its effect on the feeling of job insecurity by the employees. According to Embleton and
Wright (1998), their acceptance level will improve, however, if management communicates its rationale constantly about the deal, and possible career paths (Embleton and Wright, 1998).
The Navran Accosiation (1996a) examined that by time the deal is finalized, 50 per cent should be accepting of the situation with a further 30 per cent acclimatizing to the deal within six months after it is signed. These statistics describe a best case scenario, that can only be achieved when communication channels remain open (Embleton and Wright, 1998). Managers must ensure all those affected are made aware of milestones that are reached and the options available. Providing counselling and out-placement services, therefore, is an essential component of the successful outsourcing process. All employees must believe that management is being fair (Embleton and Wright, 1998, p.103). Besides the employees, the change process is of value for the third party, the outsource organization. For the service provider it is crucially important that the outsourcing process goes well in order to ensure that employees are committed and motivated to perform (Roe et al., 2005). Unwillingness to change, distrust and lack of commitment may seriously undermine the feasibility and success of the outsourcing operation (Roe et al., 2005).
The outsourcing process is according to recent literature important for the negative or positive thought of the employees about the outsourcing. This thought can have its effect on the feeling of job insecurity.
1.5.2 JOB CONDITIONS AND JOB (IN)SECURITY
According to Greenhalgh and Rosenblatt (1984, p.440) the individual perceives as potential loss of continuity in a job situation can span the range from permanent loss of the job itself to loss of some subjectively important feature of the job. The loss of valued job features is an important but often overlooked aspect of job insecurity (Greenhalgh and Rosenblatt, 1984). In this paragraph the variable job conditions and its relation with job (in)security will be explained.
Job conditions can be defined as the conditions on the shop floor, also called the working conditions. You can think about the weight of the job and the work facilities. Besides these features, in this research the terms of employment, the conditions of the contract, and the benefits are taken in account. These terms can be reproduced in the collective labour agreement. An organizational change can create changes in the job conditions of the employees. As mentioned before, outsourcing may provide opportunities for enhanced career and training opportunities, or it may provide
greater stability and predictability (Kessler et al., 1999). Kusel et al. (2000) and Kessler et al. (1999) both tried to show the effect of outsourcing on the employees, especially in terms of conditions.
In the case of the wood workers, outsourcing had a variety of negative effects on the woods workers and their families (Kusel et al., 2000). The workers and their partners made it clear that displacement had implications far beyond their loss of income. The outsourcing resulted in the reemployed working more hours in generally less stable jobs where they lost an average 25% of their predisplacement wage (Kusel et al., 2000, p. 129). A number of displaced workers had to work many more hours than they did before. Moreover, the employees found their new jobs not as stable as before, and this lack of stability also contributes to worker and family stress. Besides, almost all workers identified the loss of company benefits as one of the most significant drawbacks of displacement. Company benefits include health insurance, pension benefits, vacation pay and sick pay.
In the study of Kessler et al. (1999) the employees were confronted with some changes too. In the first place the employees had the option of remaining on their old contract, known as the ‘image contract’, and the alternative was the companies own ‘standard contract’. There were significant differences between the contracts, and in particular pay was determined in different ways (Kessler et al., 1999, p.12). Second, there were also slight differences in pension contributions and in hours of work. Changes to the general working climate constituted another substantive change. Much tighter behavioural codes were introduced. Although these changes might appear relatively trivial, they were symbolically significant and had a major impact on the working atmosphere (Kessler et al, 1999). Besides, Kessler et at. (1999) examined four areas of HR practices (Table 6); rewards, career and development, skills and training and communication. The most dramatic shift has been in terms of career development, where employees have a more positive view of their new employer. Concurrently, there was been a slight positive shift in assessment of rewards and training. However, views on communication and involvement remain largely unchanged.
HR practices Mean SD Mean SD Difference
Rewards 3,53 1,54 3,96 1,49 + 0,43
Career and development 2,68 1,32 3,9 1,54 + 1,22 Skills and training 4,05 1,39 4,59 1,44 + 0,54
Communication 4,05 0,95 4,28 0,79 + 0,23
* Scale 1-7, strongly disagree - strongly agree
Time 1 (n=103) Time 2 (n=47)
Table 6 Changes in perceptions of HR practices
Beside the HR practices Kessler et al. (1999) examined the expectations of the new employer. Aspects like job security, career opportunities and work tempo were measured. Table 7 suggests that employees feel they are working harder in their new employment than they had expected. The move to the new employer has gone some way to alleviating employees’ anxiety about the future, and at the same time, expectations about job security have largely been met. These numbers give information about the expectations, and not about the weight or height of the aspects. At the same time it is difficult to establish whether the configuration of employee perceptions is specific to the local authority or whether it reflects a more typical response to outsourcing (Kessler et al., 1999).
Mean SD Mean SD Difference
Anxious about the future 5,09 1,61 4,19 1,69 - 0,9 Work harder in new job 4,7 1,28 4,98 1,63 + 0,28 Greater career opportunities 5,21 1,36 4,68 1,79 - 0,53
Job security 4,39 1,5 4 1,78 - 0,39
Job more interesting 4,79 1,38 4,7 1,76 - 0,09 Changes for the better 4,67 1,56 4,83 1,76 + 0,16 * Scale 1-7, strongly disagree - strongly agree
(n=47) (n=103)
Time 1: expectations Time 2: fulfilment
Table 7 Employee expectations and fulfilment
In these two studies the researchers tried to measure the effects of outsourcing, and specifically on the differences in job conditions. According to Kessler et al. (1999) and Kusel et al. (2000) the organizational change has implications on the working conditions. However, it can not be said that these implications are general for all employees after outsourcing. In this study the researcher will do a closer examination of these issues at the employees of the Cash Centres.
After reading this literature review it is clear that outsourcing has its impact on the employees. A precise filling up of this impact is not possible. Current studies gives us a first awareness of this topic, and moreover they embouchure for further research. In this study the researcher will have a closer examination of the social impact of outsourcing. This research will add value to the recent literature, besides looking at the feeling of employees about the outsourcing it measures the effect of the outsourcing process and the job conditions on the feeling of job insecurity. Before explaining the research method, in Chapter two, an introduction of the case study will be given.
2 INTRODUCTION TO THE CASE STUDY his chapter describes the case study of this research. The research is conducted at Services Operations NL of ABN Amro Bank, where outsourcing is a frequent occurrence. The first paragraph describes the organisation ABN Amro and emphasize the Services Operations NL department. In the second paragraph there is attention paid to ABN Amro Services Operations NL and outsourcing. Especially the outsourcing activity were this research is conducted, the Cash Centres, will be explained. In the third paragraph outsourcing and the collective agreement are pointed out, because there is a special part about starting points in outsourcing.
2.1 ABNAMRO BANK
On 29 March 1824, King Willem I issued a royal decree creating the Nederlandsche Handel-Maatschappij (NHM) with the aim of reviving trade between the Netherlands and the Dutch East Indies. In 1964, NHM merged with De Twentsche Bank to form Algemene Bank Nederland (ABN) while Amsterdamsche Bank and Rotterdamsche Bank joined to become Amsterdam-Rotterdam (Amro) Bank. In 1991, these two banks merged as ABN Amro (www.abnamro.com).
Nowadays, ABN Amro is an international bank with European roots. ABN Amro has a clear focus on consumer and commercial clients in our local markets an focus globally on select multinational corporations and financial institutions, as well as private clients (Annual Report 2006 ABN Amro).
Since January 2006 ABN Amro adopted a new structure, the group structure (figure 4). In the opinion of ABN Amro, this structure enables them to share expertise, and operational excellence across the Group with greater impact. ABN Amro’s Group structure comprises: seven Client BUs three product BUs, two cross-BU segments, Group Functions and Services. The seven client BU’s consist of five regional BUs (Netherlands, Europe including Antonveneta in Italy, North America, Latin America and Asia) and two global BUs Private Clients and Global Clients. The three Product BUs (Global Markets, Transaction Banking and Asset Management) support the Client Bus by developing and delivering products for all of our clients globally.
ABN Amro binds all her Client BUs together through a cross-BU Consumer Client Segment and a cross-BU Commercial Client Segment. These segments drive winning formulas across the various geogr aphies, and work with the Product BUs to deliver high-quality solutions to clients.
Group Functions delivers value-added support across the Group in areas ranging from Risk to Finance and from Human Resources to Sustainability, while always balancing global control with local flexibility and expertise. Services (including Services Operations NL) continues the focus on increasing operational efficiency trough Group-wide consolidation and standardisation.
Netherlands Europe North America Latin America Asia Private Clients Global Clients
incl AntonVeneta
Local Products Local Products Local Products Local Products Local Products Local Products M&A ECM
Asset Management Services Group functions Consumer Client Segment Commercial Client Segment
Global Markets Transaction Banking
Figure 4 Organization Structure ABN Amro
2.1.1 SERVICES OPERATIONS NL
ABN Amro’s Services organisation is responsible for delivering internal support services across the bank’s global, regional and product BUs worldwide. It’s core areas are IT, Operations, and Corporate Services. Services Operations NL provides operations services to a number of BU’s throughout the bank, notably to the BU NL, but also to Global Clients, Private Clients, BU EU and Group Functions. Currently over 400 services are managed for their internal clients. Subjoined table shows the activities of Services Operations NL. In general, it can be said that Operations takes care of almost all the administrative processes, for example changes in address or credit card requests. The services are specified in Service Level Agreements with the clients. Items such as costs, quality, and time limits are recorded in those agreements (www.abnamro.com).
Treasury Savings
Investments Credits
Trade Finance Payments
Generic administration process Cash Activities
Approximately 150 projects at the global, regional and local levels are brought together under single umbrella programme, and includes large-scale systems replacements, process reengineering and consolidation, outsourcing and offshoring. Besides, the collective agreement of ABN Amro (Appendix 3) describes the search for alternatives, like outsourcing or continue by joint venture, when services or activities are not profitable in the long run.
2.2 ABNAMRO SERVICES OPERATIONS NL AND OUTSOURCING
In the sourcing strategy of Operations there are three sourcing models: outsourcing, in-sourcing and co-sourcing. Services Operations NL formulated three sourcing criteria, objectives. A strategic objective “does the service activity directly contribute to ABN Amro’s competitive advantage, core competency or capability?”, a financial objective “do investments in this activity provide a return which is more than the cost of invested capital?”, and a performance objective “is the operating performance of the Service measurably equal, less or more to relevant financial industry standards?” (internal document Services Operations NL). Subjoined figure shows the current state (2007) and the preliminary end state analysis (2012) of sourcing activities. It is visible that the activities of Operations will be outsourced, in-sourced and co-sourced before 2012. Even different sourcing models occurs together, like outsourcing and co-sourcing.
Sourcing Criteria
Strategy
Does the service activity directly contribute to ABN AMRO’s competitive advantage, core competency or capability?
Financial
Do investments in this activity provide a return which is more than the cost of invested capital?
Performance
Is the operating performance of the Service measurably equal, less or more to relevant financial industry standards? End State Sourcing Models Insourcing •Core Competence
•High levels of control required.
•Operational excellence
•Technology platform available
•First mover Strong capability
Co-sourcing •Core, high value-add services
•Strong track record of internal funding/support.
•High risk / uncertainty.
•Close link with client relationship. Influence on future direction
Outsourcing •No need/desire to control
•Non core, low value-add services
•Poor track record of internal funding/support.
•Low risk/uncertainty. Market capability and maturity.
Current state End state analysis
Sourcing model
Sourcing model
Off shoring Off shoring
Scope Scope 40% 31% 6% campaigns 11% NL NL NL NL NL NL NL / Global NL EU / Global NL NL EU NL NL NL NL NL NL NL NL NL EU NL / EU NL / EU EU / Global Global Global t.b.d. Cross Border Paym.
Trade Cards Cash Treasury Securities Credit & Loan Credit Services Mortgages * Stater Insurance Reconciliations TB OPS GM&GC CORDD
* Partner Delta Lloyd Domestic Payments
Savings Crossproducts
For outsourcing the activities there is no need or desire of control, it concerns non core, low value-added services, there is a poor track record of internal support, and low risk. For co-sourcing, the activities it concerns core, high value-add services with a strong track record of internal funding or support, with high risk and uncertainty, and a close link with client. In this study the interviews have been conducted at the Cash Centres, where the sourcing model is a combination of co-sourcing and outco-sourcing. In this situation ABN Amro first decided to outsource the activities, after which is chosen for a liberation of the Cash Centre. Further, the Cash Centres needed a increase of the volumes to keep the head above water, which resulted in a co-sourcing between ABN Amro and Rabobank.
The activities were non core activities of ABN Amro and have been outsourced and co-sourced by ABN Amro bank. In this case the activities and the employees are transferred to the new organisation. The employees are transferred and remain subsequently involved in delivering services to ABN Amro. The bank has part in ‘new’ organizations, a 50% share in Altajo, while Rabobank has the other 50%.
2.2.1 OUTSOURCING PROCESS SERVICES OPERATIONS NL
Services Operations NL has divided the outsourcings process in three parts, the before, the after and the outsourcing implementation (Figure 6). In the preparing phase, the management has to write an business case. This business case contains some regular elements, like the objective of the outsourcing, the project organisation, risks, the third party and personnel implications. With regard to the personnel paragraph, this includes an stock-taking of the employees who perform the outsourcing services and various analysis like years of services, function scale and age of the employees. Besides, an communication plan is necessary, in this the possible communication tools and the way to inform the employees need to be described.
Figure 6 Outsourcing Process in main lines (Services Operations NL)
Outsourcingstraject Natraject
• Request for Information (RFI) • Request for Proposal (RFP) • Due Diligence
• Overeenkomst met derde • Daadwerkelijke overgang
Terugkeer na outsourcing: • Vrijwillig na exact 2 jaar • Economische reden: ontslag • Staken van activiteiten
Voortraject
• Business Case • Voorbereiding
The purpose of the outsourcing path is selecting one of the suppliers, who fits the best in the organisation. HR is responsible for the personnel aspects in the negotiation, they see to it that the bank meet his obligations. Besides, HR gives input and advice in the comparison of the working conditions. According to the collective agreement (paragraph 3.3) the legislation determinates that the employees retain all their rights and duties.
In the evaluation state it is recommended that HR and the management evaluate the process. Different aspects can be discussed, like how the process elapsed and what the possible learning points are. Besides, in this state HR and the management have to look at employees that return, while there are different possibilities for employees to return (paragraph 3.3).
2.2.2 ALTAJO
In the opinion of Services Operations NL (and so ABN Amro) the Cash Centres were not profitable in the long run. It only incurs expenses instead of bringing money in. The volumes where decreasing, in the first place through the introduction of the Euro and in the second place through automation. Operations decided to outsource the Cash Centres.
After the offer for sale there was a long period of negotiating with external parties. Nevertheless, the CEO of the Cash Centres had a strong believe in this department and he started a business case for liberation. When the outsourcing to a third party failed, ABN Amro gave the Cash Centre the opportunity to liberate. However, after the introduction of the Euro the volumes decreased and to be profitable it was necessary to deal with more volumes in-house. A collaboration with Rabobank established and Altajo was born. A contract for seven years with ABN Amro and Rabobank was concluded.
2.3 OUTSOURCING AND THE COLLECTIVE AGREEMENT
In the current collective agreement there is a separate part about general starting points by outsourcing (collective agreement ABN Amro 2006-2008, p. 110-113, Appendix 3). To begin with, by outsourcing the Dutch legislation, more specific article 7:662-666 BW (Appendix 4), need to be applied here. Statutory, by outsourcing there is no lost of employment. Second, by transition of company legislation believes that employees follow their work (Article 4). However, sometimes this
doesn’t fix, in that case the employees can choose to stay at ABN Amro or to change to the third party.
Third, statutory the employees retain their all rights and duties by outsourcing. This includes salary, bonus arrangement, job conditions, holiday, and so on. Besides, ABN Amro tries to maintain the working hours of the employees and to include the years of services at ABN Amro in the working conditions of the third party. When the third party makes alterations in the working conditions, ABN Amro will pay the regular employees a once-only compensation.
Fourth, article 6 describes the return guarantee for employees after outsourcing. It is possible to return at ABN Amro by economic reasons or voluntarily. Depending on the return reason, the employees are employed in a appropriate function or in the Employability Centre. There is a distinction between employees older than 57,5 and employees younger than 57,5. In subjoined figure, the different possibilities for return are visible.
