Harshal Naik 100953980 The factors influencing the decision of whether to contract out or keep it in the house.

City of lonk
!CCT 5013 " #r. ailey Church

Q1. Decision to Contract or retain in house employees. There are various reasons because of which the manager (Myself) may choose to contract our cleaning services. The current cleaning union may have been facing some challenges or liabilities to operating its services in house lea!ing to "uality atten!ance an! cost issues. Therefore several factors nee! to be consi!ere! to ma#e the !ecision to awar! a contract such as$ Cost: %lthough cost is not necessarily the sole criterion to evaluate the awar!ing of a contract it certainly is an important one. Consi!ering the fact that the in&house operation has become "uite e'pensive consi!ering the "uality provi!e! an! the fact that other ine'pensive options e'ist some of which are reputable an! provi!e with better "uality may prompt one to consi!er contracting. Cost control is a ma(or issue for most institutions an! a primary reason for contracting. % survey carrie! out by )M*in# + ,ncompass -lobal Technologies .//. in!icates that one of the primary reasons for outsourcing was savings. %ccor!ing to the case the in&house cleaning costs an average of 10.12 percent more that of %3C cleaning services inclu!ing the one&time severance fees an! withhol!ing the 41// /// for a perio! of 1 years. Costs can be measure! in varie! ways such as cost per s"uare foot cleane! labor costs supply costs costs of benefits an! overhea! costs. 5f the in&house operation is too e'pensive contracting may present us with an opportunity to en(oy the cost a!vantage of the economies of scale that can be e'ploite! by the contractors an! speciali6e! labor. 7ignificant savings may also be generate! because the costs of benefits can be avoi!e! through contracting. %lthough one must bear in min! that the issue of benefits is an e'pensive one an! it re"uires that a!ministrators !evelop strategies that minimi6e the impact of benefit costs. 5n a!!ition salary bases are in most cases higher for in&house operations an! this along with high benefit costs contributes to significantly higher costs per s"uare foot for an in& house cleaning operation versus a contract cleaning operation. Efficiency: 8ro!uctivity of the in&house cleaning wor#force is an issue that has been cite! by employees an! customers ali#e. 5ncreasing the efficiency of in&house cleaners can !ecrease operational overhea!s9 however union managers may not have the will or the time to fight labor actions to increase the pro!uctivity an! efficiency of the in&house staff. %n important fact to note is that efficiencies in contractual operations can be mislea!ing. % contract cleaner:s in!ication that its average staff can clean ;/ /// s"uare feet an! an in&house cleaner can only clean 2/ /// s"uare feet may not be completely true. The "uality an! cost of service is base! on multiple factors such as tas#s fre"uencies time allocate! an! "uality e'pecte!. This is a comple' problem an! one must #eep trac# of these variables to !etermine actual costs. Inflexible staffing: 7ome in&house operations have limite! control of their staffing levels. ,mployees may be hire! to wor# !uring fi'e! times be restricte! to certain areas or have a !ivision of labor that ma#es it !ifficult to reali6e efficiencies. ,ven though the wor#loa! may fluctuate throughout the year the operation labor costs stay more or less static. % contractor on the other han! can increase or !ecrease the labor pool base! on the wor#flow an! respon! to situations that nee! a rapi! increase in staffing for a short time.

Core mission: % manager may !eci!e to outsource because the company wants to concentrate on their core mission an! no longer wishes to !igress from its business to !eal with such issues as house#eeping. Personnel issues: 5n most cases when one completely outsources a function such as cleaning services personnel actions an! issues are ta#en care of by the company which has been awar!e! the contract. 5ssues such as payroll time #eeping labor relations benefits !isciplinary actions etc. are han!le! by the contractor thus relieving the a!ministrative bur!en on the manager. Quality: %t times there may be a !isparity between the "uality of cleaning as perceive! by the in&house management an! the way the customer views the facility:s cleanliness. %!!itionally the current employee as well customer fee!bac# provi!es an impetus to consi!er contracting.

2. What external control factors need to be considered here? Who is in play and hat are their interests? What are your ris!s? Who are the sta!eholders?

5n this case there are various macro&environment variables that affect the influence the !ecision whether the !ecision to awar! a contract or retain in&house employees such as$ External "actors:

-overnment$ The current government policy favors native entrepreneurs. This ma#es it challenging to awar! the contract to %3C Cleaners !espite having a clear a!vantage in terms of "uality as well as price. Costs$ %lthough contracting in this case is more economical an! minimi6es cost one may argue that the costs associate! with ma#ing employees re!un!ant are high. <nion$ The presence of union ma#es it !ifficult to lay off current staff an! implementing the process of contractual agreement. 8olitical$ =elate! to the government are political changes such as elections or political agen!as to attract votes from a particular bloc

#is!s: >ne of the most fears associate! with contracting is control. There is a general assumption that the company has greater control over employees an! services when sourcing is internal an! there is less chance of failure of supply than using a contractor. )urthermore the company can become overly !epen!ent on the opportunistic contractor !ue to the lac# of awareness associate! with cleaning an! this

may lea! to the contractor hol!ing the company to ransom. >n the other han! having the cleaning internally implemente! in the current state can lea! to loss off business focus. ?owever since the level of ris# or uncertainty is low in this case since there is more than one contractor it ma#es outsourcing as the preferre! option.

#is! $atrix:

uyers $ne #any %ew

*ow of ris# in e'change

>ne

)ew Contractors

Many

Players and Interests: 8layers The Company -overnment @ Ministers office 5nterests >btain a cleaning service at minimi6e! cost ,ffective implementation of the provision for native entrepreneurs

%3C Cleaners %!anac Cleaners <nion Current 7taff Myself =egional Director

-ain a foothol! in Cana!a >btain contract an! establish practice an! !evelop business 8rotect thee (obs off the current staff =etain the (obs Ma#e the most feasible !ecision consi!ering the social economic an! environmental factors To be able to meet the !eman!s of the union Aice&8resi!ent an! the Minister:s office

%ta!eholders:

Myself =egional Director Contractors City of 3lon# Minister:s office <nion Customers ,mployees Current 7taff

&. What decision style is appropriate in this case?

Ma#ing efficient an! informe! !ecisions can become especially tough when they involve many people. The in!ivi!ual perspectives an! behaviors of various sta#ehol!ers can create !ifferences of opinion an! may raise political issues an! spar# conflict between !ifferent organi6ational environments. 8roper communication an! sta#ehol!er management can re!uce the negative effects of ba! !ecisions or long !rawn&out !ecision&ma#ing processes. )or comple' programs an! pro(ects such as this one mapping psychological characteristics an! personal motivators provi!es the right pathway to !ecision& ma#ing. 5n the case provi!e! 5 believe that a combination of !irective an! analytical !ecision ma#ing is appropriate. )or managers with a !irective an! analytical style a matri' an! summary along with integration level scope pros an! cons ris# impact an! costs for each option are important. 7ince the sta#ehol!ers are comple' an! the !ecision to awar! a contract may cause !isruptions in efficiency of wor#. 5t is important that one must rely on his #nowle!ge an! in the case that there is an issue that the manager is unaware of he must consult some of the team members for their insights. >ne inherent ris# associate! with see#ing the opinion of team members is that there is high probability that they are incline! one way or the other an! this may influence the manager:s !ecision to whether or not to awar! a contract. %t the same time in a situation involving several sta#ehol!ers one must not solely rely on his@her #nowle!ge since the completeness of that #nowle!ge may result in a poor !ecision that may cause a!!itional costs an! poor service "uality.

'. What actions( in the form of a process( ould you ta!e? )ocusing e'clusively on e'ecution rather than paying attention to removing barriers in the environment may not bring the e'pecte! efficient an! effective results. Communication gaps are one of those barriers especially in situations involving many sta#ehol!ers. 5 woul! carry out an accurate an! systematic sta#ehol!er analysis by i!entifying an! un!erstan!ing the people involve! their positions an! roles their e'pectations an! interests their influence levels an! whether they are internal or e'ternal neutral resistors or supporters. 5 woul! have the following steps clearly !efine!

% !etaile! analysis an! information !ossier. This shall inclu!e the costs involve! an! what will be the li#ely scenarios in case each of them is appointe! an! the worst&case scenario inclu!ing the Minister:s office opposing the appointment of the contractor. Clear !efinitions of roles an! responsibilities. This shall inform the sta#ehol!ers what is e'pecte! of them. This shall inclu!e the current staff in&case they are appointe!@reinstate!. Mapping sta#ehol!ers: e'pectations an! motivations an! i!entifying the !ecision ma#ers were critical to support the sta#ehol!er management strategy. %s specifie! in the communication plan hol!ing regular meetings tailore! for Minister:s office contractors union an! the regional !irector.

Meetings with a!ministrative staff to evaluate re"uirements an! i!entifying #ey ris#s for approval of the contractor. -iven the program:s comple'ity an! the bu!get re"uire! un!erstan! the !ecision:s impact on the business @ function of both the organi6ations.

). What are the !ey decision factors that( based on the information a*ailable( ould you ha*e to balance in ma!ing the final decision? The #ey !ecision factors in this case are$ Cost: 7ince the manager has been as#e! to minimi6e the cost by 1/B an! improve the efficiency an! "uality of the cleaning service cost is one of the prime factors to impact the !ecision ma#ing process. The following are the costs associate! with each contractor in worst&case scenarios$

Current %taff: 4 1// /// with rising labor costs +,C International Cleaners: 4 C;1 /// with 4 2// /// in severance costs of the current staff 4 1// /// withhel! in performance bon! an! the option to retain some of the current staff +danac Cleaners: 4 D0/ /// (400/ /// E 4.1/ ///(e"uipment) E 41/ ///minimum (severance))with option to re!uce the severance costs

Efficiency: 7ince "uality an! efficiency is another important to prompt contracting it is imperative to be consi!ere!. Current %taff: Dismal Quality poor fee!bac# poor atten!ance an! overtime issues +,C International: -oo! "uality repute! presence across the <7. +danac Cleaners: Fo !ata on "uality not professional woul! retain several of the current staff (which lea! to !ismal "uality in the first place) Influence - Pressure: 7everal sta#ehol!ers are involve! in the process. The following factors woul! be consi!ere!$

Current %taff: 8rotecte! by union high cost of terminating employees +,C International: Fone +danac Cleaners: )avore! by the Minister:s office

En*ironmental: Decisions are always influence! by business environment There may be e'ternal or internal factors that influence the process. #is!: Decisions always consi!er the problem of ris#. =is# an! uncertainty are two important aspects always influence the !ecisions.

.. /o

ould you implement this decision? Who needs to be informed? When and ho ?

Implementation of a solution, like any business plan, requires clearly stated steps to resolve the problem, timelines for the implementation of modules, as well as a resource allocation Plan. The functions of planning, organizing, leading and controlling all come into play during an implementation. I would begin implementing successive parts of the cleaning process until the last part is implemented. The most ever at risk is the current module being installed. This would involve systematically replacing the current existing staff rather than terminating all of them at once. This would add redundancy and increase costs as we would have two cleaning staffs at a point but this would also provide with an opportunity to review the quality, productivity and behavior of the new cleaning staff. Those involved such as the regional director and the implementation. inister!s office need to know the stated solution

"b#ectives, the $esource %vailability, the &udgeted 'unds and Time as well as the methods of anagers involved with the implementation plan need to be aware of the issues relating to political acceptance as well as the environment of the solution model. (uring and after the implementation, easurement tools need to be employed to determine if and to what

extent the solution solved the problem. )ontingency plan*s+ need to be ready for the eventuality that the solution has missed the mark in terms of performance and there needs to be a clause that allows us to terminate the contract without further ado.

)ommunication, Factors Regional Director Ministers Office Union Contractors

Intensity

'requent )ommunication /eeping abreast analysis, and indicators. It is important to keep her notified about the process from finish Telephonic start to her of costs other

$egular )ommunication 0otifying the office

$egular )ommunication 1olding discussions about retention of employees or about quality The add some concerns. to of the team possibility

.parse )ommunication )ommunicating in terms of cost and of

-hat .hall be )ommunicate d

about what factors are important to make the decision such as cost, quality and efficiency, experience They shall be informed only when logical steps are formed

explaining expectations quality. It is important to understand the needs of contractors as stakeholders.

current staff to new contractor!s shall be discussed.

Telephonic

0egotiations

2mail, 0ewsletter

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