Company Outsourcing Relationships: Testing the Effects of Employees' Perceptions of Outsourcing on Supplier Relationship Quality

Business Process Outsourcing (BPO) offshore has emerged as an important business strategy. The basic allure of outsourcing is to improve profitability; however, research show, the problem with BPO is that most arrangements fail. Despite the global popularity of outsourcing and the high failure rate, there remains a significant gap in outsourcing literature regarding the relationship between the human effects of outsourcing and outsourcing success. Therefore, this quantitative statistical study examined selected employee attributes purported to be affected by outsourcing and its relationship on the perception of the outsourcing supplier's relationship quality which is the main reason cited for terminating outsourcing contracts prematurely. Outsourcing, the process of obtaining goods or services from individuals or organizations outside the firm's boundaries, is one of the most visible and fastest growing of all modern management practices due to its impact on organizational economics and the design of tasks and jobs. The study was informed by 156 survey responses designed to measure employee attributes affected by outsourcing and attitudes towards outsourcing suppliers as perceived by selected employees of a mid-size bank engaged in BPO in four countries. As it relates to BPO, the perception of employee attributes; (a) Job Enhancement, (b) Career Mobility, (c) Training, (d) Inspired to Innovate, and (e) Importance of the Process Outsourced, were all found to be significantly correlated (p<0.0001 in most cases, and one is 0.0009) with the perception of supplier relationship quality. Additionally, these employee attributes were analyzed using linear regression analyses and found to be statistically significant predictors of supplier relationship quality (r-squared ranging from 0.07 to 0.46). A one-way ANOVA indicated that based on job level, participants differed in their opinions regarding attributes: (a) Importance of the Process Outsourced, (b) Inspired to Innovate, and (c) Job Enhancement. No difference was found in perception of training and career mobility. Recommendations for future research include addressing conditions that affect variables correlated with perceptions of supplier relationship quality and differences in opinions based on job level. The empirical findings in this study clearly indicate that a better understanding of the human effects of outsourcing is warranted.