PERSONNEL OUTSOURCING AND ORGANIZATION’S COMPETITIVENESS

ABSTRACT

The study sought to determine the nature of the relationship between personnel outsourcing and organizational competitiveness, ascertain the extent to which commercial banks outsource their personnel services, identify the areas in which commercial banks outsource personnel services, determine the benefits from outsourcing personnel services. The study had a population size of

613, out of which a sample size of 242 was realized using Taro Yamane’s Formula at 5% error tolerance and 95% level of confidence. Instruments used for data collection were questionnaire and interview. A total number of 242 copies of the questionnaire were distributed while 191 copies  were  returned.  The  Survey  research  design  was  adopted  for  the  study.  The  four hypotheses were tested using Pearson product moment correlation coefficient and chi- square statistical tools. The findings indicated that there is a significant relationship between personnel outsourcing and organizational competitiveness. Nigerian commercial banks always outsource their personnel services. Recruitment of human resource, cleaning and security services are areas  in  which  Nigerian  commercial  banks  outsource  personnel  services.  Reduced  cost, improved quality and time-related advantages are benefits attributed to personnel outsourcing. The study recommended that every organization that operates in a highly competitive environment should embark on personnel outsourcing.

CHAPTER ONE INTRODUCTION

1.1         BACKGROUND OF THE STUDY

With  competition  becoming  stiffer,  and  the  Nigerian  business  environment  increasingly becoming   hostile   amidst   several   regulations   and   government   interference   nowadays, organizations especially banks are continuously being forced to find ways to improve their business performance and to obtain competitive advantage in all possible means. To this end, many of them have looked beyond the traditional boundaries of their firms to obtain performance improvement. They have turned to personnel outsourcing with an increasing attempt to enhance their competitiveness, increase their profitability and refocus on their core business (Hill, Ireland and Hoskisson, 2007).

Personnel outsourcing can potentially reduce costs, which is one crucial basis for attaining competitive advantage over competitors as well as increasing profitability. Organizations may give away their ‘Crown of Jewels’ if they are not careful when doing the outsourcing .For example, strategic reputation loss, compliance and operational risks arising from failure of a service provider in providing the services, breaches in security, or inability to comply with legal and regulatory requirements of the company, etc(Kremic, Tukel and Rom, 2006).

Personnel outsourcing can only be a panacea for organizational competitiveness if organizations possess the resources and capabilities required to achieve competitive superiority in all primary and support activities (Gillett, 2004).

Linder,  Jarvenpaa,  and  Davenport  (2003)  state that,  few  companies can  afford  to  develop internally all the technologies and the competences that might lead to or enhance competitive advantage. And by nurturing a smaller number of capabilities, a firm can increase the probability of developing a competitive advantage because it would not become overextended-which is protective against the great risk of loss in outsourcing. Meanwhile, by outsourcing the personnel, it makes the firm concentrate on those areas in which it can create value (Click and Duening, 2005).

Paraskevas (2001) stresses that personnel outsourcing as an alternative approach:“Outsourcing might be a better alternative when it is believed that certain support functions can be completed faster,  cheaper,  or  better  by  an  outside  organization”  Nowadays  along  with  traditional outsourcing of internal functions in category of support, advice, audit, and evaluation such as IT,

training, accounting and internal auditing, organisation  outsource other service encounters by eliminating internal suppliers like the purchasing department that replace with e-procurement, food production and housekeeping (Paraskevas, 2001).

One of the effective ways to handle this issue is outsourcing the training or at least outsourcing the appraisal of training. Outsourcing has been viewed as a form of predetermined external provision with another enterprise for the delivery of goods and/or services that would previously have   been   offered   in-house  (Elfing   and   Baven,   1994program  and   satisfaction   survey (Paraskevas, 2001).

Personal outsourcing  is able to save money for organisations and is able to perform a business function better than organisations’ employees by economic of scale, process expertise, access to capital, and access to expensive technology (Zhu et al., 2001).

Lackow (1999) opines that the main reasons of outsourcing as cost saving, improvement of service, the ability on focus on core business and the ability to access outside expertise. “Given that outsourcing will be a natural outgrowth of globalization and fast-changing technology for many companies in the world, those who anticipate and manage these changes strategically, the gains can be enormous”.

The effectiveness of outsourcing application can be reached when the need of outsourcing is correctly determined, core competencies are identified, cost benefit analysis on advantages and disadvantages of outsourcing is conducted, information regarding outsourcing function is disseminated, bank basic outsourcing needs in long and short terms are identified, data collection process is implemented, proposals from available vendors (those companies that are able to contract out to and carried out the function) are collected and evaluated, a most suitable vendor is identified, a contract is made, and a control process is implemented (Bolatet al., 2009).

Similarly Domberger (1998) states that organizations should assess the range of its internal activities  by  considering  its  objectives  additional  to  the  intention  to  apply  cost  saving. Outsourcing should be employed to satisfy organisational strategic objectives such as strategic improvement in area of cost saving and enhancement of efficiency, or strategic business impact in area of improving contribution to companies’ performance, or strategic commercial exploitation in area of leveraging technology related assets .

Thus in addition to cost reduction drives of outsourcing; organisation strategic repositioning, core competency improvement, superior service integration and upper value creation are among major drivers of outsourcing (Quinn, 1999).

1.2         STATEMENT OF THE PROBLEM

The increasing competition in the today banking industry has prompted management of Nigerian banks to adopt different kinds of strategies just to make their customers and other stakeholders enjoy improved operational performance. Incidence of distresses resulting from increasing operating costs and consequently shrinking profits have been the order of the day among the banks. Despite these, inability to keep pace with technological advancement made some Nigerian banks competitively battered. Meanwhile, tight labor conditions have equally made it a challenge to attract, retain and invest  in the necessary technology-based human capital and expertise. However, the study focuses on personnel outsourcing and organizational effectiveness.

1.3         OBJECTIVES OF THE STUDY

The specific objectives of the study are:

i.      To determine the nature of the relationship between personnel outsourcing and organizational competitiveness.

ii.      To ascertain the extent to which commercial banks outsource their personnel services. iii.      To identify the areas in which commercial banks outsource personnel services.

iv.      To determine the benefits from outsourcing personnel services.

1.4         RESEARCH QUESTIONS

These research questions were formulated for the study

i.      What is the nature of the relationship between personnel outsourcing and organizational competitiveness?

ii.      To what extent do Nigerian commercial banks outsource personnel services?

iii.      What are the areas in which Nigerian commercial banks outsource their personnel services?

iv.      What are the benefits from outsourcing personnel services?

1.5         RESEARCH HYPOTHESES

These hypotheses were proposed for the study

i.      There is a positive relationship between personnel outsourcing and organization’s competitiveness.

ii.      Nigeria commercial banks always outsource their personnel services

iii.      Recruitment of human resource, cleaning and security services are areas in which

Nigerian commercial banks outsource personnel services

iv.      Reduced cost, improved quality and time-related advantages are benefits attributed to personnel outsourcing.

1.6         SIGNIFICANCE OF THE STUDY

The outcome of this study shall be useful to management of many Nigerian banks who may be contemplating or considering personnel outsourcing as a means of achieving sustainable competitive advantage especially in today’s harsh banking industry.

2) It shall also benefit students as well as future researchers in this area. Thus .the study will serve as a reference material.

1.7         SCOPE OF THE STUDY

Contextual Scope

This study covers the meaning and forms of outsourcing, reasons/drivers of outsourcing, how outsourcing works  for  achieving competitive  advantage, benefits  from outsourcing  and  the potential risks of outsourcing.

Geographic Scope

The study covers the southeast branches of First Bank and Guaranty Trust Bank (specifically, one branch from each of the five Southeast States: Abia state, Imo state, Enugu state, Ebony State and Anambra State. The study covered a time range of 2008 -2014

1.8  LIMITATION OF THE STUDY

This study is limited by

Attitude of the Respondents

Some of the respondents show negative attitude towards the study because there is no financial benefit attached, some refused to supply the necessary information required, for fear of leaking the secret of their organisations. The researcher was able to overcome this limitation through the help of the Managing directors who sensitize and educate them on proper purpose of research as an academic exercise.

1.9 DEFINITION OF TERMS

Outsourcing

This refers to the process of delegating one or more intensive, core or non-core functions of a business to one or more external partners within a framework of a result oriented partnership (Arnold, 2000).

Personnel Outsourcing

This is the transfer of operational responsibility of either business processes or infrastructure management to an external service provider (Arnold, 2000).

Outsourcer/buyer/ customer:

The organization which buys services from one or more service providers is referred to as an outsourcer/buyer/customer, Kremic, Tukel and Rom, (2006).

Supplier, service provider, outsource service provider (OSP)

The  organization(s) which provide(s) services to  the  buyer/outsourcer is  referred to  as the

Outsourced Service Provider, Lackow, (1999).

Competitiveness

This is simply an advantage enjoyed by a company with lower costs than a rival, enabling it to sell for less or make greater profits at the same price as its rival (Hitt, Ireland and Hoskisson, 2007).

Contract out

This is simply the offering of work to other companies or workers outside an organization. It also means outsourcing (Kremic, Tukel, and Rom, 2006).

1.10 PROFILE OF THE ORGANISATIONS UNDER STUDIED

First Bank Nigeria Plc

First  Bank  has  been  through  many  seasons  since  1894  when  it  was  first  incorporated in Liverpool as the Bank for British West Africa. In 1896, it opened its first international branch in Accra, Ghana. In 1969, it became incorporated locally as the Standard Bank of Nigeria Ltd, listed on the Nigerian Stock Exchange in 1971; established the first offshore financial subsidiary of a Nigeria owned bank in the UK in 2002; acquired two banks- URC international Bank Ltd. and FBN Merchant Bankers) Ltd. in 2005 First Bank floated first-ever hybrid capital offering out of Africa, also floated Nigeria’s biggest offer in 2007.

First Bank of Nigeria is a Nigerian bank and financial services firm. It is the country’s third biggest bank. It traces its ancestry back to the first major financial institution founded in Nigeria; hence the name. The current chairman is Prince Ajibola Afonja. The bank is the largest retail lender in the nation, while most banks gather funds from consumers and loan it out to large corporations and multinationals, First Bank has created a small market for some of its retail clients.

At the end of September 2011, the bank had assets totaling approximately US$18.6 billion (NGN:2.9 trillion). The bank’s profit after tax, for the nine months ending 30 September 2011 was approximately US$270.2 million (NGN:42.2 billion).

First Bank of Nigeria maintains a subsidiary in the United Kingdom, FBN Bank (UK), which has a branch in Paris. The bank also has representative offices in South Africa and China. In October 2011, the bank acquired Banque International de Credit (BIC), a leading bank in the Democratic Republic of Congo (DRC).

The company was named the best bank in Nigeria by Global Finance magazine in September

2006. The firm’s auditors are PricewaterhouseCoopers (Chartered Accountants). The firm has solid short and long term ratings from Fitch and the Global Credit Rating Company partly due to its low exposure to non-performing loans. The firm’s compliance with financial laws has also strengthened with the Economic Financial Crimes Commission giving it a strong rating. Guaranty Trust Bank Plc

Guaranty Trust Bank plc was incorporated as a limited liability company licensed to provide commercial and other banking services to the Nigerian public in 1990. The Bank commenced operations in February 1991, and has since then grown to become one of the most respected and service focused banks in Nigeria.

In September 1996, Guaranty Trust Bank plc became a publicly quoted company and won the

Nigerian Stock Exchange President’s Merit award that same year and subsequently in the years

2000, 2003, 2005, 2006, 2007, 2008 and 2009. In February 2002, the Bank was granted a universal banking license and later appointed a settlement bank by the Central Bank of Nigeria (CBN) in 2003.

Guaranty Trust Bank undertook its second share offering in 2004 and successfully raised over Nil billion from Nigerian Investors to expand its operations and favourably compete with other global financial institution& This development ensured the Bank was satisfactorily poised to meet the N25 billion minimum capital base for banks introduced by the Central Bank of Nigeria in 2005, as part of the regulating body’s efforts to sanitize and strengthen Nigerian banks. Post- consolidation, Guaranty Trust  Bank plc  made a  strategic decision to  actively pursue retail banking. A major rebranding exercise followed in June 2005, which saw the Bank emerge with improved service offerings, an aggressive expansion strategy and its vibrant orange identity.

In 2007, the Bank entered the history books as the first Nigerian financial Institution to undertake a  US$350  million  regulation  S  Eurobond  issue  and  a  US$750  million  Global  Depositary Receipts (GDR) Offer. The listing of the GDRs on the London Stock Exchange in July that year made the Bank the first Nigerian Company and African Bank to be listed on the main market of the London Stock Exchange.

In December 2009, Guaranty Trust Bank successfully completed the first tranche of its $200 million corporate bond targeted at increasing the depth of its operations in West Africa and Europe in the next couple of years.

The Bank’s culture is tied to eight guiding principles called the Orange Rules; Simplicity, Professionalism, Service, Friendliness, ExcelWnce, Trustworthiness, Social Responsibility and Innovation.

Its value s1s1em is hinged on professionalism, ethics, integrity, and superior customer service. It maintains a culture of excellence and goes to great lengths to actualize the popular phrase; The Customer Is King and deliver to its customers at all times.

The Bank operates in a very competitive environment, where people can learn its corporate culture and apply themselves in all they do. Employees are addressed by their first names from entry level through to the Managing Director- no “Sirs or Madams”. In addition it operates an open door policy to foster a feeling of equality amongst staff and ensure everyone is accessible at all times.

The Bank’s Operations

The Bank’s primary business since inception has been the provision of a full range of financial services to its select spectrum of corporate and individual clients. It employs the best people,

processes and technology to offer services that include but are not limited to retail banking, loans and advances, money market activities and foreign exchange operations.

The Bank has also evolved over the past 20 years to become one of Africa’s leading banks with a unique reputation for service quality, innovation and excellent customer service; with significant footprints in all countries of Anglophone West Africa (Nigeria, Ghana, Gambia, Sierra Leone, Liberia) and the United Kingdom, and its sights firmly set on Francophone West Africa, it is poised to become the dominant player in the African continent.

The Bank’s Products

Guaranty Trust Bank plc provides a full range of commercial, investment and retail banking products/services to its discerning corporate, commercial and retail customers.

Widely recognized as  a  pace  setter  and  industry leader,  the  bank  is  accredited  with  such innovations as the introduction of online banking in 1990, making it possible for customers to access their accounts and conduct transactions from any branch in the bank’s network. In 2006, the bank launched GT Connect, a fully interactive service contact centre that allows customers conduct 90 percent of banking transactions via phone from anywhere in the world. In 2009, the bank launched the GTCrea8 student account to enable undergraduates take greater control of their finances and encourage financial discipline in the future leaders of tomorrow.

The bank’s other innovative products and solutions include an E-branch, where customers can perform transactions electronically with no human interface; Drive Through banking, a service which enables customers to withdraw funds and make enquires from the comfort of their cars as well as GTBank on wheels, a fully mobile banking branch. The bank’s Internet banking platform is a notch above its contemporaries in that it is enabled to support inter-bank transfers.

The bank also offe’s excellent debit and credit card services. Guaranty Trust Bank is credited with being the  first  company to  issue a Naira  denominated MasterCard-an innovative card solution that can be used in over 210 countries worldwide to make payments and receive cash in the local currency of any country when abroad. Customers of the bank are kept abreast of transactions on their accounts through GeNS, the bank’s SMS and electronic transaction notification system.

Brand Affiliations

Today, backed by its growing regional spread and strong domestic franchise, Guaranty Trust Bank’s business ties extends across all continents to include over 15 overseas correspondent banks and finance institutions which include HSBC, Citibank, Bank of China, JP Morgan Chase and Deutsche Bank, Afrexim Bank, Bank of China and BNP Paribas.

The Bank’s association with foremost international brands has also resulted in collaborations with institutions like Tate Britain, Nokia, Swiss Red Cross, the Greater London Authority, The Prada Foundation and The Commonwealth Business Council amongst others.

Social Responsibilities of the Bank

Widely recognized as a responsible Corporate Citizen, a pace setter and  industry leader, a significant part of the bank’s annual earnings are committed towards supporting structures and initiatives across diverse areas of child healthcare, education, the environment, human capital development and the Arts.

At Guaranty Trust Bank, it is passionately believed that CSR embodies an ardent commitment and social pact with all the stakeholders. Thus, the Bank is committed to creating enduring partnerships  for   sustainable  development  whilst   adding   immense   value  to   the   diverse communities in which it operates.

With over 190 business locations, the Bank’s avant-garde approach to corporate social responsibility has induced it to partner with like-minded organizations, such as the International Society for the Red Cross in Lausanne, Switzerland; the Commonwealth Business Council; the Prada Foundation; the Greater London Authority; the Students in Free Enterprise (SIFE); the Patrick Speech & Languages Special Education Centre, the Massey Street Children’s Hospital, and the Special Olympics. Also under the Bank’s social responsibilities umbrella are the Adopt a school Programme which has seen the bank adopt 1 public school in all regions of the country notable amongst which are the St. Georges Boys and Girls schools in Falomo, Ikoyi; Community Grammer School, Nkpolu, Portcourt, Federal Government Girls Secondary School, Gwaram, Jigawa State, and Babaoko Comprehensive high school in Ilorin. The Bank is also at the fore- front of promoting Arts and Artists of African origin chief amongst which are its sponsorship of the Chris Ofihi Tate Britain exhibitions and the most recent Artwork on the historic Fourth Plinth in Trafalgar Square, London-Nelson’s Ship in a Bottle’ by renowned Black artist, YinkaShonibare. The Bank also boasts a collection of over 700 exquisite artworks publicly displayed at all its business locations.

Driven by the developmental challenges of its host communities, the Bank’s CSR philosophy compels it to pro-actively meet and often exceed the social, environmental and growth expectations in line with international best practices, of those with whom it proudly shares a common destiny.

For Guaranty Trust Bank plc, every day presents the opportunity to make history. In achieving this, the bank is constantly evolving whilst consolidating its pride of place as a proudly African, truly international organization.

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