Human Resource Managers Detect Management & Legal Disadvantages to Outsourcing

Outsourcing is “a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.†(Outsourcing, 2013)  After the financial crisis of 2007-2008, many companies in the United States began to enhance their bottom-line profits by outsourcing and cutting costs instead of through the traditional route of top-line sales growth.  In an attempt to effectively cut costs and generate profits for investors, more organizations engaged in outsourcing of jobs by means of offshoring.  Offshoring is a form of outsourcing whereby jobs are relocated to a foreign country with a cheap labor force and low socioeconomic standards, and less regulations such as the EPA. From a Human Resources perspective, offshoring jobs is that there will be benefits to the organization such as cost and efficiency savings, focus on core activities, reduction of overheard costs, staffing flexibility, continuity,  avoid organized labor, and risk management.  In theory, the argument for offshoring is plausible and synergies can be created for companies; however, issues can result, creating huge disadvantages for organizations.  Outsourcing can become detrimental to the financial health of an organization because of unforeseen costs.  In addition, the organizational culture and employee morale begins to diminish when employees have no job security and they fear layoffs.  Thus, there are pros and cons of offshoring jobs those Human Resources managers’ must evaluate before choosing whether to offshore jobs or keep them domestically.  Therefore, outsourcing jobs through offshoring can result in disadvantages to an organization because of hidden costs, bad publicity and low employee morale, quality problems, loss of managerial control, threat to confidentiality and security, and reliance on the financial health of the outsourced organization. This paper has been divided into two sections due to the comprehensive approach taken by the authors to provide a focused view on the legal aspects giving the reader an opportunity to use the information as a guide if needed, or for further research.