BENEFITS AND CHALLENGES OF OUTSOURCING PRACTICES AT COMMERCIAL BANK OF ETHIOPIA

Abstract

According to Nicholas Beaumont and Amrik Sohal (2004) outsourcing is a fashionable way of solving some business problems and there are numerous reports of its increasing use. However, the use of outsourcing at CBE is very low with the exception of outsourcing some non-core functions like Security service, courier service and Janitorial service. This research attempted to assess the benefits and challenges of current outsourcing practices non-core business functions at Commercial Bank of Ethiopia with reference to security, cleaning, driving and courier services. The data were collected using questionnaires from permanent employees of Commercial Bank of Ethiopia. Moreover, interviews were conducted with the Facility Management Manager. The questionnaire was distributed to the employees on the basis of stratified sampling and the data collected were analyzed using SPSS software and analyzed using descriptive statistical methods. The findings revealed that the prons and cons of outsourcing non-core activities of the Bank. The most serious challenges are lack of internal expertise and the performance of outsourced driving service cause to increase cost, low loyalty and confidentiality to the organization. The Bank has poor monitoring and evaluation of the performance of the security, cleaning, driving and courier services, poor quality of outsourced service provider. Hence, respondents have lost their confidence on the service being provided. Unlike to the regular staffs of the bank the outsourced employees had brought many benefits to the Bank in reducing administrative burden ,increasing flexibility, minimizing fixed costs, decreasing budget wastages and introducing better cleaning equipments. Finally, the researcher has forwarded some recommendations to solve the existing problems of the Bank regarding outsourcing practice. If they done so, they will help the bank to reduce the risks and challenges associated with outsourcing and attain optimal benefits as a result of outsourcing secondary or non-core business functions.