Perceived Relationship Between Outsourcing and Organizational Performance: The Case of ethio telecom

Abstract

Outsourcing has become an important business strategy because it enables businesses to reduce costs, improve productivity, to enable a company to focus on its core activities, to gain access to expertise and to free internal resources for other purposes thereby increasing sales and improving overall organizational performance. The research objectives were to show that there exists a relationship between outsourcing and overall improvement of organizational performance in ethio telecom. To address this, the research focused on the relationship between outsourcing of selected services by ethio telecom on the organization’s cost efficiency, improved productivity, enhanced innovativeness and increased sales. A descriptive and explanatory research design was adopted in this study. The total population size was 268 managerial employees. The sample size was 73 managerial employees that were selected using convenience and proportional sampling technique for which a questionnaire has been distributed. Quantitative data resulting from the questionnaire were analyzed using Statistical Package for Social Sciences (SPSS) and qualitative data was analyzed using themes and presented in the form of narratives. Mean and frequency are generated to analyze the data and chi square correlation has also been done for cost, productivity, innovativeness and sales against organizational performance in an intent to show relationship and correlation. The major finding of the study showed that there exists a relationship between outsourcing and operational costs, productivity, innovation and sales thereby affecting organizational performance by showing a chi square statistics of less than 0.01 on all the four correlations (i.e. the alpha level is associated with a 99% confidence level on all cases). Its effect on operational cost was through cost saving from reducing operational cost and improved resources management, which was significant. The improvement in productivity and innovation resulted due to employees’ focus on core activities. From the findings of this study, the researcher recommends the assessment of outsourcing impacts and problems to further be performed in ethio telecom. Promoting the adoption of outsourcing in other functions should also be considered. Furthermore, the management of ethio telecom should also devise a mechanism to perform post outsourcing evaluation and thereby develop a remediation plan to make the outsourcing successful.