The practice of outsourcing has
been lauded as one of the avenues through which organizations can ensure
sustainable high performance in the face of the rapidly evolving local and
global market environments (Butscher, Vidal and Dimier, 2009). This concept has
gained increased prominence with the acknowledgement that organization
structure bears significant influence on the potential of an organization to
sustain the desired performance. A critical decision involved deciding whether
to outsource is to determine whether the function in question can be
categorized as a core function or not. Core functions bear a great influence on
the performance and the image of an organization and are therefore rarely
outsourced. In a hotel scenario, functions that can be easily outsourced may
involve cleaning services, provision of transport services to clients, and
sales functions, among others. Hotels in Morocco, like many other
organizations, are faced with the decision to enhance their profitability
through the use of prudent cost cutting measures. One of the most viable
measures usable in this endeavor is the outsourcing of functions that can be
efficiently operated by third parties at a lower cost (Insinga and Werle, 2000).
This study seeks to explore the various ways in which hotel chains in Morocco
can enhance their profitability through outsourcing.
The study shall aim to seek the
various ways in which hotel chains in Morocco can ensure high profitability
through outsourcing of selected functions. In line with this aim, the study
shall seek to create understanding of the concept of outsourcing and its risks
as well as potential benefits to hotels in Morocco. The study shall provide an
analysis of related studies that expound on the various forms of outsourcing
and their contribution to profitability and organizational performance. The
study shall use the resultant inferences to make recommendations on how the
same can be applied to hotel chains in Morocco to improve their profitability. The
main research questions to be answered are as follows:
·
What is outsourcing and
what are the potential risks and benefits to organizations?
·
What factors can
motivate hotels to engage in outsourcing?
·
What functions of
hotels can be considered for outsourcing, and why?
1.12 Rationale
This study uses insights from a
range of related studies to provide recommendations that can be pragmatically
used by hotel chains in Morocco taking into account their unique environmental
and economic factors. This differs from previous studies that evaluate the
importance of outsourcing in organizations as a whole across industries and do
not allocate special considerations to small hotel chains. The information
gathered and recorded in this study is expected to provide a basis for adoption
of service outsourcing as well as providing insight into the various functions
that can be effectively outsourced. The study is also expected to serve as a
basis for further research on the implication of various outsourcing practices
that have been identified. Recommendations into areas that require future
research is expected to make an invaluable contribution to academic knowledge
in the same field.
The main theories that are related
to the use of outsourcing include the agency theory, labor process theory and
the contingency theory. The agency theory relates to potential sources of
conflict of interest between the agents entrusted with various functions and
the hotels giving out the contracts (Eisenhardt, 1989). This may affect the
execution of outsourced functions and affect the firm negatively where the
parties do not clearly understand their roles in the contract. The labor
process theory helps understand the cost implications and labor control
implications of outsourcing functions to a third party (Hopper and Armstrong,
1989). According to Hopper and Armstrong (1989), outsourcing reduces the
ability of managers to control or manipulate the employees of the contracted agency
hence significantly lowering their ability to use such employees to execute
various functions when urgent need arises.
Related studies explaining the use of outsourcing in relation to
organizational structure have been outlined by Domberger (1998) in his research
on recent organizational trends. The basis of this research is largely
explained by the contingency theory which mainly focuses on the organizational
structure and form in determining the pros and cons of outsourcing to
organizations (Domberger, 1998). The study shall seek to prove the assertion
that: outsourcing can enable higher profitability in hotels in Morocco.
This study shall take a deductive
approach using previous related studies in meeting the objectives of this
research. Due to the scarcity of relevant comprehensive studies on the Moroccan
market, the study shall make use of relevant studies across various regions and
will take cognizance of the unique circumstances in Morocco when making the
recommendations for hotel chains in Morocco. The rationale for relying on
secondary data is drawn from the fact that they generally require fewer
resources to acquire and analyze. Moreover, many studies tend to be reports
made after extensive surveys and generally tend to achieve a higher level of
accuracy than would have been achieved through primary research under
constrained circumstances as is the case with this study. The reliability of
the sources shall play a major role in determining the information to be used
in this research. Data analysis shall be qualitative. Emphasis shall be laid on
bringing to the fore findings that are in line with the objectives of this
study. The quantitative analyses in the selected sources shall therefore form
part of the qualitative analysis in this study. The deductive approach shall
draw insights from studies on outsourcing across various industries in
different countries and shall seek to narrow its interpretation on hotel chains
in Morocco. This approach is informed by the presumption that hotels bear many
similarities with other organizations and the findings can be valid, albeit
with slight adjustments.
This section outlines results to
the various questions posed to the respondents and explains briefly the
significance of the questions as well as the implications of the answers. The
discussion section will combine the primary research findings and various
analyses of the secondary data collected in the course of the study. The
discussion section will seek to link the research findings and the prevailing
theories and practices in Morocco and other countries. The survey covered 150
respondents who were sourced mainly from the management teams in hotels across
Morocco. Most of respondents demonstrated thorough knowledge of the subject
matter and the findings generally reflect the opinions of informed persons. The
findings are as outlined in the following section:
The work experience of the respondents
was as tabulated below:
Experience
Bracket
|
1-5
yrs
|
6-10
yrs
|
11-15
yrs
|
Over
15 yrs
|
Frequency
|
20
|
50
|
55
|
25
|
Percentage
|
13%
|
33%
|
37%
|
17%
|
Source: Own design
The question was meant to establish the extent to
which the respondents could claim to know the hotel industry in Morocco. The
bulk of the respondents (70%) were persons with an experience of between 6 and
15 years in the industry with a total of 87% categorized as respondents with
more than 6 years experience in the hotel industry. This represents a possible
mastery of the dynamics in the industry hence giving the findings a somewhat
authoritative tone.
The respondents were also asked to
present their own assessment of the rate of understanding they possess about
the concept of outsourcing. This question achieved a two-fold benefit: firstly,
it gave the researcher an impression of extent to which the answers presented
by the respondents could be considered ‘informed’ and secondly, it
subconsciously focused the attention of the respondents to the subject matter
hence preparing them for the subsequent question. Over 90% of respondents
professed to have at least a good understanding of outsourcing as tabulated
below:
Level
of understanding
|
Very
good
|
Good
|
Fair
|
Poor
|
Frequency
|
80
|
60
|
6
|
4
|
Percentage
|
53%
|
40%
|
4%
|
3%
|
Source: Own design
The research found that the majority of the
respondents had at some point in the course of their career engaged in
outsourcing with over 83% answering in the affirmative.
Source: Own design
The level to which the respondents
had had a first hand experience with outsourcing further enriched the quality
of the findings due to the level of information possessed by them. The main
functions that were mentioned as having been outsourced by the respondents
included cleaning services, transportation services, accounting functions,
sales and advertising functions, and catering functions. Some functions such as
the cleaning functions seemed to bear a greater level of significance than
others. These functions were as tabulated below:
Function
|
Cleaning
|
Transport
|
Accounting
|
Catering
|
Advertising
|
Security
services
|
Numbers
|
135
|
135
|
55
|
25
|
120
|
135
|
Source: Own design
Source: Own design
However, only 70% of the
respondents confirmed to be currently making use of outsourced functions and
even in these cases, only a few of the functions were exposed to outsourcing. When
asked whether they thought of outsourcing as useful to hotels, most of the
respondents were of the view that it was indeed useful in ensuring the
profitability of hotels. 75% of the respondents answered to the affirmative.
One of the main reasons cited as a basis for these responses was the financial
implications of outsourcing. The respondents held that some agencies are better
equipped to carry out certain functions efficiently and at lower cost that the
hotels. In their opinion, outsourcing served as an avenue for cutting cost
while maintaining the high standards needed for good customer experience. The
ability of some agents to offer superior performance in certain fields was also
cited as a possible motivation for outsourcing. Services such as advertising
and sales were among the ones cited as among the services agents perform more
effectively that the hotels whose specialty is in hospitality. The influence of outsourcing on the
management structure and cost also featured prominently. Most of the
respondents conceded that outsourcing enables the hotels to settle on lean and
cost effective structures that would essentially drive down the fixed and
operating costs of the hotels. This would ensure sustainable profitability of
the hotels in question.
The dissenting views on the
usefulness of outsourcing to organizations were mainly based on the detrimental
effects that the practice could bring to the organization. Respondents
expressed the view that overreliance on outsourcing of functions could lead to
destructive interruptions where any disagreement arises between the hotels and
the agents. This could arise as a result of conflicts of interest and lack of
understanding on the subject of the engagement. They were also of the view that
the practice diminishes the managers’ ability to influence the activities of
the staff members in the organization. The agents’ staff would normally not be
answerable to the hotel managers. This would limit the managers’ ability to
reassign impromptu assignments to these employees in cases of emergency.
Moreover, the lack of control over these employees could lead to serious
functional deficiencies where cases of incompatibility of corporate practices
and culture arise.
The respondents were almost
unanimous that the core functions of the hotels should not be subjected to
outsourcing with many expressing a certain willingness to outsource some of
their generic functions that could potentially result in improved performance
when outsourced. Accordingly, the respondents were asked to state which
functions they considered to be core and which ones they considered to be
generic functions. The core functions as outlined by most hotel managers involved
the provision of quality and comfortable accommodation facilities. The
provision of food and beverages also featured significantly as a core function
depending on the hotels’ visions and strategies. These were the functions that
basically gave the hotels their identity and could not be outsourced under any
circumstances. On the other hand, generic functions as stated by the
respondents mainly comprised advertising and sales functions, cleaning
functions, transportation functions, and to a small extent; catering services.
These functions could be outsourced to third party agents who are able to
achieve a superior performance at lower costs.
The respondents generally agreed
with the assertion that: Outsourcing contributes to profitability in hotel
chains in Morocco. 95% agreed that outsourcing can lead to higher profitability
in hotels when carefully and objectively put into use.
Agree
|
Disagree
|
142
|
8
|
95%
|
5%
|
Source: Own design
2.2 Discussion and analysis of findings
The findings from the survey as
outlined above show that the concept of outsourcing has been widely accepted as
one of the ways of enhancing sustainable profitability of organizations in
hotel chains in Morocco. This view has been reinforced by a myriad of scholars
who concur that where proper procedures are applied in outsourcing, it can
easily contribute to higher profitability and performance of hotel chains
(Lacity, Hirscheim and Willcocks, 1994). The main consideration fronted by the
proponents of outsourcing is the cost implication. Controlling various
functions within the organization requires that various fixed and variable
costs be met by the organizations (Useem and Harder, 2000). These costs may
include the cost of maintaining permanent staff as well as the cost of
purchasing and maintaining the assets necessary for efficiently executing the
given functions. For instance, where a hotel decides to offer transportation
services to their clients, they would be required to meet the cost of
purchasing and maintaining the vehicles needed, meet the insurance costs, meet
the wage bills and the cost of offering various mandatory benefits to the
employees and meet any emergency costs resulting from unfortunate incidents
such as injury to the staff members. Moreover, provision of such services may
be outside the specialty of the hotel and may lead to poor services which may
erode the hotel’s image in the sight of their clients. Outsourcing such a
service would ensure that the hotels save on various overheads as well as
ensuring that the services offered result in improved customer satisfaction.
The related approach that scholars have taken
which reinforces the findings of this study is the influence of outsourcing on
organizational structure and the costs involved. This is explained by the
contingency theory which emphasizes the importance of prudent management
accounting in evaluating the benefits of such schemes. The dissenting views
outlined above can also be reinforced using the agency theory which explains
the influence of conflict of interest on the performance of the tasks assigned
and the implication on the performance and profitability of the whole
organization. As observed in the findings above, the respondents in opposition
to outsourcing cited conflict of interest and incompatible corporate cultures
as potential sources of failure of the outsourcing process.
Considerable attention has been
given to the form of outsourcing that involves the contracting of a third party
to execute the defined functions of the hotels. However, further studies reveal
that outsourcing can also take various forms. These may include shared service
arrangements, alliances, joint ventures, and virtual organizations (Harrigan,
1985). The option of sharing given services has seldom been exploited in the
hotel industry in Morocco and may be the new avenue awaiting exploitation to
improve the performance of the hotels. From the responses given during the
survey, it was established that services such as cleaning and transportation
services were singled out for possible outsourcing in many hotels, although a
significant proportion of the hotels were yet to actually outsource them. To
ensure sustained profitability, various non-core functions need to be accorded
lesser attention while ensuring that the operation for such functions remain
efficient and effective (Miles and Snow, 1978). The only way to achieve that is
by outsourcing the services to agencies that can exclusively dedicate their
expertise and resources to them (Laware, 1991).
The element of differentiation by
the subcontracted agents ensures that the functions can be carried out at
relatively lower costs (Laderer and Mendelow, 1987). The survey also revealed
significant under-exploitation of advertising and sales agencies through
outsourcing of the related functions. Sales and advertising require thorough
knowledge of the target client and accurate formulation of strategies that can
ensure that these potential clients can be converted into actual clients.
Through experience, and possession of various mediums of advertisement,
advertising agencies can do effective marketing at lower costs than the hotels
being advertised (Porter, 2001). The outsourcing of the sales function also
helps hotels’ managers to avoid the tedious process of constant correspondence
with prospective clients which may divert their attention from pressing
strategic issues that may be of greater significance to the organizations.
Other functions that may be
outsourced include the information technology functions. These functions would
ordinarily require that the hotel management recruit highly skilled individuals
to execute and run such services (Lacity, Willcocks and Feeny, 1995). The IT
functions include the installation of devices such as internal communication
system, installation and maintenance of a hotel management system and an
intranet that allows all branches of a hotel chain to remain well coordinated,
and installation of security devices such as door-lock systems and surveillance
cameras among others (Sigala, Lockwood and Jones, 2001). Such installations
require highly skilled individuals and it may be extremely costly in terms of
finances and attention if the hotels were to execute such functions on their
own. Firms specializing in such functions tend to offer more reliable solutions
due to their expansive experience in the field and the fact that their
infrastructure is used to serve many other clients translates to lower costs
per hotel (Intner, 1994).
As seen from the findings above,
most respondents were reluctant to outsource functions they consider to be core
functions. This observation is reinforced by the general concepts surrounding
outsourcing that largely advocate for the outsourcing of those functions that
are considered generic (Ogburn, 1994). Core functions define the organization’s
essence of existence and are often considered too sensitive to be placed in the
hands of a third party. The core function forms the backbone of the
organization and it comprises the real service that the hotels are set up to
offer (Nordan, Howe and Patel, 1998). Depending on the specific visions and
organizational objectives, the core functions may vary from one hotel to
another (Tallon, Kraemer and Gurnaxani, 2000). Outsourcing of non-core
functions enables the hotels to pay considerable attention to their core
services and this ensures improved customer experience which yields high
satisfaction levels and customer loyalty (Alphas and Saharia, 1995). Satisfied
customers often turn into regular consumers of the services being offered and
leads to improved revenues and profitability for the organizations.
This section offers a brief summary
of the contents of the study, outlining the research aims; the methodology; and
a brief description of the findings and their implications. The study uses the
observations made in the practice of outsourcing in Morocco hotels to make
recommendations on how a hotel chain can improve their profitability by
outsourcing. The section also makes recommendations for further studies based
on the limitations encountered in this research.
In seeking to state ways in which
hotel chains in Morocco can improve their profitability by outsourcing, this
study has exploited the various motivations for outsourcing by organizations
and has singled out the various functions that are commonly outsourced in
organizations. The study made use of a survey on the players in the hotel
industry in Morocco as well as research into various secondary data sources in
order to draw the recommendations called for by the study. The research
generally found an overwhelming support for outsourcing even though a
significant proportion of the respondents tended to express certain
reservations on it. The main reasons for the overwhelming support for outsourcing were cited as its
ability to enable hotels save on the cost of running non-essential functions,
while ensuring that their quality is not compromised. The use of specialized
agents in the execution of such functions was also viewed as a likely
indication that the functions would be executed more efficiently and more
effectively than they would have been executed by the main organization.
Moreover, the removal of extra structures that would normally call for
considerable attention may divert attention needed to ensure that the hotels
remain effective in the offering of their core functions.
On the other hand, opponents of
outsourcing remained skeptical on the effectiveness of the concept. They held
the view that incongruence between the hotels and the agents and between their
staff members were more likely to result in poor rather than improved services
(Naylor, Prichard and Ilgen, 1980). They also expressed caution that the
hotels’ management teams would have diminished influence over the employees of
the agents and they would not be able to directly influence their actions
whenever there was need to do so. The research used various theories to try and
provide the rationale for outsourcing and how it can be practiced to provide
maximum benefits to the hotel chains. These theories include the contingency
theory, labor process theory and the agency theory. From the findings above,
outsourcing can only be effective and beneficial to the hotel chains if the
process of implementing it is considered carefully. The cost benefit analysis
must be conducted to establish the extent to which the organization would stand
to gain through such implementation (Ogburn, 1994). The categorization of
services as core or generic functions in the hotels is also crucial to its
survival and sustained performance. On the whole, the study was able to
establish that outsourcing of selected functions, when carefully and properly
considered, can lead to improved profitability of hotel chains.
The information in the study gives
invaluable insight into outsourcing and how it can be used to ensure
profitability of small hotel chains in Morocco. To begin with, the
identification of the functions of the hotels and their classification into
core and generic functions is crucial. The management must thereafter do a cost
analysis to determine which functions among the generic functions they can
execute at lower costs by engaging the services of a third party without
compromising on the quality of their services (Andersen, 2000). Once these
parameters have been accurately set out, outsourcing can be conducted in a
manner that yields higher benefits for the organization.
Although the concept of outsourcing
is widely accepted in the hotel industry in Morocco, its practice is relatively
diminished with only a few functions put up for outsourcing. This may be due to
inadequate expertise among the agents or merely due to the fear of failure by
the managers in the case that agents turn out to be a disappointment. This
study recommends the adoption of cost effective measures in management through
the outsourcing of as many generic functions as can be realistically be done.
The exploitation of outsourcing needs to stretch beyond the traditional fields
and needs to be extended to sharing of certain services between market players
in order to share costs without compromising on the potential benefits (Ang and
Straub, 1998). The managers can also get rid of their fear by ensuring that the
agents selected to perform certain functions have philosophies and cultures
compatible with the hotels’.
Although not very commonly
outsourced, the cost of accounting can be unrealistic for small hotel chains.
Such functions may involve the recruitment of highly professional accountants
whose time may be spent on functions that common clerks could effectively
execute (Cooper and Essex, 1977). Outsourcing accounting functions on the other
hand only requires that the hotels employ a bookkeeper and the records sent to
the accounting agents periodically for the preparation of comprehensive
accounts (Camerron, 1994). This would certainly cost less than maintaining an
accounts department. Other functions that more Morocco hotel chains need to
consider outsourcing IT functions, sales and advertising functions, and
catering functions where the hotels core service does not include provision of
foods and beverages (Hillary and Baum, 1996).
In view of the scope of this study,
the specific contribution of outsourcing of various functions to the
performance of the organizations was not considered. This research recommends
that comprehensive studies be conducted in the hotel industry in Morocco to
establish the extent to which the outsourcing of various functions contribute to
cost cutting and to the improved performance of the organizations.
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