ANALYSIS OF THE EFFECTS OF OUTSOURCING ON ORGANIZATION PRODUCTIVITY IN SELECTED PARASTATALS IN KENYA

Abstract

Outsourcing has become an important business strategy because it enables businesses to reduce and control operating costs, to improve company focus, to gain access to world class capability and to free internal resources for other purposes. Outsourcing has been used as part of the new public management agenda with the aim of increasing efficiency and decreasing costs. Consequently, its effects on productivity remains a factor to be considered by managment in decision making. The purpose of this study was to establish the effect of outsourcing on employee productivity in selected parastatals. The research objectives were to establish the forms of outsourcing used in selected parastatals in Kenya, to find out the effect of outsourcing on operational cost, to determine the effect of outsourcing on employee productivity and to establish the effect of outsourcing on innovation in the selected parastatals. A descriptive research design was adopted in this study. Simple random sampling was used to select questionnaire respondents while purposive sampling was used to select interview respondents. Quantitative data resulting from the questionnaire were analysized using Statistical Package for Social Sciences (SPSS) inthe selection of respondents and presented in table and figures while qualitative data was analyzed using themes and presented in form of narratives. From the findings, this study found out that contracting out was the most popular form of outsourcing used in parastatals. In addition, security, cleaning, refuse disposal, and training were the main outsourced services in parastals. Further, outsourcing had effects on operational costs, innovatio nand producitivity. Its efffects on operational cost was through cost saving, reducing operational cost and improved resources management which was significant while its effects on innovation and productivity were found to be insignificant. From the findings, this study recommends the assessment of outsourcing modes and promoting the adoption of other forms of outsourcing in parastatals. Coming up with employee motivation techniques and proper communication on outsourced services were also recommended.