Reference no: EM132938725

Case Study 2: Outsourcing at OZ Airlines

Fiona Elliot, CFO, spoke: "Look, we are facing a loss of $300 million. If we outsource our maintenance services, we can reduce labour costs by at least one third. We have a moral responsibility to our shareholders to operate as efficiently as possible.' Laura Li, HR manager of Oz Airlines, glared at Fiona. 'Yes, and we have to be realistic. Why should Australian jobs be shipped offshore? Our concern is with the welfare of our Australian workers. Why should Australian money end up in the pockets of foreign workers?' Fiona snapped back, 'For the very good reasons that the work will be done at much lower cost and with much better results! And you outsource so I don't see why you find it so distasteful when it is done by our company.' What do you mean?' Laura asked. 'Come on Laura, think - who does your house cleaning? Who cooks your takeaway? Who mows your lawn? Who does your hair? Who tutors your son? Not you - it is all outsourced. Why? Because it is more convenient, more efficient and more cost effective. Oz Airlines is no different.' 'Yes', smiled Grant Pirelli, Operations Manager. 'I understand even high school and university students outsource their assignments to India and Pakistan.' 'Fiona, wake up', Laura said sharply. 'You know how politically sensitive the airline industry is. Imagine what the government and the press will do to us when this becomes public knowledge.' 'Yes', interrupted Jason Clegg, manager marketing. 'Can you think how many politicians will be prepared to stand up and publicly declare that they are in favour of exporting Australian jobs? Outsourcing may be okay, where companies are not subject to the public and political pressures we are. Just imagine the reaction of the unions when we announce that the airline is going to do away with 200 jobs? And don't forget we have a Labour government in Canberra. You do realise that the unions are already demanding legislation to protect Australian jobs.' 'What?' questioned Fiona? Jason looked directly at Fiona and said, 'The Australian Metal Workers Union and some WA employers are putting pressure on the WA government to pass laws that would require companies to source their requirements within Australia.' 'Well I think that is ridiculous', replied Fiona. 'How do they expect companies to compete? Don't they realise that we operate in a globalized marketplace? What is more, how can the union complain when they themselves outsource?' 'What do you mean?' asked Jason. 'Unions such as the Communications Electrical and Plumbing Union and the Victorian branches of the Australian Education Union and the Community and Public Sector union outsource their membership recruiting to a private company.' 'Well unions, like companies, use a range of professional services provided by people such as accountants and lawyers - so what is the problem?' asked Laura. 'Precisely, there is no problem - they do it for the same reasons that we outsource. Because it makes economic sense', answered Fiona. 4 'Given the size of our losses, the increasing costs of fuel and labour, to say nothing of the cutthroat competition, we really have to face up to the alternatives - cut services or increase fares or go out of business. Sooner or later we are going to have to face the reality that no one owes us a living.'

Questions

1. Define outsourcing and provide an example from the case?

2. What stakeholder interests are evident in this case? How would you resolve any conflict between the various stakeholders' interests?

3. Should governments ban the outsourcing of jobs to foreign countries? Explain your answer.