Mystery shopping provides important information for businesses and leads organizations to efficient performance. Outsourcing process is mainly used to increase the effectiveness of the organization through low cost, and organizations gain competitive edge over their rivals by simply shifting some of the human resources non-core functions to outside suppliers which is core of outsourcing strategies. The aim of this study is to determine the impact of outsourcing strategies on organizational effectiveness in banks. Survey design was adopted, and the statistical tool employed comprises frequency, correlation as well as regression analysis. The findings show that there is a significant positive relationship between the variables of outsourcing strategies and organizational effectiveness. Recruitment outsourcing strategy, training & development strategy and mystery shopping strategy are positively related to organizational effectiveness. The study, therefore, concludes that mystery shopping provides important information for businesses and increases organizational effectiveness, and the correlation matrix implies that the independent variables are very crucial determinants of organization effectiveness. Hence information provided by the mystery shoppers is used for improving the services and products to get more customers. The study thus recommends that banks should outsource their training & development activities, since its potential effect is cost reduction, as outsourced training provides a means of reducing the fixed costs associated with maintaining a training staff.
Background to the Study
To survive in this era of stiff competition, banks need to adopt the strategy of outsourcing in order to focus and develop their core competencies. The needs and demands of customers and other stakeholders in the industry are forcing these firms to reform and restructure the mode and method of operation to ensure that they keep up with market demands. Outsourcing as a human resource (HR) function is one of many ways to improve an organization’s efficiency. With the increasing stiff competition in the financial industry which sprung up as a result of similar services being provided by these institutions, HR outsourcing activities tend to be an important business approach and a workable strategy through which competitive advantage will be attained as products and services are offered more efficiently by outside suppliers (Yang, et al, 2007; McIvor, 2008).
Today’s HR managers are expected to shed some of their conventional roles associated with policies and procedures and the hiring, selecting, training and compensating of workforce, for more strategic roles that include customers’ perception of quality, reducing overall costs of HR administration and management of scarce resources. It is in response to this shift in paradigm that many Human Resource Managers are now outsourcing some of their functions (Cook, 1999).
The Banking Industry in Nigeria has witnessed a remarkable growth in terms of deposit base, number of branches, total asset and volume of loans and advances, especially since the deregulation of the sector in the recent past years. However, given the nature of demand in the market, they are required to do more, particularly in providing services as needed by their customers and other stakeholders in the industry. Therefore, the ability to respond to this urgent need in the market by these organizations ultimately depends on the effectiveness of the strategies they wish to put in place to enable them achieve their aim. Consequently, financial service businesses all over the world are increasingly engaging third parties to perform those activities that would have been performed within the organization.
Among the reasons for engaging in the HR outsourcing is the desire to get access to expert services as well as to capitalize on the excellent quality that external vendors provide in performing the HR functions. Also the decision to outsource payroll along other HR functions is reinforced by the fact that vendors are often in a better position to provide improved profitability, efficiency and service delivery at relatively lower cost than can be achieved by in-house operations thereby increasing the competitive advantage of firms. There is, therefore, a desire to minimize the amount of management time and effort which is spent on managerial activities.
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