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EFFECT OF OUTSOURCING ON PERFORMANCE OF FEDERAL GOVERNMENT OWNED HOSPITALS IN ENUGU, NIGERIA

10,000 3,000

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                                                        CHAPTER ONE

INTRODUCTION

  • BACKGROUND OF STUDY

Outsourcing is a business strategy that occurs when a business purchase services or products from a foreign manufacturer (or supplier), or when a business pays another company to provide services that the business might otherwise have employed its own staff to perform (Fiona, 2006:1). Outsourcing stemmed from attempts to reduce guild controls in Europe in 13th century. They used abundant and cheap female and child labour force available in the countryside to achieve a lower cost of production. This process was termed ‘putting-out’ (Jones and kierzkowski, 2004: 4).  About this time also, merchants hire cottage workers to perform some tedious, less skilled tasks in their production process.  A major instance was in the textile manufacturing sector where peasant women did the spinning on a putting–out basis. The merchant gave out (put-out) the raw materials such as the raw wool, flax and cotton and collected the finished yarn.

 

In the late 1960s, however, outsourcing took a major leap forward when firms began to use data transfers technology to outsource their payroll administration, that is, the tasks of calculating workers’ wages and deductions and carrying out checks.  Nowadays most business farm out their operations to external entities that specialized in the management of that operation. Some of the operations that are being outsourced include maintenance functions, catering, payroll, personnel management and so on. Currently, outsourcing is gaining momentum globally as a potential strategy for enhancing business activities particularly in the developing economies. Outsourcing of operations or jobs from internal handling to an external entity is changing the landscape of business. In every developed economy, companies are taking the advantage of readily available expertise in other markets to strengthen their competitive advantage in local markets.  India, China and other South East Asian economies have made outsourcing an important emerging and key sector in the development of their economy.

 

The Nigerian economy which is one of the most vibrant in Africa provides a good condition for outsourcing and it is playing a leading role in outsourcing particularly with the Government interest in promoting the strategy. Government established the National Outsourcing Policy and Institutional Framework in 2007 as well as the Guideline for Public Service Reform of Parastatals of  2006 for the country.  Outsourcing was officially implemented by Federal Government in some of its parastatals in January, 2007. The expectation was that outsourcing would enable the nation enjoy the benefits of free trade such as lower cost, higher labour productivity and efficiency that was usually associated with outsourcing.

 

1.2       STATEMENT OF PROBLEM

Outsourcing was introduced into the Nigerian Federal Government Parastatals in 2007 with the intention that it will benefit and improve the Parastatal’s performance in terms of lower cost, higher labour productivity and efficiency that flows through outsourcing activities.  Whereas this is an obvious generalisation, it is not certain whether such cost saving, higher labour productivity and efficient flows of activities have actually occurred in Federal Government parastatals in Nigeria. This uncertainty in terms of cost saving through outsourcing is due to level of costs shown in the financial reports of the Federal Government parastatals. Outsourcing which is expected to bring about higher labour productivity seems not to be giving the expected result. Moreover, there is an uncertainty about the efficiency or quality of services being rendered in the Federal Government  parastatals in Nigeria.

These uncertainties turned out to be a source of worry to parastatals/organisations that outsourced their services. As a result of this situation, the researcher deemed it necessary to study the effect of outsourcing on performance of Federal Government owned hospitals in Enugu, Nigeria, using University of Nigeria Teaching Hospital Enugu (UNTH) and National Orthopaedic Hospital Enugu (NOHE) as organisations for the study.

  • OBJECTIVES OF THE STUDY

This dissertation will examine the effect of outsourcing on performance of Federal Government owned hospitals in Enugu, Nigeria by finding out whether outsourcing has reduced cost, improved quality of services, increased labour productivity as well as built capacity in Federal Government owned hospitals in Enugu, Nigeria.

Specifically, objectives of the study are summarized as follows:

  1. To determine whether there is significant difference between laundry  services cost without outsourcing and laundry services cost with outsourcing in UNTH and NOHE.
  1. To determine whether there is significant difference between cleaning services cost without outsourcing and cleaning services cost with outsourcing in UNTH and NOHE.
  2. To determine whether there is significant difference between security  services cost without outsourcing and security services cost   with outsourcing   in UNTH and NOHE.
  1. To determine whether outsourcing has improved the quality of services rendered in UNTH and NOHE.
  2. To determine whether outsourcing has improved labour productivity in UNTH and NOHE.
  1. To determine whether outsourcing has improved capacity building in UNTH and NOHE.

 

  • RESEARCH QUESTIONS

To facilitate the investigation of this study, the following  research questions will be addressed:

  1. To what extent has outsourcing reduced  the cost of laundry  services in UNTH and NOHE?
  1. To what extent has outsourcing reduced  the cost of cleaning services in  UNTH and    NOHE?
  1. To what extent has outsourcing reduced the cost of security  services   in UNTH and NOHE?
  1. To what extent has outsourcing improved  the quality of  services rendered in UNTH and NOHE?
  1. To what extent has outsourcing improved labour productivity  in UNTH and NOHE?
  1. To what extent has outsourcing improved capacity building  in UNTH and

NOHE?

1.5       RESEARCH HYPOTHESES

The following null hypotheses are formulated for this study:

  1. There is no significant difference between laundry services cost without outsourcing and laundry services cost with outsourcing   in UNTH and NOHE.
  2. There is no significant difference between cleaning services cost without outsourcing and cleaning services cost with outsourcing in UNTH and NOHE.
  3. There is no significant difference between security services cost without     outsourcing and security services cost with  outsourcing in UNTH and

 

  1. There is no significant difference between improvement in the quality of services rendered with outsourcing and improvement in the quality of  services rendered without outsourcing in UNTH and NOHE.
  2. There is no significant difference between improvement in labour productivity with outsourcing and improvement in labour productivity without outsourcing in UNTH and NOHE.
  3. There is no significant difference between improvement in capacity building with outsourcing and improvement in capacity building without  outsourcing in UNTH and NOHE.

 

1.6         SIGNIFICANCE OF THE STUDY

This study shall be relevant to the extent that Federal Government of Nigeria will know the effects of outsourcing on performance of the Federal Government owned hospitals in Enugu, Nigeria. They will also be able to take decision on how to handle costs and other elements of outsourced services in Government parastatals. Management of the Federal Government parastatals shall know the effective and efficient ways to handle outsourcing activities for higher capacity building and achievement of organizational goal.

This study shall immensely help management and employees to understand and appreciate the positive effects of outsourcing on services rendered by their organisation. Students as well as researchers shall find this work very useful in their quest to know outsourcing benefits in Government owned hospitals in Enugu, Nigeria.

1.7        SCOPE OF THE STUDY

This study covered University of Nigeria Teaching Hospital (UNTH) Enugu, and National Orthopaedic Hospital Enugu (NOHE), Nigeria. The study looked at the effect of outsourcing on performance of Federal Go

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