An analysis of effects of outsourcing strategies on organizational performance: A case of the Kenya Revenue Authority
Ochieng, Jasiron Anambo
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Outsourcing is an important business strategy where a third party is contracted to perform non core activities for the organisation. Outsourcing of services may lead to reduction of operational cost and achievement of efficiency. Other benefits that accompany outsourcing strategies include: gain access to world-class capabilities, creating a rich environment of resources that might have been insufficient internally and sharing risks with a partner company. Therefore this study was intended to establish the effects of outsourcing strategies to an organization while focusing on The Kenya revenue authority. The study adopted a descriptive research design. The study population was the Kenya Revenue Authority employees with an approximated population of 4571 employees. Stratified random sampling method was used with the strata being Board Corporate Services and Admin, Finance, Headquarters Treasury, Human Resources, Information Communication Technology, Internal Audit, Risk Management and Investigation & Enforcement who were concerned with strategy Formation and also assisted in giving the effects of the adopted strategies at the organisation. Sampling for these categories was determined using the Fischer formula for the population of More than 1,000 elements using a 95% confidence interval hence giving a sample size of 139 correspondents. Primary data was collected using a questionnaire while secondary data was sourced by reviewing existing publications on the subject. After collection of data and testing for reliability, the questionnaires were coded and analysed with the aid of SPSS. Descriptive statistics was used to establish the extent to which each of the practices was applied at the Kenya Revenue Authority. The descriptive statistics here were the percentages. Then, the Pearson's correlation analysis was used to test the relationship between outsourcing strategies and firm performance, The study revealed that, the decision to outsource part of KRA functions or activities was prompted by Potential cost savings, access to technological innovations and strategic considerations. The study found that compliance, counterparty, access and contractual risk were perceived before the organisation undertakes an outsourcing decision. The study also revealed that KRA adopted varying outsourcing strategies to access to specialized vendor through single supplier, multiple supplier, The study concluded that benefits perceived before the organisation undertakes an outsourcing decision were accessibility of free resources and improved services access to specialised vendor and cost reduction. From the findings, it was noted that outsourcing through joint venture reduces cost, enable the company to focus on core competencies, and improve services. In addition, outsourcing strategies has an effect on the company performance and it pays off at the firm _level hence is a viable management decision. This study also concludes that accessibility to specialised vendor, free resources, improved services and cost reduction were derived by the firms through undertaking an outsourcing decision. It therefore recommends that for the organization to succeed in its outsourcing it should be given authority and responsibility to achieve their goals. Good communication should be ensured, job quality should be a priority, strict rules should be implemented to guide business process outsourcing, an explanation should be given to the entire staff why the corporation has to outsource, benefits of business process outsourcing should also be made clear to all the corporation members, there should be a thorough follow-up (supervision) so that the work is done professionally and in good time, costs should be Considered before business process outsourcing; to make sure that they do not exceed the benefits of business process.