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THE IMPACT OF OUTSOURCING STRATEGIES ON ORGANIZATIONAL EFFECTIVENESS IN NEW GENERATION BANKS

CHAPTER ONE

INTRODUCTION

Background of the Study

The global economic instability has considerably accelerated and intensified competition in many industries, forcing organizations to identify strategies and new ways of dealing with the challenging environment (Orogbu et al., 2015). Companies which have traditionally put manufacturing and service excellence at the core of their competitiveness are being forced by external factors to re-examine their core competence (Wagner & Friedl, 2007; Welmer & Seuring, 2008).

Stewart (2007) affirmed that organizations are facing turbulent times due to changes in economic conditions, globalization and rapid technological advances and to cope with such changes, organizations continuously seek for different solutions including outsourcing strategy. Outsourcing strategy otherwise known as sub-servicing is the process of contracting tasks that are usually handled internally by the company itself to a third-party in order to achieve goals (Ganesh, 2007).

Outsourcing strategy is important because companies today are expected to improve their performance and remain competitive through effective management which requires the services of outsiders (Oluyemi, 2013). Most business organizations focus on utilizing their core competencies and outsourcing the non- core functions. They outsource those functions that are resource intensive (high labor or capital costs), specialist competencies, rapidly changing technology and require expensive investment (Lysons & Farrington, 2000).

Today, outsourcing strategies (such as contracting, comprehensive and selective strategy) have been made easy in developing countries through globalization, explosive growth of internet and the development of information society. In Nigerian banking industry, efforts have been made by Deposit Money Banks (DMBs) to achieve stated objectives through effective adoption and implementation of outsourcing strategies.

Deposit Money Banks have engaged in outsourcing of several non-core functions such as security services, catering services, cleaning services, data bank, human resource, maintenance of Automated Teller Machines amongst others to improve performance in terms of profitability, improved service delivery, customer satisfaction, job satisfaction, operational efficiency, liquidity and market share. Olajide (2014) noted that organizational performance is affected by multiplicity of individual, groups and task, technological, structural, managerial and environmental factors including outsourcing strategy. This study is therefore carried out to investigate the extent to which outsourcing strategies affect performance of the Nigerian banking industry with specific focus on deposit money banks (First Bank of Nigeria Plc, United Bank for Africa Plc, Guaranty Trust Bank Plc and Zenith Bank Plc). The choice of deposit money banks was informed because of the critical role they play in the Nigerian banking industry and 

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