The Case of Ethio-Telecom By: Yoseph Muluneh Advisor

96 Pages·2015·2.3 MB·English

by  Yoseph Muluneh Tessema

ADDIS ABABA UNIVERSITY
College of Business and Economics
Department of Public Administration and Development Management

Challenges and Prospects of Outsourcing: The Case of Commercial
Bank of Ethiopia

By:
Abebe Maru Feleke

Advisor: Jemal Abagissa (PhD)

A Thesis submitted to the school of Graduate Studies of Addis Ababa University in
Partial Fulfillment for the Degree of Masters of Art in Public Management and Policy
(MPMP) in the Department of Public Administration and Development Management

May, 2015

Addis Ababa, Ethiopia

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Challenges and Prospects of Outsourcing: The Case of
Commercial Bank of Ethiopia

BY:
Abebe Maru Feleke

Approved By Board of Examiner:

Advisor Signature Date

Examiner (Internal) Signature Date

Examiner (External) Signature Date

Chairperson of department Signature Date

2
Declaration
I, Abebe Maru declare that this thesis is my own work and has not been previously
submitted for the ward of degree in any university.

Declared by:
Name: Abebe Maru
Signature:………………..
Date:………………………

Confirmed by Advisor:
Name: Jemal Abagissa, PhD
Signature:……………………..
Date:…………………………..

3
Acknowledgement
First and for most I am very enchanted to take this opportunity to thank almighty God who
helped me to begin and finish this study.

Second, I would like to thank my advisor Dr. Jemal Abagissa for his valuable and constructive
criticism from the very beginning to the end that guided me to the right direction.

Next, my deepest thanks goes to CBE employees and employees of the service provider working
in CBE who helped me by filling the questionnaires and providing documents that used as an
input for the study, especially Ato Belete Kene manager of CBE outsourcing administrative
office and Ato Derje Debessa manager of Human resource in commercial nominees PLC gave
their office hours for me to conduct an interview.

Moreover, when I looked back on the past, from where I have started to follow my dreams there
have always been people who gave me enormous courage, inspiration and support. In relation to
this I would like to truly and deeply thank my father and Ato kassahun Asress.

Last but not least thanks are due for my friends and work colleagues for their support and
encouragement.

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Table of Content page

Acknowledgement……………………………………………………………………… ii
Table of contents ......................................................................................................... ii
List of Tables and Figures .......................................................................................... iii
List of Appendices…………………………………………………………………….. .v
List of Abbreviation ...................................................................................................................... vi
Abstract ........................................................................................................................................... vii

Chapter One

1.Introduction…………………………………………………………………1
1.1 Background of the Study ........................................................................................ 1
1.2 Statement of the problem ....................................................................................... 4
1.3 Research Questions………………………………………………………………… 5
1.4 Objective Study...................................................................................................... 6
1.4.1 General objective. ........................................................................................ 6
1.4.2 Specific Objectives ...................................................................................... 6
1.5 Significant of the Study ......................................................................................... 6
1.6 Scope of the Study ................................................................................................ 7
1.7 Limitation of the Study ......................................................................................... 7
1.8 Organization of the Thesis .................................................................................... 7
Chapter Two

2. Literature Review .......................................................................................8
2.1 Definition and Terms of outsourcing ....................................................................... 8
2.2 Levels of outsourcing .............................................................................................. 10
2.2.1 Tactical outsourcing. ................................................................................... 10
2.2.2 Strategic outsourcing ................................................................................... 11
2.2.3 Transformational outsourcing ...................................................................... 11
2.3 Reasons for outsourcing ........................................................................................... 12
2.4 The Costs and Benefits of Outsourcing ................................................................... 18
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2.4.1 Costs of outsourcing .................................................................................... 18
2.4.2 Benefits of outsourcing ................................................................................. 20
2.4.3 Costs and benefits of outsourcing Security Guards ....................................... 21
2.4.4 Costs and Benefits of outsourcing the Janitorial function .............................. 22
2.5 Outsourcing process .................................................................................................. 24
2.6 Conclusion…………………………………………………………………………….27

Chapter Three
3. Research Design and Methodology .................................................................. 29
3.1 Research Type....................................................................................................... 29
3.2 Population of The study ........................................................................................ 29
3.3 Sampling Method .................................................................................................. 29
3.4 Sample Size ......................................................................................................... 30
3.5 Data Collection Instrument .................................................................................... 30
3.6 Pilot Test ............................................................................................................... 36
3.7 Methods of Data Analysis ..................................................................................... 31
Chapter Four
4. Data Presentation, Interpretation and Analysis ..........................................32
4.1 Background Information of the Respondents ........................................................ 32
4.2 The Reason for Outsourcing .................................................................................. 34
4.3 Benefit Gained after outsourcing the services ........................................................ 37
4.4 Employees Attitude towards the Outsourced Services ............................................ 40
4.5 Challenges or Problems of Outsourcing. ................................................................ 48
Chapter Five
5. Summary of Finding, conclusions and Recommendations ..........................51
5.1 Summary of findings .............................................................................................. 51
5.2 Conclusions ........................................................................................................... 54
5.3 Recommendations .................................................................................................. 55
Bibliography
Appendices
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List of Tables and Figures page

Table 2.1 Outsourcing Motives………………………………………………………………… 16
Table 2.2 Reason for outsourcing security and janitorial service………………………….…….17
Table 2.3 Major challenges in outsourcing ……………………………………………………...20
Table 2.4 Functional and Financial Pros and cons of outsourcing …………………………...…23
Table 4.1 Background Information of the Respondents ……………………………………......33
Table 4.2 Reasons of outsourcing the janitorial, messenger and Security services…………...…34
Table 4.3 Advantage/benefits of outsourcing janitorial, messenger and Security services….….37
Table 4.4 CBE employee’s attitude towards the out sourced services………………….…….….40
Table 4.5 The attitude of employees of the outsourced services………………………………....44
Table 4.6 Challenges or problems observed after outsourcing the service ……………………...48
Figure 2.1 Benefits of outsourcing……………………………………………………………....21
Figure 2.2 Outsourcing Decision Frameworks…………………………………………………..24
Figure 4.1 Outsourced Employees Vs Training………………………………………………….47

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List of Appendices
Appendix A: Questionnaire designed for CBE employees
Appendix B: Questionnaire designed for janitors, messengers and security guards
Appendix C: Interview question designed for HR Manager of the service provider
Appendix D: Interview question designed for Manager of the outsourced
Administration office in CBE.
Appendix E: Part of CBE service level standard

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List of Abbreviations
FFIC- Federal Financial Institutions Examination Council
CBE- Commercial Bank of Ethiopia
CN- Commercial Nominees
HR- Human Resource
PLC -Private limited company
SLA- Service Level Agreement
US- United State of America

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Abstract
The purpose of this research is to assess the challenges and prospects of outsourcing the
security, messenger and janitorial services in commercial bank of Ethiopia and to come
up with the possible solution to minimize the existing problems. The study covers CBE
branches under west Addis district and the outsourcing administrative office. The
researcher used both qualitative and quantitative data collected through questionnaires,
interview, and review of CBE service level agreement document.

The findings of the study show that the outsourced services enabled the bank to save
managers time, give more attention for the core functions of the bank rather than non
core areas and expand its branch aggressively. On the contrary defining SLA, selecting
the right vendor, loss of direct controlling and measuring service qualities were the
challenges of the bank as the result of outsourced services. In addition to these,
employees of the service provider were not properly trained about their job, lack
motivation and belongingness, not properly equipped with materials that help to perform
their job. Thus, the performance of the service provider was not as per service level
agreement. Finally, it is recommended that commercial bank of Ethiopia should deal with
the service provider to revise the service level agreement and enforce the service
provider to facilitate the necessary training to improve employees’ skill and to provide
working materials for a particular job. The bank also need to follow up the service
quality as per SLA and check the amount of commission that the service provider
collect from each employees monthly salary as compare with the bank paid to the
service provider per individual employee.

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