Transplants’ role stress and work performance in IT outsourcing relationships

This research investigates individual level effects of information technology (IT) outsourcing. The basis of this research rests on several organization and management theories typically applied to outsourcing separately. Some theories were focused primarily on cost concerns, and resources concerns, while others had partnership concerns. Stakeholder theory recognizes the importance of balancing interests of all stakeholder groups. Agency theory recognizes that principal-agent relationships change as a consequence of outsourcing. And economic theories are addressing performance, but not directly individual level work outcome. These complementary perspectives are integrated into a framework, which subsequently was applied in empirical research. A combination of qualitative and quantitative research was used to explore and test the findings. The exploratory case studies involved six large organizations and in-depth interviews with a selected number of client and vendor stakeholders. Combined they revealed important features influencing and creating successful IT outsourcing relationships, and more specifically explored individual level attitudes, behavior and performance. The case studies recognized occupational stress among transplants, outsourcing arrangement stressors, and indicated consequences of occupational stress. The confirmatory survey involved transplants of IT outsourcing. The survey found role stress as prevalent among transplants of IT outsourcing. In turn, perceived role stress was found to influence transplants’ work outcome. Three outsourcing arrangement stress (complementary core competencies, client managerial persistent expectation, and relational norms) were found as stressors affecting the level of perceived role stress among transplants. The main contribution of this research is the development and application of a multiparadigmatic based research framework providing a more comprehensive understanding of transplants’ role stress and work outcome. Used as an analytic tool this framework will help managers in dealing with issues of role stress among transplants of IT outsourcing

When subordinates become IT contractors: Persistent managerial expectations in IT outsourcing

T his paper investigates the persistence of managerial expectations in an IT outsourcing context where the traditional relationship between supervisor and subordinate changes to one of client-manager and contractor. A mixed-method approach was used, in which a qualitative methodology preceded a large-scale quantitative survey. Data were collected from 147 survivors of a government IT organization which had undergone IT outsourcing in the previous year. Findings show that role overload, the presence of strong ties between manager and contractor, and the lack of prior outsourcing experience increased the persistence of managerial expectations. In turn, persistence of expectations had a distinct influence on managerial perceptions of contractor performance. (IT Outsourcing; Persistent Expectations; Role Overload; Strength of Ties; Contractor Performance; Contract Workers; Changing Employment Status) Introduction Since the late 1980s, the trend towards outsourcing of information systems has continued unabated. Much research has focused on reasons why companies outsource One form of outsourcing that is commonly practiced is that of spin-offs, examples of which can be found in organizations such as American Airlines, Baxter Healthcare, and Philips Electronics . In this form of outsourcing, an IT department (including the employees, systems, and operations) within an organization gets "spun-off" into a separate external entity, becoming empowered to behave as an external vendor and having to focus on new issues such as marketing, customer service, and offering competitive prices to the clients Koh 2000, Willcocks and. In addition, the IT employees formally leave their organization and are transplanted to the new spin-off company, which employs them and offers their services back to the original employer for a service fee. Even though these transplants still provide services to the original organization, it no longer directly employs them. Instead, the spin-off company is the new employer and is responsible for the management and supervision of these transplants, including compensating them and assigning them to specific clients (Ang and Slaughter 2002). In other words, the status of the transplants relative to the original employer changes from subordinates to third-party contractors. The advantages for a client organization of using transplants (as opposed to nontransplants) are numerous. Due to the transplants' prior experience with the client organization, they are familiar with the operations and procedures of the organization and need not invest as much time and effort to understand its fundamental problems and opportunities. Also, because these transplants (or contractors) are former subordinates of the client-managers, the latter should possess a deeper knowledge of contractor competencies and skills and, consequently, be more effective in supervising them. There is an alternative hypothesis about the efficacy of using transplants. From their prior experience in supervising the contractors (as subordinates), clientmanagers may have developed clear expectations about what the contractors should provide to the organization, such as a requisite level of work, effort, and commitment. Evidence from social psychology suggests that expectations and beliefs are not readily subject to change, even in the face of disconfirming evidence (e.g., The objective of this study is to examine managerial attitudes and expectations toward transplants in IT spin-off arrangements. Specifically, we focus on the phenomenon of persistent expectations by exploring the conditions under which managerial expectations persist and the effect on managerial evaluation of contractor performance. We first draw on literature in social and cognitive psychology, particularly research in belief perseverance, as well as agency theory, to offer theoretical lenses for the phenomenon of persistent expectations. We then adopt a mixed-method approach to empirically develop and test a model of persistent expectations (Creswell 1994, Tashakkori and Persistent Expectations in IT Outsourcing Spin-offs as a form of IT outsourcing arrangement involve the use of transplants and entail a change in the relationship between the two contracting parties. Before outsourcing, the relationship is supervisorsubordinate, in which supervisors have legitimate power arising from their position of formal authority in the organizational hierarchy (Masten 1991). Supervisors can guide and influence subordinates' workrelated actions, tasks, and decisions. Moreover, the scope of their authority is fluid and not explicitly circumscribed in the employment contract. This is reflected in the notion that subordinates have a "zone of indifference" in their duties and responsibilities Agency theory (e.g., 1 In the former relationship, supervisors monitor the day-to-day activities of their subordinates and rely primarily on behavior-based controls, given the formal authority prescribed under the employment contract and the relative ease of measuring subordinate behavior. However, when the relationship changes to one between client and contractor, the two parties now work for two different organizations, thereby introducing the potential for goal conflict (Eisenhardt 1989b). Consequently, agency theory stipulates that the contract and the ensuing control mechanism should change to one that is predominantly outcome-based instead in order to be efficient. Second, in IT outsourcing, the contract between the client organization and the vendor organization plays 1 We are especially grateful to our anonymous reviewer for highlighting the pertinence of control mechanisms as described in agency theory. a more important role Hirschheim 1993, Lacity and Despite the overnight change in the legal relationship from supervisor and subordinate to clientmanager and contractor, it is likely that ex-supervisors (now client-managers) will continue to perceive contractors as direct subordinates. Therefore, they will persist in imposing on their former employees (now contractors) a set of expectations that were internalized in their prior employment relationship, expectations which include mostly the use of micromanagement and behavioral controls rather than predominantly outcome-based controls as prescribed by agency theory. We posit that client-managers will expect former subordinates to perform their duties and contribute much as they did in the past, even though these duties and responsibilities may not be included in the new outsourcing contractual arrangement. We advance the theoretical construct "persistent expectations" to describe and explain this phenomenon. This term is adopted from the "belief perseverance" phenomenon described in the social cognition literature (e.g., HO, ANG, AND STRAUB Applied to the IT outsourcing context, these sociopsychological findings lend weight to the notion that client-managers do not change their old schemas and expectations regarding former subordinates, even though the managers may recognize that these exsubordinates are no longer officially under their jurisdiction but are under the supervision of another organization. Consequently, client-managers may continue to impose on contractors demands and responsibilities that may not have been contracted for in the IT outsourcing arrangement. To develop a framework for the occurrence of persistent expectations and to explore this phenomenon in greater detail, we adopted a mixed-method approach, starting with an exploratory, qualitative case study to develop the theoretical model. Study 1: Development of Theoretical Model Since neither belief perseverance nor persistent expectations has been examined in the context of a change in employment relationship, a qualitative case study approach was selected to provide critical information about the phenomenon. Following Eisenhardt (1989a), the purpose of the first qualitative phase was to obtain a richer description and understanding not only about the nature of the phenomenon, but also about factors affecting, and effects arising from, persistent expectations. We used focus groups to elicit the nature of persistent expectations, the organizational context in which it occurs, and the consequences of persistent expectations (Spradley 1979). Study 1: Method Participants and Setting. We conducted focus group sessions with employees in a large public-sector organization offering IT services to 20 government bodies. The services included the development of information systems, promotion of IT services in the government bodies, and propagation of IT usage to the general public. The department had spun-off its systems building and maintenance services eight months before to increase organizational efficiency and streamline operations. Before the spin-off, the IT department employed 1,501 personnel providing a full range of IT services. Approximately 67% (1,013) of the employees were development and maintenance personnel. They built and maintained applications software and managed and operated the data centers of the organization. The remaining 488 employees were support staff (e.g., administrative, financial, and human resource personnel) and IT planners and solutions providers who created liaisons with end users in the subsidiaries and managed in-house systems development projects. In effect, the IT planners and solutionsproviders formed the upper and managerial levels of the IT department, with IT developers and maintainers occupying the lower, technical levels. In the outsourcing changeover, all the IT developers and maintainers were formally separated from the IT department and transplanted to a new spin-off organization. They became employees of the new organization but continued to offer technical services to their former employers (henceforth called the "client" organization) as contractors. The exchange became a client-vendor arrangement governed by a formal service-level agreement (SLA). The IT planners and solutions providers remained with the client organization and continued to provide IT solutions to various government bodies. In addition, they became clientmanagers responsible for managing the outsourcing contracts with the same IT professionals who were now external contractors to the client organization, rather than its subordinates. Procedure. Three focus-group sessions involving a random selection of 19 client-managers in the client organization were conducted over a two-week period. In each focus-group session, the second author led the discussions. We developed a questioning protocol to guide the participants in describing the repercussions of the outsourcing, specifically pertaining to their relationships with transplants, i.e., former subordinates who were now contractors. The questions required the participants to describe: HO, ANG, AND STRAUB (1) the nature of their jobs before and after outsourcing; (2) the changes experienced by them in terms of roles, responsibilities, interactions, and relationships with the contractors; and (3) the changing expectations and obligations of the contractors. One other major issue that was deliberated was the phenomenon of persistent expectations. Participants discussed the implications and repercussions of having the development IT professionals working for them under the auspices of the new vendor organization instead of as subordinates. Two of the authors and two research assistants independently took notes of the discussions, which were compiled and transcribed for processing and further analysis in NUD•IST, a qualitative data analysis program. To reveal the major themes, we adopted the approach advocated by To establish an independent assessment of these themes, two "blind" coders (Ph.D. students in MIS and management) read and coded transcripts using the six themes. They conducted initial coding of the first transcript to establish interrater reliability, the calculated Cohen's Kappa for which was 0.865. The raters then discussed the discrepancies and developed explicit coding rules to reconcile the discrepancies. Subsequently, the coders independently coded the rest of the transcripts, with a resulting Cohen's Kappa of 0.92. Given this level of agreement, the coding approach was deemed reliable, satisfying Landis and Koch's (1977) threshold of 0.70 for robustness and validity. Study 1: Results and Theoretical Model Six major themes emerged from the focus group discussions: (1) persistent expectations, i.e., the client-managers' continued expectations of the contractors to respond as if they were still subordinates; (2) client-managers' experiences of role overload resulting from IT outsourcing; (3) their strength of ties with former subordinates; (4) their level of trust in the contractors; (5) their outsourcing experiences with other thirdparty vendors and a comparison of these with those relating to the new contractors; and (6) client-managers' assessment of contractor performance. Themes Persistence of Expectations. In terms of clientmanagers' working relationship with contractors, client-managers found it both difficult and awkward to manage former subordinates as external contractors. Many continued to relate to their former subordinates as if they were still subordinates and continued to expect the same level and quality of support and service. However, managing contractors requires a different mindset and skill set from that required for managing subordinates. In general, managers can compel subordinates to perform a broader range of tasks than what they can demand of contractors. From the perspective of agency theory, this translates to the use of predominantly behavior-based controls by the managers. After outsourcing, however, the client-managers' formal authority over the contractors was limited only to tasks that were explicitly stated in the SLA between the client and vendor organizations. Consequently, clientmanagers found that former subordinates had become unwilling to simply "take orders" from them. Instead, these contractors adhered closely to the terms and conditions spelled out in the outsourcing contract. In contrast, the client-managers expected the contractors to provide the same service level as in the past. One manager explained: The problem with the contractors is mainly the relationship. For other vendors, the expectations are already set in the contract, and we know the limit of their responsibilities. But for these contractors, we assume that they will continue with their prior responsibilities as subordinates, so our present behavior is based on past behavior. . . . There's a lot of assumptions between both sides, and we need to manage the relationship. It's like getting a divorce but still staying in the same house. Another manager also noted the difficulty in trying to switch their treatment and expectations of the transplants from subordinates to contractors. In the past, they [the contractors] will do anything under the sun, like moving computers from one site to another, or writing Chinese and Tamil software and other small tasks. Now, if it's not specified under the SLA, they won't do it. . . . Not surprisingly, the discrepancy between clientmanagers' expectations and contractors' actual service levels does not please the client-managers. One manager described his situation as follows: Before, we [both client-managers and contractors] worked as a team towards a common goal. Now, they won't go beyond their duties or responsibilities, but only up to specs. . . . There's a lot of emotions that go with the change of relationship from subordinate to contractor. . . . The emotional aspects don't pertain to newcomers because they don't have the prior relationship with the contractors as subordinates. Role Overload (Antecedent to Persistent Expectations). In terms of work concerns resulting from IT outsourcing, client-managers reported having to perform additional duties that were previously not part of their job requirements and, subsequently, feeling overwhelmed in their duties and responsibilities. One manager noted: I'm managing more things now. In the past, I handled one specific project and it was very specific in the skills that are required. But with outsourcing, my job scope has expanded to contract management, to vendor relationships, to writing proposals, and all other kinds of skills that are needed. . . . But I've little time to develop technical skills, and it's difficult to read and get enough depth. Other client-managers agreed. Many described an expansion in job scope and duties, particularly with regard to administrative matters. A manager described her situation: I had to do administrative work for the past four to five months, and had to do coordination and liaison work. I should join the administration department since I'm largely doing administrative work 90% of the time, like verifying the number of tables and chairs! While client-managers had to undertake additional roles and responsibilities after outsourcing, they were stripped of subordinates who previously supported them in completing work assignments. This resulted in a lack of resources needed to fulfill job responsibilities. One manager summarized the situation: We have to pay the contractor a fee to perform the R&D work that was previously absorbed by our subordinates. Now I have to do the exploration myself, whereas in the past the subordinates did it. . . . In the past, I could delegate administrative work to my subordinates, but not any more. We need clerical officers, administrative officers, or executive officers to help us out. Overall, these findings indicate that as a result of the massive downsizing requisite in IT outsourcing, job roles and responsibilities of survivors expanded significantly to the extent that they experienced role overload. In turn, this role overload may have amplified client-managers' persistent expectations, such that, to cope with the overload, they continued to perceive the contractors as subordinates and expected them to perform duties that fell within a subordinate's role, even though they were no longer in such a position. The relationship between role overload and persistent expectations can be explained by examining the cognitive and motivational biases of the clientmanagers. In terms of cognitive constraints, increases in role overload result in survivors having limited time and cognitive resources to assimilate and interpret new information. It has been proposed that, when such constraints exist, people make judgments and evaluations based on salient information or available schemas currently in their possession (Anderson and Lindsay 1998). We predict a similar reaction in the IT outsourcing context. Client-managers who experience role overload will be preoccupied with trying to deal with the urgent, day-to-day issues resulting from outsourcing. Consequently, they will not have sufficient time and cognitive resources remaining to gather and analyze new data to develop a new set of expectations for the contractors. Also, it is well documented that, in times of cognitive stress, people tend to experience threat rigidity and rely on automatic information processing Other than the cognitive effects described above, motivational forces may also contribute to the persistence of expectations. Anderson and Lindsay (1998) suggests that "motives or needs of the perceiver can influence what information is brought to bear" (p. 22). In the outsourcing context, client-managers with role overload are already overwhelmed with having to cope with the additional duties and responsibilities resulting from outsourcing. This works against their decreasing their expectations of help from others. Hence, client-managers do not have the motivation or reason to expect that contractors will provide fewer services than they did as subordinates. In fact, for clientmanagers to cope with the increase in workload, they need contractors to offer even more assistance than they did previously. This suggests that client-managers continue to evoke old schemas of the transplants as subordinates, and expect contractors to perform certain duties and tasks for which they may no longer be responsible under the new outsourcing agreement. Therefore, we hypothesize that

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