The high costs of outsourcing: Vendor errors, customer mistreatment, and well‐being in call centers

• Published date: 01 January 2024
• Author: Sean O'Brady,Virginia Doellgast,David Blatter
• Date: 01 January 2024
• DOI: http://doi.org/10.1111/irel.12338

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Industrial Relations. 2024;63:80–103.

wileyonlinelibrary.com/jour nal/irel

INTRODUCTION

Outsourcing is a common practice for companie s looking to cut costs and re- align resou rces

towards core compet encies. A growing literature documents the negative impact of out-

sourcing on job qual ity and employee well- being (Ber nhardt et al., 2016; Dorn et al.,2 018;

Goldschmidt & Schmie der,2 017; Weil,2 014). However, past rese arch has focused overwhelm-

ingly on outcomes for the employees of vendors or subcontractors (Deery et al.,2013; Dube

& Kaplan,2 010). While a small number of studies show that outsourcing can harm employ-

ees remai ning with in an organi zation, these have primarily focused on how downsizing af-

fects perceptions of job inse curity or work intensity (Böckerman & Maliranta,2 013; de Jong

et al.,2016; Mae rtz Jr et al.,2010; Quinla n & Bohle,2009). There has been less re search on how

dependenc e on vendors can change the content and demands of internal jobs. These dy nam-

ics are likely to be particularly important in busine ss services, where employers often adopt

‘blended sourci ng’ or joint service delive ry models that closely integr ate in- house , outsourced,

and offshore operation s and workflows.

Received : 11 April 2022

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Accepte d: 26 May 2023

DOI: 10.1111/irel.12338

ORIGINA L ARTICL E

The high costs of outsourcing: Vendor errors,

customer mistreatment, and well- being in call centers

SeanO'Brady1 | VirginiaDoellgast2 | DavidBlatter2

This is an op en acces s article und er the terms of t he Creative Commons Attribution-NonCommerc ial License, wh ich permi ts

use, dist ribution and re production in a ny medium, prov ided the orig inal work is prope rly cited and is not u sed for comme rcial

purposes.

© 2023 The Authors . Industria l Relations publi shed by Wiley Per iodicals LLC o n behalf of Regent s of the Universit y of Californ ia

(RUC ).

1DeGroote S chool of Busine ss, McMaster

Universit y, Hamilton, Ontor io, Canada

2ILR School, Co rnell Univers ity, Ithaca,

New York, USA

Correspondence

Sean O'Bra dy, DeGroote Scho ol of Business ,

McMaster Uni versity, 1280 Main Str eet

West, DSB 406, Ham ilton, ON L8S 4M4,

Canada.

Email: obradys@mcmaster.ca

Abstract

We analyze the impa ct of outsourcing on the well- being of

internal c all center employees in the U.S. tele communica-

tions industr y. Our findings draw on mi xed- methods data.

The qualitative findings suggest that internal employee s

experienc ed escalating job demands connected to errors

by third- par ty call center vendors a nd their employees due

to additional work and intensifie d customer fr ustrations.

SEM results show sequential mediation between the ti me

internal employees spent correcting vendor er rors, cus-

tomer mistreatment of employees, emotional exhaustion,

job satisfaction, and absenteeism. Employee autonomy

over customer- related decisions appeared to help workers

manage thes e job demands and their ef fects on well- being.

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THE HIGH COSTS OF OUTSOURCING

In this pape r, we ask how the u se of third- party outsourc ed service provid ers or ‘vendors’ in

call centers impacts i n- house employees' well- being and absenteeism through thes e dynamic s

of joint servi ce delivery. We know from past research t hat customer mistreat ment of employees

can both significantly increas e job demands and drive up emotional exhaustion (Koopmann

et al.,2015; Sliter et al.,2010 ; Van Jaarsveld et al.,2010). Our inter views with workers and union

representat ives at U.S. cal l centers suggested that outsourcing can exacerbate the se problems.

We learned that internal cal l center workers were increasing ly experiencing extra workload

and stress associated w ith ‘vendor errors’. Customers would be routed to the in- house, i n-

ternal workforce after already interacti ng with workers at domestic or of fshore third- party

vendors— ofte n because these workers had ma de a mistake or were unable to resolve a r equest

or problem. Under these conditions, custom ers were more likely to be frustrated or abusive in

their intera ctions with internal employee s. These problems were compounded where manage-

ment had taken away inter nal employees' autonomy to de- escalat e abusive calls, through tig ht

scripti ng and othe r limits to their dis cretion over how they handled customer i ntera ctions.

This study exa mines relationships bet ween vendor errors, customer mistreatment, job au-

tonomy, and employee well- being and absenteeism. Findings are based on a mi xed- method

study that integ rates qualitative inter views and focus groups with a s urvey of 1894 internal call

center workers across six employers. Our research de sign allows us to develop unique insights

on how management strategies to organize work across organizational boundarie s can affect

both organiz ational and worker outcomes via customers' responses to joint service delivery.

We develop an original model to test these relationships, which integrates the employment

relations literature on outsourci ng and job quality (B ernhardt et a l.,2016 ); and the organiza-

tional psychology l iterature on customer mistreatment (Koopmann et al.,2015) and demands

and resourc es at work (Bak ker & Demerouti,2018).

Our study is distinctive in exa mining how the use of third- party vendors can shape job

demands on internal workers, as well as the role of job autonomy as a resource for employees

dealing with escalati ng or unpredictable demands c onnected with outsourci ng. In addition,

it sheds new light on an under- studied but inc reasingly i mportant aspect of the labor process

in call centers. Over the past several dec ades, US employers have outsourc ed hundreds of

thousands of cal l center jobs to domestic and foreign bu siness process outsou rcing (BPO) pro-

viders. Between 2006 and 2010 alone, call center outsourcing was linked to 500,000 job cuts

in the United States (CWA,2011) and is expected to continue at a rate of over 3% per year in-

ternationa lly (Tehn avio,2022). We provide new evide nce of the impact of these orga nizational

strategies by e mployers on th e remaining, in- house ser vice workforce.

The article is structu red as follows. First, we rev iew the literatures on outsourcing, job au-

tonomy, customer mistreatment, and employee well- being and set out hypotheses based on

these literatures. Second, we describe the sett ing of our research and our qual itative findings.

Third, we outline the methodology and measure s from our survey re search. Fourth, we pres-

ent our quantitative f indings, i ncluding a str uctural e quation model analyzing the relation-

ships. Fifth, and finally, we present our conclusions c onnecting our findings with the broader

literature.

THEORETICAL BACKGROUND AND HYPOTH ESIS

DEVELOPMENT

The Job Demands and Resources (JD- R) literature st ipulates that a broad scope of demands

can have detrimental effects on employee well- being (Bak ker & Demerouti,2 018; De merouti

et al.,20 01). Demerouti et al.(20 01) define job de mands as “thos e physical, social, or organi-

zational aspects of the job that require susta ined physical or mental effort and a re therefore

associate d with certain physiolog ical and psychological c osts.” We are inte rested in the effect s