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CASE STUDY

Meralco Outsourcing Strategy

In Meralco, outsourcing shall be undertaken to help achieve the Companys

business goals and targets through the following means:1. providing organization flexibility and lean manpower focused on the core

business activities of the company;2. achieving operational efficiency and better quality; and3. managing the companys labor cost.The following are the five (5) phases of outsourcing:

1. Outsourcing PlanningIn this phase, the identification of jobs to be outsourced is done

through the assessment of their criticality to the Companys business.Criticality is assessed based on the information involved in carrying out suchjob, the use of licensed software system, and the degree of changes incurrent operations once outsourcing is pushed through. Cost-benefit analysisis conducted to ensure that savings will be generated out of outsourcing.Further, the impact/implications of outsourcing to affected organizationand manpower are all identified/determined in this phase.

2. Contract PlanningService Level Agreement (SLA) development is done in this phase.

SLAs are negotiated contracts between the company and the serviceprovider. This contract contains the scope of work outsourced, theresponsibilities and accountabilities of both the client and the serviceprovider, performance metrics and the contract price.

A vendor pool is created to allow line organizations to choose whichcontractor is most fitting and capable of providing the required service atdesired quality.

3. AcquisitionThe contract is awarded to the most technically competent service

provider who offered the most reasonable contract price. SLAs arestipulated in the outsourcing contract. The Purchasing Department, signingon behalf of the company in the outsourcing contract, will act as conduitbetween the service provider and the clients line organization.

4. Contract Administration

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The line organizations monitor the daily performance of the serviceprovider vis--vis what is stated in the SLA. However, all concerns such asnon-compliance to standard operations/process, misconduct, etc., will haveto be coursed through the Purchasing Department and not directly to thecontractor employees.

Recommendations for contract renewal or termination all come fromthe line organizations.

5. Outsourcing AuditThe efficiency and effectiveness of outsourcing is regularly monitored

to ensure success of the project.HR, for its part, sees to it that the service providers are evaluated

based on standards to guarantee quality of output. In addition, it alsomonitors timely payment of line organizations to the contractors to ensure

financial viability of the latter.

A job can be a candidate for outsourcing if it is deemed non-critical. However,if the cost-benefit analysis would result in no savings generated out of outsourcing,then the performance of the job would be retained in-house.

As the Company enters into a deregulated business environment, it is moredrawn to focus on investing on positions which directly impact its core business. Inthis regard, outsourcing has become a major thrust in achieving operational and costefficiencies. Currently, all organizations are enjoined to develop their outsourcinginitiatives. Organizations review their operations and assess the criticality of their

processes for possible outsourcing.

The following are outsourcing milestones in Meralco:

Year Outsourcing Activity

1992 Meter reading contracting of residential meters1995 Contracting of shuttle bus services1997 Delivery of electric bills and disconnection notices

by Messengerial contractor

2001 InformationTechnology2008 Tellering (acceptance of payments) at Branches

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CitiBANK Experience

Like any other companies, it was imperative for citi to look for radical changesin its business processes; moreso as it was heavily affected by the current globalfinancial crisis. Even before the current crisis, the bank moved into outsourcing

several functions in the apparent need to strengthen its competitive advantage. Somefunctions that were outsourced where the call based citiphone service, internalmessengerial service, IT functions, statement rendition units, and its creditacquisition units.

The immediate impact of such move was the perceived deterioration of servicein the citiphone function. Before it was outsourced, according to reliable reports,citiphone was known to be the heart and soul of citi. Most of the officers who rosefrom the ranks were citiphone graduates. It was a real time one stop shop foranything that is citibank at that time.

Once outsourced, quality dropped considerably. Complaints were mostly due tosubstandard customer care as VIP clients complain about the grammar inadequacy ofcall agents and for failure to provide accurate and reliable information such asupdating client accounts. This has impacted on the corporate image of the company.

Complaints and dissatisfaction over the outsourcing initiative likewise affectedthe morale of the employees prompting the Citibank Philippines Employees Union tofile several cases with the Office of the Secretary of Labor questioning the otheroutsourcing initiatives of the company. Since the cases are pending, it would beprudent not to comment on the issue at this time.

To take advantage of the boom in the BPO industry, citi organized its own BPOventure. Since it is organized in a regional set-up, various countries are competingagainst each other to acquire several processes that would be regionalized in -country. The Philippine branch has its CBS (Citibank Business Solution) Asia where itoffers expense/payment processing to other regions like North America, EMEA, andAustralia. Singapore offers IT services. Shanghai offers bank reconciliation.

The reason for these initiatives is to be more competitive by focusing in itscore business (banking and credit cards) while having a peripheral vision on areas thatcan add to its competitive advantage. Being a dynamic institution, citi continues tolook for business opportunities that may help the corporate giant weather the

current economic uncertainty.

CONTINGENT STAFFING IN AMBER GROUP OF RESTAURANTS

Amber Group Of Restaurants is a fast growing family corporation that issynonymous in the Makati Business District for its pancit, barbecue and pichi-pichi.From a single store in 1988, Amber has now 2 other branches in Muntinlupa and

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Mandaluyong, with a third branch opening in Quezon City sometime in the last quarterof the current year. Demand has been growing for the past 5 years and from a smalleatery, Amber has now expanded to offer delivery and catering services. Amber isnow a full blown SME.

Like any other restaurants, Amber has a peak period from September toDecember. Demand usually increases three fold as the Christmas season nears. Toaugment the existing workforce, contingent or seasonal workers are employed fromSeptember to early January. Amber has been sourcing the seasonal workers from theunemployed sector.

The company does not use any agency to source their manpower needs. Theyhave been engaged in the direct hire practice for the past 5 years. The owners want apersonal hand at recruitment and views this as a desirable social dimension, that ofproviding employment opportunities to the needy. Their business orientation isanchored on helping others alleviate poverty by proving livelihood.

A number of those initially hired as seasonal employees were eventually givenregular status as the business grew. This practice has motivated their employees to beloyal to the company and one proof cited was the low turn-over rate in the pastyears. Employees feel that they are part of the companys growth and expansion.