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Explain the costs and benefits to organisations, such as NHS Scotland, of outsourcing. - Scottish Highers Business Management - Question c - 2019
Question c
Explain the costs and benefits to organisations, such as NHS Scotland, of outsourcing.
Worked Solution & Example Answer:Explain the costs and benefits to organisations, such as NHS Scotland, of outsourcing. - Scottish Highers Business Management - Question c - 2019
Step 1
Costs
Answer
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Private firms could increase costs: While outsourcing can often reduce operational expenses, partnering with private firms might lead to increased costs if the services are more expensive than anticipated, potentially creating cash-flow problems for the organisation.
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Loss of control over private firms' activities: When outsourcing, NHS Scotland may have less oversight regarding how services are delivered. This lack of control can lead to discrepancies in service quality and unmet performance standards.
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Financial pressure from service contracts: Outsourcing might put pressure on NHS Scotland’s budget, particularly if there are unexpected costs that arise from the contracted services.
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Limited suppliers: Depending on outsourcing can limit NHS Scotland’s choice in finding suitable new providers, particularly if the market is narrow and competition is limited.
Step 2
Benefits
Answer
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Fewer employees required: By outsourcing certain functions, NHS Scotland may be able to reduce the number of employees needed, potentially leading to cost savings through lowered payroll expenses.
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Ability to focus on core activities: Outsourcing allows NHS Scotland to concentrate on essential healthcare services instead of administrative or non-core tasks, thus enhancing its operational efficiency.
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Improved service quality: Certain tasks may be better performed by specialist firms, which can lead to enhanced service delivery in areas like IT and procurement, improving overall healthcare outcomes.
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Access to expertise: By outsourcing specialized functions, NHS Scotland can benefit from the expertise available from firms that have a stronger focus and experience in certain domains.