What is it about?

The literature on outsourcing outcomes has focused on certain evaluation criteria—mostly market-oriented values—emphasized by external constituencies. Although the literature points to potential changes in working conditions and management practices resulting from outsourcing, and alludes to how these changes can affect employee attitudes, a firm understanding of outsourcing from the perspective of government employees remained elusive. This study reports evidence of the negative impact of outsourcing on perceived performance and a viable causal mechanism linking outsourcing to organizational performance.

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Why is it important?

Analyzing how government outsourcing influences employee perceptions and attitudes can foster a broader understanding of how this practice affects public organizations.


A main claim in this research is that comparing direct production to outsourcing, or to any other governance mode for that matter, requires a more complete picture of comparative governance costs, including those that relate to human resources, such as job satisfaction and turnover. The finding from this study on the direct negative relationship between outsourcing and perceived organizational performance indicates that transaction costs, including agency costs, may be greater than anticipated and may outweigh the benefits of outsourcing. Public managers should seek ways to reduce agency costs that federal agencies may experience, while strengthening monitoring and evaluation of contractors frequently to mitigate abuses associated with the principal-agent problem.

Gyeo Reh Lee
Indiana University System

Read the Original

This page is a summary of: Outsourcing and Organizational Performance: The Employee Perspective, The American Review of Public Administration, June 2019, SAGE Publications,
DOI: 10.1177/0275074019855469.
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