Outsourcing: reap the fruit; contain the “bad apple”

Abstract

Purpose The purpose of this study is to show how outsourcing partners can maximise the benefits of outsourcing while containing the negative effect of destructive conflict (the “bad apple”) on trust and commitment. Design/methodology/approach The study reviewed existing literature on the benefits and limitations of outsourcing from the principal’s (outsourcer) and the agent’s (service provider) perspectives. The study further draws on empirical evidence from studies conducted across ten industries in three countries within the Asia–Pacific Rim and the Middle-East, namely, Australia, Malaysia and Saudi Arabia. Findings Long-term orientation and ethical norms are robust ex-ante (i.e. before the destructive conflict) handling strategies, whereas integrative conflict handling style and (to a lesser degree) accommodating and compromising conflict handling styles are effective ex-post (i.e. after the destructive conflict) handling strategies. Forcing and avoidance conflict handling styles can escalate destructive conflict and should be completely avoided by outsourcing partners at all times. Practical implications The benefits of outsourcing outweigh its challenges. Trust and commitment are positively affected by ex-ante and ex-post (destructive conflict) strategies. Destructive conflicts (or the bad apple effect) can be contained through these strategies. Firms should leverage the upsides of outsourcing relationships and contain the downsides by integrating long-term orientation and ethical norms that can help to pre-empt and forestall destructive conflict. They should adopt an integrative conflict handling strategy in the event of a manifest conflict. Other strategies that can be applied to manifest conflict (albeit more sparingly) are accommodating and compromising strategies. Each has the potential to increase trust and commitment in the relationship. Originality/value The authors unveil before and after (the destructive conflict) handling strategies that do not depend on contextual factors or industry/sectoral differences.