BUS630: Managerial Accounting
Instructor: Stacy Hiles
April 27, 2011
The trend toward organizational outsourcing has increased dramatically over the past decade. The drive for cost reductions and greater efficiencies has forced many organizations to specialize increasingly in fewer areas. Outsourcing can include anything from outsourcing an IBM (IBM) or HP, to recruiting talent and everything in between. As a sales manager working to hire a new sales team in a new office through a company merger, I have opted to outsource the bulk of my recruiting to expedite the process and to ensure a lower attrition rate. The key to recruiting in this environment is to hire the right number of sales representatives, with the right mix of talent and personalities in the shortest amount of time. This paper will examine why outsourcing talent during this time and throughout the selling seasons is more efficient and cost effective than using an internal human resources department.
In a press release dated May 14, 2010, Tyco International Ltd announced, “that it has completed the acquisition of Brink's Home Security Holdings, Inc. ("Brink's Home Security") (NYSE: CFL) following approval of the transaction by Brink's Home Security shareholders on May 12, 2010. Brink's Home Security, which operates as Broadview Security, will now be combined with Tyco's ADT security business, the world's largest electronic security provider.” These are exciting times and everyone seems pleased with the transaction. Tyco Chairman and Chief Executive Officer Ed Breen comments by saying that "[W]e are excited to complete this transaction to bring together two of the premier companies in the North American residential and commercial security industry."
After the merger, most of the Brinks/Broadview offices were closed and absorbed under existing ADT offices. But a few of the offices remained, including my office in Largo, Florida. It made sense to keep it and several other offices open throughout the US to accommodate flourishing markets with opportunity for growth. In deciding which offices to keep, ADT analyzed several factors and/or costs to determine if the remaining offices could earn more revenue than they would cost to maintain. Factors had to be addressed to determine which offices to keep and which offices to absorb. The process involved weighing marginal benefits against marginal costs. Thomas and Maurice (2011) note that “[T]he principal rule is to increase the level of an activity if marginal benefits exceed marginal costs and decrease the level if marginal costs exceed marginal benefits (pg. 91).” If the math makes sense, then it makes sense to do it.
One of the most common input decisions companies make is how much labor is necessary for profit maximization. The firm's demand for labor is a derived demand since more demand for a firm’s products are demanded, more labor is needed, hence, if demand for the firm's output increases, the firm will demand more labor. If it falls, the firm will reduce its work force.
In the home security industry, commissioned sales people are common. We rationalize hiring a new rep as a low risk investment: just a small training salary plus commission. Many of us will look at the training salary as the cost of bringing a new rep on board. While calculating our sales projections we figure, “I can grow my revenue by X amount and it’s only going to cost me Y.”
After determining how many sales representatives I need to have a successful launch, my next question is where I will go to recruit them. I will attend job fairs, hold open houses, post ads internally with our human resources team and of course, I will set up an aggressive referral program with our existing employee base. Each of those methods is effective for the long-term solutions. And when those methods are combined, they work to ensure a steady flow of...