Hiva Mohammadi, Mehran Molavi. Department of Public Administration, Mahabad Branch, Islamic Azad University, Mahabad, Iran

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International Research Journal of Applied and Basic Sciences 2015 Available online at www.irjabs.

1 International Research Journal of Applied and Basic Sciences 2015 Available online at ISSN X / Vol, 9 (8): Science Explorer Publications Evaluating the Outsourcing Performance in Implementing Development Projects Using Analysis of Hierarchical Process (AHP) Technique (Case Study: Mehr Housing Project) Hiva Mohammadi, Mehran Molavi Department of Public Administration, Mahabad Branch, Islamic Azad University, Mahabad, Iran Corresponding author dr_molavi1967@yahoo.com ABSTRACT: The aim of the present study is to evaluate the outsourcing performance in implementing development projects using Analysis of Hierarchical Process (AHP) technique (case study: Mehr Housing project). Initially, criteria of performance valuation are identified in outsourcing process followed by categorizing these factors using AHP model method. The statistical population comprises of 66 mangers, employers, and engineers of Sardasht Mehr housing. Conesus method is used to choose the sample size. The study is that of survey and SPSS v22 software is employed to make statistical analysis. Results of the method show that reflectivity criterion is ranked as the first output level. Finally, a case study is conducted in Mehr housing project section and the data are analyzed. Using fuzzy hierarchical analysis method, options weight or outsourcing levels are determined and prioritized. Ultimately, appropriate level for activities outsourcing i.e. necessity of activities outsourcing is introduced as the study result. Key words: outsourcing process, performance evaluation, AHP, development projects INTRODUCTION Nowadays, organizations tend to make use of outsourcing solutions due to the pressures induced by competitive forces. Outsourcing companies enjoy it as an instrument to establish advantage and business capabilities. One should consider the fact that all organizations do not take the advantage of outsourcing all activities and that disadvantages can induce great risks e.g. not considering the expenses of contractors evaluation and expenses for supervising their activities to ensure the true case of their commitments (Kalantar & Shayan, 2011, 64). One of the important tasks to be done in planning and decision-making of developing the projects is choosing appropriate contractor for doing the projects. In fact, contractors are regarded as indispensable element within projects process. Actually, they provide the services and equipment of projects. There are a number of contractors in each project who enjoy the conditions and capabilities of doing the contract, but the point here is which contractor to choose. When it comes to contactor s evaluation, one should note that decision-makers taken into account the criteria in relation to indexes for making decisions. Incase these criteria are quantitative and are liable to be demonstrated by numbers, different mathematical methods can be used however, in case the criteria are qualitative, one is not able to make use of mathematical methods. It is seen in evaluations and choosing of contractors that decision-making criteria are both qualitative and quantitative (Zare Mehrjerdi et al., 2010, 33). Review of literature Outsourcing process Delivering or assigning is defined as the act of transforming or job assigning from one unit to the other. Outsourcing is defined as the transformation of task to the foreign partner. To admit outsourcing or not is the deciding aspect of whether doing the self-task or purchasing it from the outsource supplier. Organizations face the decision continuously whether to use resources to establish capital, resources, product, or internal services o to purchase them from the foreign party. In case organization choses purchasing, it actually involves itself in

2 outsourcing. Outsourcing the productive elements cause used resources to do the tasks and decision-making right or the responsibility of decision-making. The organization which assigns these factors acts as client and that the organization which does the task and makes decision is known as seller or service provider leading to the notion that the context of task is considered as project (Seyed Javadin et al., 2011, 8). Outsourcing is regarded as the fundamental characteristic of reconstructing the organizational framework that has changed the traditional orders of organizations. Outsourcing can be considered as the hugest transforms of organizational structures throughout century. Outsourcing has to do with assigning fundamental activities to be done previously in organization. The term is used to demonstrate the assignment of activities from one country to another to be called sometimes as abroad outsourcing. Producing a product in/out of organization or its outsourcing is a vital decision which can affect different decisions. As is evident nowadays, drawing attention toward the expenses factor cannot lead to a fundamental decisions, but there are other factors such as organizational strategies that playa great role in this regard. This is beyond the scope for a public organization due to the fact that government s policies are contributive to organizational decisions. The outsourcing term is usually used in cases the company analyzed the activities or vertical analysis. Reasons leading to the demand of outsourcing There are different reasons I for using outsourcing approaches to companies, it is not surprising that different companies tend to use the approach since conditions of companies are different and each of the overall reasons depend on exclusive condition of company. One can follow the reasons of why companies use the approach: organizational reasons, reasons related to financial fairs and expenses, reasons pertinent to human force Types of outsourcing Regarding diverse implications of the term outsourcing, one can consider different types of outsourcing. To do so, criteria such as level of decision-making, size of outsourcing, combination degree, exclusive relations, official control level and type of possession are considered and types of outsourcing are classified as follows. Classifying criteria Level of decision-making Size of outsourcing Degree of integration Exclusive relations Official controlling Possession Table 1. Types of outsourcing Type of outsourcing Solution-based outsourcing, tactic or traditional outsourcing Total outsourcing, selective or partial outsourcing Outsourcing, semi outsourcing Collective or internal outsourcing, non-collective or external outsourcing Performance outsourcing, advantageous outsourcing Private sector outsourcing, public sector outsourcing Evaluating and assessing the performance Followed by analysis of constructing/purchasing and decision-making on outsourcing in outsourcing process is identification, evaluation, and choosing of supplier. One of the important purchasing activities is evaluating and choosing the suppliers, Philip Kerazi believes that 50% of qualitative issues is due to weak choosing and management. This is importance from the perspective that organizations should take into account the accuracy in choosing the suppliers who enjoy the required capabilities. The process of choosing supplier is important to the extent that nowadays examining and supervising the facilities and equipment of supplier as well as evaluating them are given to meta-task teams (Cheshmberah & Mortazavi, 2011, 75). Importance of evaluating and choosing appropriate suppliers Decision-making and choosing appropriate suppliers are more complicated along with the increase of different purchasing methods. The more organizations are depend on suppliers, the greater the risk of inappropriate decision-making will be. Commerce and expansion of internet has led to the increase of methods and different conditions of suppliers. Customer satisfaction, providing the needs, and priorities of customers require rapid selection of suppliers. New organizational structures have led to the point that there are many people to make decisions when it comes to choosing the suppliers. That is the reason decision-making has gained importance. Deboer (1998) complexity and importance of decision-making in choosing suppliers enlighten the necessity of principle-based method (Halt, 1998). International studies The scope of outsourcing was developed with technology progression. In 1980s and 1990s, these affairs were done in high levels. Sometimes, outsourcing involved the information technology section based on its 1258

3 expense. Informal evidences indicate that China, Malaysia, and Phillipines are regarded as optimum places for outsourcing. Based on the report given by Deloutte accounting institute in 2004, outsourcing has been growing in recent decease. This report shows the development of global financial service companies with outsourcing facilities from 29% in 2002 to 67% in It is estimated that 200millard dollars are increased up to 400millard dollars by the year 210 (Rahbar Shams Kar, Fereidoni, 2007, 18). Contractors of development projects are liable to be evaluated by terms such as time, expense and quality. Project developers have experienced pressure so as to choose the best contractor for doing the project. Multi-index analysis method, multivariate regression, cluster analysis and theory of fuzzy sets were compared to evaluate the contractors (Holt, 1998). The concept of providing financial resource has been taken from the outer context in 1989 in which the Kodak Company assigned its information technology section to three outer companies. Providing financial resources from outer contexts is of great popularity. 86% of the prominent companies have made use of it in 1996 while it was 58% in the year Mark Company has provided services to companies, colleges, and hospitals from STUDY DESIGN The study is applied and descriptive in terms of goal and quality of data collection. 66 employers and staff of Sardasht housing projects as well as the engineers are involved in the present study. Sampling is not used in the study since all the participants have been examined by consensus method. According to the identified criteria in literature, 5 indexes were chosen and questionnaire including pair tables to determine the importance of indexes and subscales in evaluating contractors performance was distributed. To measure the reliability of the questionnaire was done by Cronbach alpha coefficient (0.922) which shows a good command of reliability. To do so, the questionnaires were collected from the respondents and the raw data were registered in computer. Important and effective indexes in evaluating outsourcing process were identified and prioritized. Finally, the performance of outsourcing was identified through entering the collected data from questionnaires using Expert choice and SPSS 22 software. Evaluating method of hierarchical analysis is multi-criteria one initiated by identifying and prioritizing the components of decision-making. These components involve goal, criteria, and probable options. In so doing, the first step so to develop hierarchical tree in which the components are highlighted. Other steps are as follows: calculating the weight of criteria and subscales, calculating weight of alternatives, calculating final score of alternatives, and examining compatibility of judges. Inferential analysis of statistical data Based on the findings of the present study, 56 (84.8%) people of the participants are male and 10 (15.2%) people are female. 25 (37.9%), 12 (18.2%), 16 (24.2%), 10 (15.2%), and 3 people have less than 5 years of experience, 5-10 years experience, years of experience, years of experience, and more than 20 years of experience, respectively. 11 (16.7%), 13 (19.7%), 29 (43.9%), 12 (18.2%0, and 1 (1.5%) of the participants are under graduate, diploma, associate degree, bachelor of art, and master of art holders. Accordingly, 3.1 % (5 people), 1.2% (2 people), 11.8% (19 people), 66.5% (107 people), and 17.4% (28 people) have less than 2, 2-5, 6-10, 11-20, and more than 20 years of experience. T is used to determine the final score to the criteria using comparative method of double-double fashion in which two criteria are compared and are given different values based on their importance and the goal of the researcher. Having determined the effective factors to valet the performance of outsourcing of Maskane Mehr and determine the priorities as well as preferences, each of the factors were analyzed and the priority of secondary scales were examined in relation to one another. Subsequently, paired comparison was developed for each of the main actors with regard to the secondary scales. Later, normalized matrix of the factors was provided and the weight of each secondary scale was ranked. Ultimately, compatibility of each factor was calculated. Indexes related to quality of effective performance in evaluating performance The experience of different organizations indicate that the performance quality had significant effect on pre evaluation in relation to outsourcing process. This is the reason the study focus on this notion as one of the main and important indexes pf evaluating outsourcing performance of Maskane Mehr. Secondary indexes of this factor was categorized as received services and credit. The degree of importance pertinent to the secondary indexes in relation to one another and analysis of these indexes are shown as follows. 1259

4 Table 2. The degree of importance related to indexes of performance quality Performance quality credit Received services credit Received services Indexes pertinent to expense One of the important factors in evaluating performance of outsourcing process is offered expense for operations and exploitation of project. In cases the contractor offers lower amount of expense, this procedure is accepted. When it comes to scoring the contractor, one can say that the contract who finishes the project with less amount of expense is liable to be scored higher in evaluation. Important indexes of expenses are studied and are prioritized based on the perspectives of managers and engineers. The analysis of the related data are provided as follows. Table 3. Determining the importance degree of indexes related to expense expense Exploitation expense Operational expense Exploitation expense Operational expense Indexes pertinent to on-time delivery Delivery component of project is one of the contributive factors to evaluate performance of outsoruc9ng process. Secondary indexes of this factors are compared, examined, prioritized and weighed. Finally, they are calculated in terms of compatibility. Table 4. Determining the importance degree of indexes related to on-time delivery On-time delivery rate accuracy rate accuracy Indexes pertinent to services Provided serviced by contractor is regarded as one of the important factors of evaluating the performance of outsourcing process. This factor is considered as significant aspect which involves customer support to be prioritized as follows. Table 5. Determining the importance degree of indexes related to service delivery Services Customer Support Support Customer Support Support Indexes pertinent to reflectivity Reflectivity in process and in projects process can have effect on evaluating the performance of outsourcing process. This s regarded important in the present study and secondary indexes were examined. Table 6. Determining the importance degree of indexes related to reflectivity Reflectivity Reflectivity in size Reflectivity in product Reflectivity in size Reflectivity in product

5 Ranking the scales (outsourcing levels) in relation to each of the subscales Table 7. Determining the importance degree of choices in relation to credit index credit A B C A B C Calculating the final weight of components In this section, final score of each component is determined through integrating the weight of criteria and subscales aiming to study as well as sites weight in relation to each of the criteria. O determine the final score of components, following model is employed: Final score of j component = ( gij) N K 1 M I 1 W K W I Goal Flexibility Services On time Delivery Expense Performance Quality In Volume In Process Customer Support Support Precision 0.8 Rate 0.2 Operation Exploitation Received Quality Validity Figure 1. Having integrated the relative weights, the degree of importance and final prioritizing of each scales are obtained by expert choice software. Based on the outputs of software and conducted analysis, the outsourcing levels are ranked according to the below table and basked on their final weight. Ultimately, level B or outsourcing is described as the most effective alternative and that choosing priority is completed by assigning Masken Mehr housing project to contractor or outsourcing. Table 8. Ranking the scales Choices Final weight A B C total 1 Research questions results RQ1. What are the important and effective indexes in evaluating performance of outsourcing? Several studies have addressed the planning and determining indexes of evaluating performance of outscoring. The most important discussions in relation to indexes of performance evaluation are appropriateness of indexes and organizational goals, compatibility with organizational strategies, credit in time interval, rapid and 1261

6 accurate feedback. In so doing, 5 main performance index and 10 subscales were identified in this present study. Later, performance-based and strategic criteria were identified according the following diagram. In general, studies indicate that on-time delivery, expense, quality, reflectivity, services, responding, technology, credit, and organizational management are highly given attention. RQ2. Should the organization select for outsourcing strategy or not? Regarding the fact that establishing a long-term cooperative relationship requires accurate examination of all performance-based aspects, the outsourcing process was evaluated based on the performance-based criteria. Since it was needed that the output of each level be evaluated based on the output and to be ranked subsequently, analysis of hierarchical process technique was employed to evaluate. The technique enabled us to assess the levels in outsourcing process and to rank them using the collected data. Having identified and chosen the evaluation criteria, each of the evaluations level and ranking procedure were conducted and three levels of outsourcing process were ranked as follows. It was concluded based on the obtained results that organization should choose outsourcing strategy and assign the tasks to contractors. Finally, one can add that organizations are coerced to establish reflective framework to enjoy inconsistent opportunities. Outsourcing is the instrument which can have a great role to play in case it is used in an appropriate way. Also, it can have a contribution to achieving competitive advantage. RQ3. What activities should be outsourced by organization? The more the activity is tangible and personal, the more tendency to outsourcing will be. The more standard activities are, the more tendency to outsourcing will be. The less the amount of non-distinguishability in relation to activity are, the less tendency to assigning the activity will be. The more the complexity of service-based activities are, the less tendency to outsourcing will be. When activities tend to be main, there will be weak reverse relationship between complexity, non-distinguishability, and contact with customer. When the importance of activities increase, the direct relationship between lack of standardization, expense determining based on competition and complexity with tendency to outsourcing will be weaker. In case suppliers and providers are large in number and that the activity is tangible, standardized and distinguishable, tendency to outsourcing the activities will be stronger. REFERENCES Azad A Fuzzy hierarchical analysis process. Journal of Management and Development, 4, Iranzade S, Bargi A Paradigms of evaluating organizational performance. Tabriz: Forozesh publications. Javan Roh Kivi S Developing the system of performance evaluation of parts manufacturers in car parts supplying chain. MA thesis. Industrial management organization. Kang M, Xiaobo W, Paul H, Youngwon P Aligning organizational control practices with competitive outsourcing performanc e, Journal of Business Research, Kirchhoefe RG The Business Process Outsourcing Agreement, Kirkiland & Ellis llip. Mary L. 2012, leslie willcocks, legal process outsourcing: lpo providerlandsecape, lacity, willcocks. Sakaran O Research methods in management. Translated by Mohamad Saebi and Shirazi. Second edition. Tehran: Department of Education and Training of Management and Planning. Seyedjavadin SR, Hasangolipor T, Porvali B Outsourcing process. Tehran: Negahe Danesh Novin publications. Swain M The Evolution of Document Process Outsourcing, Document Outsourcing Europe Zanjirchi M Fuzzy hierarchical analysis process. Tehran: Sanei publications. 1262

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