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Merger is an attempt by the company to build-up scale so that they cannot be acquired by other companies. Many times they are blocked or done subject to fulfilment of conditions. The Indian market is full with examples of mergers like the one between Polyolefin Industries with NOCIL, Sandoz (India) Ltd with Hindustan Ciba Geigy, etc.

Types of Mergers

Mergers can be of the following types:

Horizontal Mergers: A horizontal merger occurs between two companies which are operating in the same industry and often in the same market space. This type of mergers happens in an industry which has very few firms. As a result of this there is intense rivalry between the firms. A merger in this case is beneficial because of the synergy created and also the gains in the market share that can be realised. The objective of a horizontal merger is to create a greater organisation. It can also combine manufacturing, reduce excess capacity and create greater value for customers. For example, a merger between Idea and Vodafone in the Indian telecommunication market could be an idea of a horizontal merger. The combined entity could leverage on the competencies of both Idea and Vodafone. It could also share a lot of common infrastructure like towers, manpower, etc.

Vertical Mergers: Vertical mergers do not aim to increase sales or revenue, but Instead to bring in greater efficiency in management or reduction in costs. A vertical merger occurs when two companies which were earlier engaging as customers and sellers, merge with one another. These companies are usually at different stages Of the production cycle. An example of this when a manufacturer decides to get into the manufacture of the raw materials or inputs to its manufacturing process. Vertical merger is of two types:

• Forward Integration: The firm acquires a customer.
• Backward Integration: The firm acquires a supplier.

Conglomerate Mergers: Conglomerate mergers can be of many types ranging from short term Joint ventures to total mergers. In its purest form or when it is case of geographical extension or product line extension, the merger involves firms that are involved in totally different markets. Therefore, there is no impact on the competitive scenario Of the industry. Conglomerate mergers help the management to improve efficiency and reduce overhead costs. It also forces the managers to increase their efficiencies. Through a conglomerate merger the firm can participate on the supply side or on the demand side in the market place. For example, the merger of Procter and Gamble and Gillette in 2005 allowed to add Gillette’s range Of shaving products to its product portfolio to create greater value for its customers.

Advantages of Mergers

Economies of Scale: Mergers lead to the increase in scale of operations of the organisation. This reduces the per-unit cost. The different economies of scale that can arise are:

• Technical Economies: If the firm has a larger proportion of fixed costs then these get spread over a larger Output, hence bringing down the per unit fixed cost.
• Bulk Buying: The organisation gets a discount because it now buys raw material in bubulk from its suppliers.
• Financial: Since it becomes a bigger institution, it gets a better rate of interest from financial institutions.
• Organisational: Reduction in head office from two to one also saves costs. Economies Of scale benefit horizontal mergers more than vertical mergers.

International Competition: Mergers can help firm counter the threat Of MNCS as they become larger in size With sufflcient resources to take on new competition.

Mergers may allow Greater Investment in R&D: Mergers can lead to better and greater investment in R&D. This is because the company can plough back the greater profits into R&D.

Greater Efficiency: The organisations gains from greater efficiencies if the duplication and redundant activities are removed.

Disadvantages of Mergers

Integration Difficulties: Since a merger of the two companies also means a merger of the two distinct cultures, the integration becomes a very big issue. This is particularly so when there are major differences in the managernent style, employee profile. Dealing With such circumstances becomes a very big issue.

Inadequate Evaluation of Target: The acquiring company in its zest to acquire does not do a valuation of the target company’s assets and liabilities. This often ends up in the form of a bigger premium paid for the assets of the company as against their worth.

Inability to Achieve: The merger also fails because the intended synergy never happens because of reasons like employee non participation, managerial bottlenecks, scepticism, etc.

Too much Diversification: Mergers can also lead to over diversification, which has drawbacks of its own.

Too Large: Increased size has its own inherent limitations. Achieving consistency in terms of decisions and actions may be difficult. Formalised rules and policies may come in the way of flexibility and innovation. The merger can also create problems for the organisation in the sense that it becomes too large. This impacts its decision making and it becomes a victim Of its size. This hampers flexibility and creativity.

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An organisation grows externally by adopting a strategy of merger. The merger typically happens between two organisations which are equal. For this reason the merger is often approved by the board of the organisations. The board of the merged organisation is likely to be equally represented by both organisations. On the flip-side a merger is not always likely to lead to a shared appreciation for both the companies. This is because mergers also suffer from the same problem of acquisitions, The intended benefits of mergers are often overestimated and the real costs make the merger a costly exercise. Also integration of the two organisations is a difficult task.

Differences between Mergers and Acquisitions

Human Side of Mergers and Acquisitions

In some of the past decades, there has been a improvement in the merger and acquisition (M&A) activity internationally. For the purpose of development of the organisation and to achieve higher return from the shareholders, various important strategic plans are accomplished by mergers and acquisition transactions. Not only economic, financial, legal and political success of an organisation but also the Human Resource (HR) is greatly influenced by these transactions. A lot of focus is diverted toward legal, financial, and operational aspects of mergers and acquisitions. But the manager who has witnessed the merger activities now think that in the present economy, the main aspect of maximising the worth of the deal is closely related to the manpower management. The focus of the top management seems to ignore the human resource management aspect of activity which depends on the M&A’S rite of failure. Most of the mergers are not able to create the expected shareholders’ value. The most common factor for this failure can be seen as the combination of cultural variations and impractical human resource integration strategy. In fact, it is found in the researches that the problems related to individual manifest at different step or levels of process. The issues related to people will be consists of the following during the integration stage of mergers and acquisition:

• Sustaining the vital talent;
• Communications;
• Retaining potential managers; and
• Incorporation of corporate cultures.

Through this movement, a number of comprehensive problems related to the people have emerged. For example, assessing and selecting the duplicate managerial talent to find out who will continue and who would leave, after the merger and acquisition. During the process of integration of corporate culture, human resource policies and practice implemented in both the organisations may undergo assessment, amendment or substitution. Although the human resource issues are quite vital in the entire world during the M&A process, but depending on the nature of M&A combination the significance of these will change. For example, in case of an acquisition that will result in the departure of the acquired company, it may result in lesser assessment, selection and substitution decisions in comparison to the acquisition yields the comprehensive combing of the two organisation. The lesser the integration Of organisation, the requirement to reduce manpower size will also be lesser. Apart from these problem related to the people in the interaction phase of activity, there are number of more problems which are quite possible in the phase prior to after the integration. By managing mergers and acquisition activity model, it is possible to manage these effectively and prominently.

Three-Stage Model of Mergers and Acquisition

A model of M&A activity consisting of three stages is derived from the organisational experience in the merger and acquisition process:

• Pre-combination;
• Combination – integration of the partners; and
• Solidification and advancement – the new entity.

Although, a large number of business activities such as business strategy, finance, marketing, distribution, IT, manufacturing, etc. are included in all these three stages. The main problems arise here are commonly related with human resource management. Thus, to focus more intensively and to facilitate greater dimensions of these Human Resources (HR) issues in activity, the attempts are made to identify HR consequences and actions for the varied issues. These HR issues and implications are explained below:

Stage l- Pre-Combination

The first step of process includes a number Of human resources issues. When we notice this, the differences related to merger in place of acquisition are identified. Due to a huge range of possible merger and acquisitions, it is not possible to provide the comprehensive details of these differences. Table 1 indicates about the most critical HR issues and their precise consequences and actions for M&A activity. First of all, the description of HR issues is provided and then HR consequences and action are detailed. Several HR issues and their implications are explained below:

Table 1: Stage – 1 Pre-combination

Stage 2 — Combination-Integrating the Companies

On the second stage of M&A activity, it is important to address the foundation which has been developed by the processes in the first Step. For example, in order to make the second Stage effective, it is important that in the first step the planning for the integration processes has to be done with expertise. It is found that almost 80 percent merger and acquisition activities have failed due to lack of integration planning. Table 2 indicates the large number of activities which are included in the second step. Usually, integration is mainly the activity in which two organisations are clubbed together once a merger or an acquisition is declared and all the pre-integration processes are carried out.

Table 2: Stage 2— Combination-Integrating the Companies

Stage 3 — Solidification and Advancement – The New Entity

In this Stage, a well-defined and certain new entity Will be developed. A number of HR issues have to be managed by this new entity or new organisation, Table includes various HR issues and their consequences:

Table 3: Stage 3 — Solidification and Advancement – The New Entity

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Acquisition is growth strategy in which the company purchases or takes over another business. In this manner the company can enter new markets or new products or get access to a new distribution channel. The company which acquires new business needs to manage the acquisition carefully otherwise it could financially be suffered. It can make phase wise payments so that these are matched to the funds generated by the organisation. The logic behind the acquisition is that companies are always available for being acquired. However, when the choice facing the company is limited then it can expedite the acquisition process. In an acquisition the firm buys a controlling stake in the target company. This is done with the intention of making it a subsidiary business or merging With one of the existing businesses of the acquiring company. For most companies acquisition is a one-time activity which is done With a specific objective in mind. The process of acquisition is a case of dominance of one company over the other. Here a bigger company will take over the shares and assets of the smaller company and either run it under the bigger company’s name or might run it under a combined name. The acquisition is an act of dominance. In this the target company is taken over by the acquiring company. After this it is run either in the acquiring company’s name or by a new name. For example, when Satyam was taken over by Mahindra and Mahindra, the erstwhile Satyam name got merged in Tech Mahindra.

Types of Acquisitions

Types of acquisitions are as follows:

Friendly Takeovers: In this type of takeover the acquiring company notifies the target company’s board of directors of their bid. The board decides if accepting the offer is in the best interests of the shareholders of the company or not and accordingly makes the decision. In private companies, the board of directors is usually the majority shareholders and hence private acquisitions are friendly in nature. In case the shareholders decide to sell the company, then the board of directors already has instructions to accept the friendly bid request.

Hostile Takeovers: In this the acquiring company tries to acquire the target company in the face of severe opposition from the target company. In this, the acquiring company actively continues with its acquisition efforts even after the board of directors has rejected its bid offer or the acquirer company makes the bid without informing the board of directors of the target company. It is a kind of takeover strategy in which a lot of opposition has to face by the acquiring organisation from the target firm. Under the hostile takeover, despite the acquisition bid rejected by the board of directors of the target company, the acquisition firm continues to perform acquiring activities and without giving any information to the board of directors, acquisition is conducted. Hostile takeover is ethical in nature. This is because, in most of the cases, the victims of the hostile takeover are the weak firms and a lot of benefits are obtained by its customers and shareholders from such takeovers. There may be some managers and employees who might lose their jobs While some may get additional benefits during the activities of hostile takeover. Thus can be some arguments regarding the ethicality of hostile takeovers.

Reverse Takeovers: Reverse Takeovers or RTOS is a type of merger activity in which the acquiring company tries to get itself publicly traded without going for an initial public offering. In this the private company first buys enough shares in a publicly traded company through the open market. It then tries to swap its shares for the shares of the publicly traded company. It thus becomes publicly traded indirectly.

Back-Flip Takeovers: This is a rather uncommon type of takeover in which the acquirer company becomes a subsidiary of the target company. After the takeover the business is carried out in the name of the acquired company. This is called a back flip takeover because in a conventional takeover the new entity typically takes the name Of the acquiring company. In the case of Back-flip takeover it is the opposite. The acquired company assets are taken over by the acquiring company and the control of the business is usually in the hands of the acquirer company. This is typically because the acquiring company is of sounder financial health and the acquired company is a struggling entity. For example, this was the case in the Satyam takeover by Mahindra and Mahindra.

Advantages of Acquisitions

Assets Acquisition: Acquisitions help the acquiring company to decide which Ofthe assets Of the target company it wants to acquire and which liabilities it wants to take.

Gain Experience and Assets: Another benefit of an acquisition is that the acquiring company quickly gains the goodwill and market reputation of the target company. If the acquired company gels well with the business and culture of the acquiring company, then the resultant will be an increase in the efficiency and profitability of the organisation.

Excite the Shareholders: An acquisition typically has the effect of exciting the stockholders of the company. The stock market takes this as a sign that the organisation is taking steps to increase growth and this improves the stock price of the company.

Combining Organisation Cultures: Another advantage of an acquisition is that it brings about an amalgamation of two organisational cultures,

Reducing Costs and Overheads: The company can also reduce costs and overheads by reducing all duplication of activities in marketing, sales and administration.

Disadvantages of Acquisition

Cost: Acquiring another organisation can be a very expensive proposition and the acquiring company has to release lot of precious financial resources for the acquisition. This prevents the funding of other critical projects and businesses in the company. The company can also resort to debt markets to finance the takeover. In this case the debt levels of the company soar and if the returns from the target company are less than the short term profitability Of the company is affected. Acquiring a new company through the issuance Of stock also has its drawbacks as the shareholders holding percentage drops in the company and they have to forego control in the organisation.

Employee Retention: Once the acquisition is completed, there are a lot of people who are performing similar tasks in the organisation. Reallocation of these employees becomes a very difficult task. Typically the acquirer company may resort to firing of excess workers. Many a time’s employees pre-empt the management by leaving for greener pastures before the acquisition is completed. This increases the attrition rate in the organisation.

Letter of Intent: All acquisitions have to be accompanied by a letter of intent. This includes a confidentiality agreement as the buyer could cancel the payment and use the sellers’ business knowledge and trade secrets. This letter of intent safeguards the interests of the seller.

Value: The method of valuation of the combined entity is critical. The assets of a company include many intangible assets like goodwill and brand equity. These can be destroyed if the acquirer company has a negative reputation.

Duplication: The acquisition also creates lot of duplication in the two companies. There are many people in both the organisations, who are engaged in performing similar tasks.

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When a certain company is approached for getting a certain work or activity done, it is regarded as outsourcing. Outsourcing is implemented by almost every organisation. The core activities are not outsourced by the organisations. For example, some of the operations of a telecom company which are not connected to insurance or have strategic significance to the business can be outsourced to specialised organisations. Service providers or third party providers are the common names used for the firm providing the facility of outsourcing. In recent years, outsourcing the HR related activities is a common and popular exercise which is adopted by both small and large organisations as it results in cost reduction, lesser administrative work, and minimisation of risks. Outsourcing human resource can be seen as a trending issue in HRM. It can be understood as a process in which different HR related processes are assigned to an outside firm which is having expertise in dealing in such tasks. All the outsourced activities will be managed and administrated by the external firm on behalf of its client. In simple words, human resource outsourcing can be seen when some activities of human resource are assigned to a service provider. A number of HR related activities can be outsourced. The last decade can be considered as the decade of organisational restructuring and outsourcing has been implemented in both public and private sector. Challenges have been created for the existing employment relation frameworks and for the management workplace relation due to resulting phenomenon. At the union’s workplace level, various advantages are provided to the managers by outsourcing as the work can be taken away from the effect of unions to an organisation which is external to the firm.

Reasons for Investing in Outsourcing

The different reasons causing the investment in the outsourcing are given below:

Improved Profit and Productivity: The operating expenses of performing every activity within the organisation is relatively quite high. The competitive edge can be obtained by the cost structure and economy of scale which is provided by a firm that specialises in HR outsourcing.

Controlling Labour Costs: It can be very time consuming and costly to hire different employees for different projects and providing them training in different aspects of the projects. The resources can be allotted at appropriate places with the help of HR outsourcing.

Limited Risks and Liabilities: There is a continuous change in competition level, government regulations, and financial positions. A certain amount of risk emerges for the business owners with these changes and this can be controlled by outsourcing.

Get “Big” Company Benefits: The in-house support services which are maintained by the big firms cannot be managed and afforded by the smaller firms. The same quality of efficiencies and expertise can be provided with the help of Outsourcing.

Reasons for Failed Outsourcing Contract

The predefined objectives are not achieved by every outsourcing company. This results in an increase in costs which could be due to the repetition of the outsourcing process or bringing the processes back in the organisation. There are several reasons for the failure of outsourcing which are listed below:

Lack of Shared Objectives: One party involved in an outsourcing relationship may have to increase its cost because of another. Therefore, a common objective will result in cost saving for the parties involved in an outsourcing relationship. For example, provisions for rewards and penalties specified in the outsourcing contract.

Poor Communication: Poor communication between the supplier and the outsourcing company may result in the failure or the outsourcing contract. Many unforeseeable situations may force the Outsourcing contract to be modified or altered. proper communication among the parties is necessary regarding any change in their expectations and possessions.

Failure to Manage Relationship: A proper internal framework of managing relations might not be developed if the outsourcing arrangement is made very complicated. There may be even cases where no contact personnel are appointed.

Basic HR Functions Outsourced

The task of maintaining high enthusiasm levels of employees till the time they continue to be the part of the organisation is taken care of by the human resource management. At first instance, one may think that maintaining low cost per employee and keeping the motivation and performance up to the maximum level are easy tasks to do. But in practicality, this is not the case. Thus, if we see the present trends, certain HR functions are Outsourced by many firms which are enlisted below:

Employee Assistance Programmes: One of the most popular services which can be outsourced by the firm can be the counselling of employees and their families on a personal level. Qualified counsellors are used in order to facilitate the counselling of employees with the help of these third party employee assistance programmes. There is total confidentiality in all the interactions. The different types of advices such as legal, financial, personal, and familial are taken by the employees so that they can deal with these issues effectively and can find the solution.

Drug Testing: Another outsourced function is drug testing. Such kind of testing in the workplace is prohibited in many countries. It is a common practice to conduct pre-employment drug The job applicants are sent to collection sites which are operated by authorised labs and the samples are collected and tested there.

Background Cheeks: On behalf of in-house HR department, third party vendor can be used for the background checking purpose. Identity verification, confirmation of educational qualifications, searching for any criminal records, etc., are the common activities which are performed. In fact, credit reports can also be asked for by some employers for certain reasons.

Payroll: The process of payroll is assigned to the accounts department of the firm but in some firms, this responsibility is assigned to the HR department too. One of the most significant functions of HR outsourcing is the payroll processing. Different types of flexible methods of data submission are provided by the service providers to the clients. Apart from reducing the number of checks, various additional services such as tracking employee time off, preparing customised reports, submitting tax data, dealing with garnishments, etc., are also facilitated by these service providers.

Benefits Administration: In order to manage the various benefit plans of a firm such as life insurance, vision and disability plans, dental check-ups, etc., human resource department can hire any third party service provider.

Recruitment: The most popular outsourced activity of the HR function is recruitment. Depending upon the culture, requirement, and nature of the organisations, different individuals are recruited by the organisations. The checking of resumes and primary screening is conducted by them. In most of the cases, the final round of interview is conducted either by or under supervision of the in-house HR department or CEO. However, the organisations are responsible for the strategies, designing of questionnaires, and the environment Of the interview. In order to ensure the selection of the correct candidate, proper care should be taken in the entire process so that the right impression of the firm can also be laid on the prospect employees.

Compensation Consulting: The compensation packages are also handled by third-party firms. This is a common fact that the employees are mostly attracted and motivated by money. Special care must be given While deciding these packages. A ‘per employee budget’ is provided by the client to these firms. Depending upon the given budget, the firms decide On basic salary, health benefits, incentives, dearness allowance, conveyance allowances, and probation norms. As there are number of state and central rules and regulations which must be followed while deciding each of these criteria, it is not an easy task to accomplish. Sometimes, the required expertise for designing compensation programmes is not possessed by the in-house HR department. Different types of customised compensation plans can be formulated by the outside consultants who are specialised in designing compensation plans so that higher level of motivation and performance can be obtained from the employees.

Employee Re-Location: HR department of a firm can be assisted by firms in transferring an employee from one location to the other. Some special services such as shipping the vehicles of the employees can be offered by the service providers in addition to packaging of household stuff of family, providing domestic and international for the family, etc. In Order to facilitate the social, psychological, and economic adjustment needed due to job relocations, these services are provided.

Exit Interviews: A record of performance and behaviour of the employee is maintained during their association with the organisation. These records are also maintained with the outsourcing firm. These details are checked when there is an end of tenure of an employee due to retirement, resignation, or tennination. Exit interview is compulsory for a corporate. With reference to the employee, this can be seen as the last form of interaction which takes place between the firm and the organisation.

Advantages of Outsourcing

Various advantages of outsourcing are as follows:

Facilitates Better Manpower: Better quality of manpower can be received with the help of outsourcing firms. They also provide the latest information and practice related to the certain activity or task. These firms can have the expertise in doing the different activities of HR as this is their core business activity. For example, the firm which is having the expertise in training the manpower on the application of presentation making software will be quite useful in facilitating the training of the employees On the latest and upgraded software which includes new specifications and features.

Boosts Employee Morale: In order to improve the morale of the employees and preserving the strong culture in the organisation, certain employees and activities which are not aligned with the organisation can be outsourced. For example, the benefits administration activity by a law firm can be outsourced in the situation where the employees are trained only as attorneys.

Minimises Risk: The risk associated With the business can be controlled through outsourcing. There is a regular change in the employment and labour laws and it is very difficult for the employees to have the updated information on these regulations. The firms which have the latest information on various updated laws of central and local government are hired by the organisations. These firms can be quite useful in order to avoid the costly law suits which could result from the employee side in case these laws are not followed and implemented in the workplace. In order to protect the interest of the organisation and the employees, different types of audits are also conducted for the organisational policies and practices by these service providers.

Cost Savings: There is a requirement of highly trained and experienced HR professionals and additional office space by a fully functional HR department. In comparison to expanding to a bigger and more spacious location to meet the space requirements of other department, outsourcing can be more effective method of dealing with these issues by smaller firms. Whenever there is a requirement, the cost of outsourcing can be controlled as these are variable.

Disadvantages of Outsourcing

Different disadvantages associated with the outsourcing are stated below:

Loss of Control: There is always a problem of losing control over a crucial activity when these activities are outsourced. This can be a costly affair for the organisation. For example, the deadlines of a time sensitive projects can be missed by the organisation which has outsourced its recruitment process to an external service provider if there are more clients prioritised by the service provider.

Loss of Opportunity to acquire Knowledge: The opportunity of acquiring important knowledge which can prove quite beneficial for the organisation in long run can be missed if these activities are outsourced. For example, When the executive training and development program of a business organisation is outsourced, it can be seen as a missed opportunity to learn about the distinctive features of the way the leadership takes its form within the organisation according to its culture.

Threat to Confidentiality: Some of the vital information of the company can be leaked to its competitor when these activities are outsourced. In order to facilitate the smooth and unrestricted functioning of the outsourced firm, various critical information of the organisation related to organisational structure, product, or other inner workings are mandatorily provided. There is always a probability that this information can be leaked from the side of outsourced firm.

Affects Company Goodwill: It is quite common to have layoffs when any activity is outsourced. This may also result in increase of domestic unemployment rates. The level of dissatisfaction among the remaining employees can be increased due to these practices. Due to doubts associated with the job security, it Will be very difficult the organisation to attract good talent for future recruitment.

Outsourcing HR Implications

Making a profit and staying competitive are the main objectives of any business. To that end, some organisations opt to Outsource their HR Or Other functions in Order to aid in their success. While this practice has positive implications, it does not come without its disadvantages. Companies considering outsourcing anything should carefully weigh these implications before making a decision:

Cost: Perhaps the most attractive implication of HR outsourcing involves cost reduction. By outsourcing certain functions, such as payroll Or recruitment, organisations do not need to spend money hiring and training employees for those particular roles. It also eliminates the need to pay wages and benefits in favour of a flat rate to contract the work to a third party agency, where labour is generally cheaper. Companies can also avoid paying taxes, insurance and various overhead costs, since the contracted organisation handles those instead.

Efficiency: Another positive implication of outsourcing HR functions is a company’s ability to allocate time and resources to other endeavours. Outsourcing absolves the mam company from having to recruit, train and replace employees. In doing so, the organisation can take the time and money otherwise spent on these functions and redirect it to new projects, allowing it stay competitive and speed up productivity.

Job Loss: HR outsourcing is not a perfect practice. Job loss is a classic occurrence and a serious concern for employees. It makes staff feel undervalued, leaving them in a state of fear that they may be laid off in favour of the company’s bottom line. In turn, employee loyalty suffers, resulting in increased turnover. This is especially problematic during a recession, where workers know that finding other employment will be more difficult.

Product Quality: HR outsourcing is not an effective way to ensure quality. Whether it is human resources functions, customer service or manufacturing, third party companies employ less skilled workers at a lower wage. This can result in a substandard product that ultimately results in client dissatisfaction. In short, a company’s desire to save money can be offset by lost revenue due to a poor end product.

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Process of outsourcing are as following:

Planning for Outsourcing: The first stage of this process can be seen as planning for outsourcing. The various related risks are analysed by the management and then some actions are declared. Some advisors are appointed and team is provided with the required training. Different resources are grouped and the various issues related to the information management and resource management are tackled effectively. Eventually, the goals are decided upon. Different types of strategic possibilities and the consequences are analysed. There is a complete study of organisational vision, structure, value chain, competencies, strategies, and transformational tools.

Determination of Contract: The issues such as the determination of contract, its termination date, rights, etc., are ascertained and ultimately the initiatives are combined.

Analysis: The main focus of this stage is on the performance and cost. The cost of the activity and the cost of failure of project, both are estimated in this Stage. Cost of poor performance and measurement Of performance are calculated simultaneously. The standardisation Of both cost and performance is done. At last, risk assessment, valuation of assets. determination of total costs and pricing models, and final targets are completed.

Selection: The selection of the service provider is done by the firm under this stage. Different types of qualifying and evaluation bases are determined. Various service providers are identified and their screening is done. Drafting of request for proposal (RPF) is done and depending upon the costs and qualification criteria, different proposals are assessed. Lot of care is taken in the entire process. The determination of total cost of buying, short listing of service providers, and final selection is done at the end of this process. Ultimately, the senior management reviews the entire process once again.

Negotiation: The proper planning is done for the negotiations; various issues are settled down, preparation of term sheet is done and finally the negotiations take place. A relationship is declared if everything goes as per the plan.

Transition of Resources: The next stage is to ensure transition of resources. As per the transition plans, the team roles are modified and evaluated. Different issues related to transitions are resolved. There is a formal meeting of employees, and offers and terminations occur. The counselling is done for those who are selected and finally taken to the client location.

Managing the Relationships: Finally, a relationship is built. Management of this relationship is the last stage. There will be some modifications in the management style and a supervisory council is created. Agendas are defined and designed, and finally scheduling and actual performance happens. Different supervisory roles are carried out, below par performances are tackled, and solutions are sought. Ultimately, an outsourcing relationship is established.

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