Introduction
Business success depends on the quality of the company’s customer relations. Repeat customers, satisfied reference sources, and positive word of mouth are all possible outcomes of solid customer relations. Many problems, including the abandonment of a project, can be avoided with the help of a good working relationship founded on respect and trust. Every client-general contractor partnership, whether for a single project or several, ought to be profitable on both sides. This concept is straightforward: the customer gets a project finished on time and under budget for their content, and the contractor is compensated and earns a profit. Many factors need to be considered to build a successful contractor-customer relationship.
Ethical Issues That Can Arise in Contracting
While many studies have examined the various aspects of outsourcing, there is a scarcity of literature exploring ethical problems that occur throughout the contracting process. Furthermore, notwithstanding the assumption that there is a clear differentiation between market principles and liberal values that influence public governance, very few scholars have investigated the ethical issues and questions that occur when these areas collide. Examining ethical issues that seriously impede meeting project objectives is vital given the growing attention both contracting out as a different mode of delivering services and values in this interrelated and dependent growing industry. In general, project teams should recuse themselves from the development agendas once they have disclosed any potential conflicts of interest.
A conflict of interest often hampers the ethical conduct of those involved in the outsourcing process. In most cases, conflicts of interest result from competing priorities or goals. It may arise from various sources, including personal ties, organizational policies, and state or federal regulations. There is potential for a conflict of interest if Mary, a member of the project team, gets promoted to become the supervisor of her husband. This position is untenable for her since she feels conflicted between her allegiance to her husband and the firm. Financial conflicts of interest are also widespread. A conflict of interest might arise if a project manager was on the board of a construction firm but also owned a wood business from which they would profit. For instance, if a competitor employs the project manager’s wife, the manager may be in a conflict-of-interest position. This may occur whether or not the contract is for compensation.
Setting a fair price is another moral dilemma that might arise during the contractual process. Contract pricing should be done ethically by considering all relevant factors, including cost, profitability, and market conditions (Decker, 2022). Hence, there ought to be no deception or secret elements involved in determining rates for contracts that are morally sound. Contract pricing should be fair to all parties involved. Thus, open communication and compromise are essential. Successful contract completion based on moral principles offers advantages for all stakeholders. Accordingly, there is an obligation on the part of all individuals participating in the pricing process to avoid any potentially unethical situations.
Observing all applicable laws and regulations is another potential ethical problem. Customers, sellers, and workers are all protected by various regulations and laws. Consequently, it is crucial to communicate the relevant statutory and regulatory standards when drafting an offer and entering into a contract. The contracts a company uses to do business with its customers should be drawn up and carried out following the highest standards of ethics and law, and they should be open for inspection and auditing. Lastly, unfairness is a moral problem that may develop from business deals. Unfairness occurs when businesses engage in unethical tactics such as conspiring to set pricing, manipulating the market, or agreeing to raise their rivals’ bid rates. While conflicts of interest are a common problem in project management, they are not insurmountable. Nonetheless, it is essential to remember that this problem might develop at any point in the contracting procedure; therefore, proper precautions should be taken.
The Benefits That Can Arise with Contracting
Having a contract already drafted before entering into a deal allows involved parties to set the terms of the business partnership. To ensure the safety of all parties, contracts are designed to do more than outline the terms of the transaction. Due to digital transformation, businesses increasingly rely on the viability of innovative IT applications and extensions. As a result, the IT outsourcing industry has been expanding rapidly, with experts predicting that by 2027, its value will have increased from USD 526.6 billion in 2021 to USD 682.3 billion (Mordor Intelligence, 2022). The picture would seem quite different if it were not for the potential diversity of gains to be achieved from such a strategic move. When a firm outsources, it can devote more resources to what it does best. While it is ideal to have in-house expertise in every possible area, there are times when it is more efficient to bring in outside resources and train them to become experts in a specific area. A business that creates digital goods could do better by contracting out its accounting needs. Hiring an outside expert will let workers focus on their strengths while avoiding disruptions.
Secondly, contracting enables organizations to access low-cost and adaptable labor. Currently, the two most popular nations from which to hire overseas contractors are India and the Philippines, both of which are growing economies. Consumer businesses are realistic about their employees’ willingness to accept lower compensation in exchange for eliminating medicinal benefits and pension contributions, which will result in net savings for the company. The International Organization for Standardization (ISO) estimates that businesses can cut expenses by 15% on average through outsourcing (Ritchie, 2015). In this context, it is easy to see why a business might only require accounting assistance during specific periods in a financial year. In reality, many companies only need occasional access to particular services; thus, it would be wasteful to employ individuals full-time to provide them. Therefore, contracting allows businesses to benefit from a more flexible cost structure by shifting formerly fixed expenses into more dynamic segments.
Some operations have extraordinarily high overhead costs, yet firms may provide them to gratify consumers, develop their business plan, or compete in the market. Contracting may be a viable choice for stimulating growth if the expense of expanding to handle such activities for the company is too high, would take much time to implement, or would result in model inefficiencies. For example, a modest doctor’s office may desire to take various insurance programs, but a single employee cannot maintain with all the multiple providers and their requirements (Bucki, 2020). Outsourcing to a company that focuses on medical billing will be less expensive than employing more experienced employees or educating current employees while boosting customer value.
Contracting may ultimately offer continuity and risk mitigation during times of excessive staff turnover that cause uncertainty and unpredictability to an organization. Outsourcing presents the organization with a degree of continuity while decreasing the danger that a subpar level of operation may bring, even for a short period. An example is when the human resource (RH) director is on prolonged leave, and their administrative assistant departs for a new position. Outsourcing the HR function decreases risk and enables the business to continue operations even when the director is unavailable (Bucki, 2020). It also allows the organization to employ a new assistant without making a hasty choice due to understaffing.
The Importance of Communication Process Contractor–Customer Relationship
Communication is crucial to developing a successful company and determines excellent outcomes. According to McLean & Company research, firms with highly engaged workers saw average three-year sales growth of 20,1%, compared to the average revenue growth rate of 8.9% (Wells, 2018). Companies with extremely successful communication techniques explain the “big picture” to their workers and help them comprehend how their activities affect bottom-line performance (Wells, 2018). Creating this impression of being intimately linked to what is going on at the firm enhances employee satisfaction and, consequently, financial performance. Communication challenges become more apparent when it comes to outsourcing when groups have to create rapport from the beginning and may have been isolated not only by geographical but also temporal and cultural factors.
Communication between service suppliers and receivers is crucial for monitoring and maintaining complicated technological systems. Recent research indicates that communication increases trust between contract management and subcontractors decreases information risks, and eliminates misunderstandings (Kraljevi et al., 2020). The issue arises regarding how an organization should manage its communication process for optimal outcomes. The findings of the study by Kraljevi et al. (2020) present the results of different firms and outline the best standards in communication contracting. The respondents identify regular project conferences and the transmission of milestone updates as asynchronous communication techniques; email is the ideal option for providing this information (Kraljevi et al., 2020). Apart from that, respondents place a premium on arbitrating problems such as non-performance fines and bridging cultural barriers that may impede job completion. As regards synchronous communication, most respondents prefer face-to-face encounters, which is impractical during the COVID-19 epidemic (Kraljevi et al., 2020). Video and audio meetings follow face-to-face meetings, during which participants are more likely to submit top management appraisals and educate cadres. It is evident that there is no one-size-fits-all tactic: all communication strategies should be adapted to the unique characteristics of each firm.
In order to enhance and accelerate the communication flow, in addition to email, various technologies and apps have appeared. All phases of to-be-completed projects may be followed at any moment using online collaboration tools in the organization (Alibabic, 2021). Consequently, the contractor is constantly aware of which tasks have been done and which have not. In addition, there are work organizers that keep track of accomplished tasks and allow for their analysis. The details will be readily available as soon as one integrates this information with their schedule. Furthermore, with such programs, a user may track if somebody is late or unavailable for work or whether an employee is excessively overworked. As a result, contractors no longer have to wait for the information sent to them, as they have access to everything in a single location. The likelihood of missing deadlines is relatively low, and they also understand the behavior and any disputes that may arise on the project.
The Risks and Responsibilities in the Contractor–Customer Relationship
Outsourcing carries with it a number of dangers that need a mitigation approach. First, businesses are scared of unfulfilled promises since they establish a relationship with an unknown party (Lambert, 2022). Due to the availability of a worldwide market, there are now additional elements and contractors to examine prior to advancing communication to a new level. Another danger is the client’s lack of topic expertise and, as a result, their inability to judge the quality of products or services appropriately (Lambert, 2022). Unanticipated expenditures are another annoyance that may arise throughout the contractor-client relationship, mainly if the client is new to the outsourcing business. The misunderstanding caused by time zone variations, language problems, and the lack of face-to-face encounters may constitute a significant obstacles.
There is a viewpoint that the dangers originate not from random deviations and errors but rather from a fundamental misinterpretation of the nature of contracting on the part of organizations. The majority of businesses lack a contingency plan in the event that their existing subcontractor ceases to produce or breaks the terms of the contract. They do not consider alternative alternatives, which reduces their resistance to unreliable suppliers. Therefore, it is essential for a firm seeking to recruit contractors for perhaps the first time to plan and do extensive study carefully. Today, it is feasible to identify a contractor’s past customers and internet evaluations to understand its dependability and reputation comprehensively. Multiple terms in the contract that protect both parties might mitigate financial risks.
The contract clearly defines the respective duties of both parties. The customer is responsible for comprehending the organization’s requirements and choosing subcontracted contractors that align with the company plan. The client may appoint an outsourcing director who will serve as a liaison between corporate stakeholders and outsourced staff. The customer must have crystal-clear objectives, actionable and deliverables. They oversee the process, establish milestones, and provide feedback. As stated before, the contract should neither provide insufficient power to one side at the cost of the other nor offer room for the partnership’s character to be redefined. The vendor must adhere to the planned deadlines and maintain the quality level specified by the customer. According to the agreement, the vendor is entitled to appropriate compensation.
Conclusion
Contracting has become one of the critical trends in the corporate world. Depending on the organization, up to two-thirds of corporations trust contractors with their services. The advantages of outsourcing include lower expenses, the flexibility to concentrate on core operations and get access to compelling technologies, and highly skilled personnel that would instead be out of reach. However, organizations should be mindful of hazards like unreliability, contract violations, hidden or unexpected fees, and misunderstanding. There are additional ethical difficulties that may develop in the course of creating a client-vendor relationship. Contracting is not impervious to unethical labor practices, conflict of interests, and misuse of authority. Communication is crucial to settling problems and producing consistently positive results. Regardless of the chosen mode of communication that must be adapted to an organization profile, it promotes trust, decreases information risks, and eliminates misunderstanding.
References
Alibabic, L. (2021). The Importance of Communication in the Contractor–subcontractor Relationship – EDM Chicago. EDM Chicago. Web.
Bucki, J. (2020). Top Outsourcing Advantages. LiveAbout. Web.
Decker, A. (2022). The Ultimate Guide to Pricing Strategies. Hubspot.com; HubSpot. Web.
Kraljević, D., & Lacković, K., Šojo, R. (2020). The Information–Communication Process in a Business with Outsourcing for the Maintenance of a Complex Technical System. Tehnički glasnik, 14(2), 194-200. Web.
Lambert, K. (2022). Fear of Service Outsourcing: How to Overcome It – Small Business Psychology Consultant. Small Business Psychology Consultant. Web.
Mordor Intelligence. (2022). IT Outsourcing Market – Growth, Trends, COVID-19 Impact, and Forecasts (2022 – 2027). Mordor Intelligence. Web.
Ritchie, M. (2015). Outsourcing’s booming business. ISO. Web.
Wells, K. (2018). Bottom Line: Effective Team Communication Strategies in Business. Field Service Digital. Web.