Examination of outsourcing in an accounting firm : a shift in the unit analysis : ethnographic study of blocks to knowledge sharing

• Main Author: Anadachee, Krishna
• Other Authors: Rosenberg, Duska
• Published: Royal Holloway, University of London 2012
• Subjects: 338.7657; outsourcing : Knowledge sharing : trust : Power
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.588997

In the last few years accountancy firms have started to use outsourcing due to market pressure to be competitive. The industry is highly regulated, and outsourcing poses constraints including confidentiality of information, regulatory restriction and ethical implications. The legal and ethical responsibility of any work outsourced remains with the accounting firm that has purchased the outsourcing service, and not with the outsourcer. Since the aim of outsourcing is to make the accounting firm more efficient, it needs to be sure that the benefits of outsourcing will exceeds the costs and risks of the process. As a knowledge-based industry, this gives the sharing of knowledge a central role in outsourcing. Outsourcing in accounting creates a relationship not only between two organisations, but more importantly among those organisations' workers. The main asset of an accounting firm is its staff and their specialist knowledge. Most outsourcing studies focus on the relationship between organisations, with little emphasis on the relationship between workers. A particular quality of accounting is that workers are the owners of their own knowledge, and firms employ these workers without having a definitive right to the sharing of their knowledge. An efficient working environment stems from the workers' ability to share their knowledge (their assets) within the organisation and in an outsourcing process. The objective of this research is to understand the blocks to knowledge-sharing in a medium-sized accounting firm from an individual unit of analysis with focus on its outsourcing operations. This study examines the following research questions: What is the influence of trust and power on knowledge-sharing from the individual perspective? How does accounting outsourcing create a shift in the unit of analysis, and how does it differ from other types of outsourcing? From the perspective of the individuals involved, what are the blocks to knowledge-sharing within the firm and within its outsourcing operations? To be able to study worker relationships and behaviour in detail, data for analysis was gathered using the participant observation method. The study finds that trust and power are important elements that can influence the sharing of knowledge among individuals. The main types of trust that influence knowledge-sharing, particularly in head office, are found to be benevolence and competence trust, while one of the main factors to influence trust within the outsourcing context is communication. Lack of communication creates fear among in-house staff and thus makes outsourcing contractors less trustworthy. Power is mainly driven by specificity of knowledge and individualism; these two factors promote the use of knowledge as a power tool. Trust and power are blocks to knowledge-sharing in the organisation's in-house activities, but are less influential in blocking knowledge in outsourcing, where the two main blockages are: (i) Physical distance and lack of suitable technological platform to share knowledge, and (ii) Gap in knowledge awareness between the accounting firm and the outsourcing provider. Accounting outsourcing is shown to be different from other types because it is the outsourcing of a core competence (known as third generation outsourcing), and also of knowledge-based work. The accounting firm uses outsourcing within its legal and ethical limits, reducing costs indirectly, because it has to negotiate the profession's constraints. In this context there are two types of outsourcing, namely internal and external outsourcing. This research applies participant observation to an original context and shows the importance of using such a method in future management studies.