WAR OF WITS

AN OUTSOURCING DILEMMA AT RADIANCE SALON, LUCKNOW

Radiance Salon, a renowned beauty hub in Lucknow, has served its loyal clientele for over a decade.
To optimise operations, the salon outsourced its ancillary services, including housekeeping and
security. Interestingly, most of the outsourced staff were former full-time employees of Radiance
Salon.
In 2021, Radiance Salon's management, aiming for operational efficiency and cost savings, decided
to outsource its housekeeping and security services. This decision was primarily motivated by the
following factors: the prospect of reducing operational costs (Refer to Exhibit 1), redirecting their
focus towards core services, and gaining access to specialized service providers.

Radiance Salon conducted two surveys to gauge customer satisfaction regarding the cleanliness and
ambience of the salon— one before outsourcing and one after. The results are detailed in Exhibit 2.

Following the outsourcing decision, several noteworthy observations came to light. First, there was a
noticeable inconsistency in service quality, with certain salon areas maintaining impeccable
cleanliness while others, such as washrooms and waiting areas, often failed to meet the expected
standards. Additionally, many customers recognized familiar faces among the outsourced staff,
sparking hushed conversations and speculation. Furthermore, despite their previous employment at
the salon, the outsourced staff appeared to encounter difficulties grasping and adhering to its specific
requirements and standards, highlighting communication challenges as another key concern.
Lucknow's hospitality sector thrives on its reputation for impeccable service. Even minor lapses in
service quality can have significant repercussions in such a competitive market. With the rise of local
competitors and home-based beauty services, Radiance Salon's reputation is more crucial than ever.

The decision to outsource has led to ambiguous outcomes in terms of service quality. The presence
of former employees among the outsourced staff has added another layer of complexity to the
situation. Radiance Salon's management now faces the challenge of deciphering the root cause of
these inconsistencies and deciding the future course of action.

Exhibit 1: Costs incurred in various ancillary functions at the salon.

Expense Before Post Outsourcing

Category Outsourcing (INR) (INR)

Salaries 50,000 30,000

Training 10,000 -

Equipment 15,000 -

Miscellaneous 5,000 2,000

Total 80,000 32,000

Exhibit 2: Survey results from customers.

Feedback Before Post

Point Outsourcing (%) Outsourcing (%)

Very Satisfied with

40 38
Cleanliness

Satisfied with
30 32
Cleanliness

Neutral 15 20

Unsatisfied with
10 8
Cleanliness

Very Unsatisfied with

5 2
Cleanliness

DISCUSSION QUESTIONS
1. Should Radiance Salon continue outsourcing services?
2. What strategies can the salon adopt to enhance customer satisfaction and loyalty?
3. Are there any legal risks involved for Radiance Salon?