Successive governments in the country of Rainland have tried to overcome the social costs associated with the closure of certain high profile home-based companies by taking them into public ownership. As a result, a variety of nationalised companies exist in manufacturing, coal and steel production, rail travel, chemicals and aerospace. Most of these companies are regarded as inefficient and rely on big government subsidies in order to continue to operate as going concerns. This is not however the case for aRL, a large nationalised manufacturing operation. aRL is well managed, known as a 'good employer' and has a well-motivated workforce. The company has successfully 'turned around' most of its loss-making operations over the past few years and boasts high productivity levels per employee.

Following a recent general election in Rainland, a new Government with a different political agenda is promising change. The new Government has announced that all nationalised companies must both reduce their workforce 'full time equivalent' numbers by 50% and outsource a 'significant proportion' of their activities over the next two years. In order to implement these new policies aRL's management has identified three crucial questions:

Which of aRL's activities should be outsourced?

What are the ways of reducing workforce numbers whilst acting as honestly and as fairly as possible, consistent with being a 'good employer'?

What are the consequences of an inevitable loss of motivation amongst aRL's workforce?

Explain how aRL's management should decide which of its activities should be outsourced.