Fouroboros | If Pride matters more than money, why does Outsourcing trump thinking?

11-12-2004 UPDATE: More Links to outsourcing-related posts at bottom

Originally Posted 1-1-04 [here]

Outsourcing

Posted a few days ago on the need for a coherent answer to employee and voter questions about the merits and impact of offshore outsourcing climbing higher up the corporate value chain. (See data posted below.) In the course of scribbling some suggestions I came across this:

But haven't we heard this song before? Is offshore outsourcing really a competitive "must-do" or are the same disappointments awaiting short-sighted executives desperate to pump up earnings per share to make this year's bonus?

While there are undoubtedly cost and quality advantages to sending knowledge work to cheaper locations overseas, there are also many good reasons for caution. Reports from companies with offshore outsourcing experience are mixed. Performance is highly variable depending on the activity, country and service provider involved. Savings of 20-25% are possible -- but only if you execute flawlessly. Companies like Dell and Lehman Brothers have discovered that highly educated and inexpensive workers alone don't guarantee quality. Both recently moved help desk and customer support activities back to the U.S. because of customer complaints about poor service.

The effect is like a stone skipping over a pond--ripples, but no waves. And often, sadly, drownings for subsets of employee and shareholding populations. Each trend peters out after getting people's hopes up. Why? Each trend--whether finance-, marketing-, production-, or aspiration-based--is pegged to a balance-sheet, NPV-driven impetus. Vital stuff, but that start is its end. Because it is hope-less, inert, without intrinsic value. It looks and feels right when you scrawl it on the back of a napkin, and even when it evolves into million-dollar feasibility studies. Then you execute. And nobody but you and the rest of the executive management committee cares. There's even a term for it in our upcoming Executive Lexicon: Wision -- Wishing for an outcome or future when you know your people won't give a rat's ass.

Many of the above trends start out a great Ideas, practicable and potentially profitable. If you'll note, most were heralded as the second coming, the next wave for business. As such they have the characteristic that appeals to all of us: High gain. But "high gain" opportunities are always high maintenance as well. Again, a trap. Maintenance in this case is often outside the realm of spreadsheets, options analysis and CAGR forecasting formulas. It is the stuff left out of most MBA programs: measuring and creating intrinsic value as well as instrumental goods. Some would call this leadership, not "management". I would.

Check this out:

(BUSINESS WIRE)--Jan. 20, 2004: Korn/Ferry International Executive Quiz

How would you rate your company's senior management? (Number of Executives: 1952)

Competent and have the right strategy for the business - 34% Fairly competent and may have the right strategy - 35% Not too competent and I question the strategy - 25% Incompetent and have the wrong strategy - 6%

How would you rate your boss? (Number of Executives: 1913)

Brilliant - 15% Competent - 51% Fair/Mediocre - 22% Poor - 12%

Which would you prefer from your job? (Number of Executives: 2042)

More power - 6% More money - 18% More satisfaction - 76%

History proves there's no mileage in bending employees to our will in service of inert, incomprehesible corporate goals they have no reason to respect or support. It¹s dumb, it¹s unprofitable, and customers and shareholders end up holding the bag. Given unalloyed context behind executive decision making, people make intrinsic cost-benefit anayses on their own that track remarkably well with what's best for the company. Things like outsourcing start to make grander sense. Some don't care, but will think it's nice to be asked. It's only when we clog their heads with managerial and ethical syllogisms pasted with smiley faces do employes, consumers and voters rebel. This is key. Skip this important strategic stage and we lose or scare away the people who can best help us find new profitable opportunities. And we¹ll be shackled with those who only look to hook up to us for life-support.

"It's not personal, it's business." Say that out loud and you might as well stamp on your forehead: Rube. The CEO who leaves "to pursue other opportunities" is damn sure taking it personally. So does the the guy who gets home from the store with a loaf of moldy bread. Ditto the worker on the loading dock worried about braces for the kids. If 90% of life is showing up, 90% of successful business is about connecting meaningfully with what you do. Nobody does anything well unless they take it personally; unless it's a deeper marker that supports the innate ambition and idealized personal future people cart around in their heads. Powerful stuff. Getting your route salespeople to gently nudge aside the the Frito-Lay stuff to more flatteringly display your Utz Potato chips depends intensely on that guy or girl personally identifying with the product/company character. Yes, character; shared headspace they helped to inform. Call it ownersip-by-proxy. Some companies, the rare ones, get this.

Aviation. Grocery. Furnishing/Lifestyle. Expensive fun. Building. Clothing. Pants. Investing. Software. Chips.

All succesful players in sectors under assualt. Surrounded by peers "with all the tools", suffering through the self-induced embolisms of insulated decision-making. This is not the proverbial rocket-science. If you skip the boilerplate and engage employees and consumers in real conversation, discover and graft their latent ambition to your objectives, you get real answers and real loyalty. And you get patience. Because "owners" forgive a multitude of sins and imperfections in their practices and associations. They act like... owners. Do the job--the spadework, insight and communicating part--and they'll understand why outsourcing, unique to your business, may have to happen, as long as you offer a credible answer to their follow up question: "What's next, for me?" And believe me, bonuses or raises or new Aeron chairs aren't what they're looking to hear.

Jon Katzenbach has an interesting book out, "Why pride matters more than money". I buy some of it and disagree with other bits. But on one point, I wholeheartedly agree: The title. The part business leaders should like? "Pride" is cheaper than money. It has a better batting average too.

Jack Trout: "Outsourcing needs better Spin" + nifty global economic history graphs

America and Outsourcing: Eagle? Cuckoo? Ostrich?

If Pride matters more than Money, why does Outsourcing trump Thinking?

Outsourcing: Corporate Anorexia in a Land of Plenty?

Is The Jobless Recovery Due to Small Business Outsourcing?

C-Level executives and industry are in danger of losing some vital artillery

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Courage in Business

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