Outsourcing Nightmares: five reasons outsourcing fails
1. Lack of clear vision and objectives
Often companies enter into sourcing without a clear vision or objectives for what they aim to achieve. This is like getting in your car without knowing where you are going. Often it leads to frustration within the company, fear from the organisation and a constant discussion on the result and performance seen. Only by defining clear objectives can you measure success – and, if the objectives aren’t met, actually do something to achieve it. Unfortunately many companies enter into sourcing having cost as the single factor in mind. While you may lower cost per hour you may not get a decent performance, so therefore cost always has to be followed by objectives and strategies on how to maintain a good cost/performance ratio. A 100% performance may not be required, as a certain overhead should always be expected, but objectives such as 75% may still be a satisfactory level – and setting the 75% as an objective makes it easier for you to avoid discredit and expectations of 100%.
2. Lack of management support
I don’t think that you will often hear managers saying that they don’t support your strategy. In reality it may not be so. Often managers know that they have to support it – but the actions you observe may tell a different story. In management we often hear the phrase “walk the talk” and this is even more important in cases where employees may have doubts. It is, however, also important that the top management provides a room where middle management can discuss and bring up issues, if only so can action be taken and results achieved. Be honest about what works, and what doesn’t: don’t create a glossy picture if the reality is different, but be loyal to what you have agreed.
3. Lack of support and buy-in from the home organisation
Most people who work within a sourcing setup, as seconded employees, will agree that a key issue is lack of support from the home organisation. Statements such as “they don’t know”, “they are taking my job”, “I can’t give up the responsibility” are statements that are often heard. While there may be many different reasons for people not supporting the setup, one is often that people fear for their jobs. It is essential to communicate goals. The fear may be very different if you are aiming at 25% sourcing versus what people may worry could be 100%. Also if you have to reduce positions, I think it is essential to communicate this open and clearly: why you have to take such measures, what is the impact going to be and what you will do for the people who lose their jobs (which could be anything from lay-offs to reassignment, new training etc). One thing is clear: uncertainty is a killer for a project.
4. Lack of delegation
Having employees can be a tough job, having employees 7,000km away an almost impossible task. A few years back I had employees across seven different parts of the world. This only worked because we had clear agreements on who did what, and the tasks were delegated to the local project managers. While many companies choose a model where they remain responsible for the performance, deliverables and utilisation this can only be done effectively if tasks and activities are delegated to the remote setup.
5. Lack of understanding that “when in Rome, do as the Romans do”
I have often wondered how we as Danes would take it if someone from outside came and told us that we are doing things wrong. Well, many have tried it; few have been successful. So having this in mind I equally wonder why so many foreign companies believe that they can change a foreign setup. Everyone who has lived in places like India know that unless you adopt and learn how to act in a different environment you will never succeed. This doesn’t mean that you can’t influence. When I started in India I was often told that “you can’t manage via motivation” and had to do top-down management. I am glad to say that I proved this wrong. This is confirmation that you can adopt local behaviour and mix it with our more “human” management style, a style that has a higher level of delegation and a style that has a much higher respect for the individual. A small thing I experienced was how the fact that I said hello in the morning made people open up, and was an important part in understanding how things are done. In Denmark Christmas is an important holiday, often offices in Denmark have celebrations etc., while in India Diwali is the highlight for most people, regardless of religion, so just accepting that celebration happens at a different time of the year is an easy way to ensure a good relation and productive setup.
To read more of our lead feature on ‘Outsourcing Nightmares’ from the Autumn 2014 issue of Outsource, see the article index here.
About the Author
Tonny Rabjerg is VP Research & Development at security firm CodeSealer ApS, and a former MD of Danske IT & Support Services.