People Are Critical

People Are Critical


Hand Drawn Chart Saturday

Part 2 (Part 1)

Myth: “Change does not need to directly address culture.”  Considering culture as a black box into which sourcing changes can be inserted and functionality returned is a falsehood that most everyone recognizes, but very few directly address.  Culture refers to the cumulative deposit of knowledge, experience, beliefs, values, attitudes, meanings, hierarchies, religion, notions of time, roles, spatial relations, concepts of the universe, and material objects by a group of people in the course of generations through individual and group striving.  Bottom line, people are what they learn.  Each change is a learning opportunity.

Myth:  “Our outsourcers staffing issues are not our problem.”  Why?  One of attractions to outsourcing is the belief that the outsourcer is a black box composed of processes performed by interchangeable cogs.  The reality is that staffing headaches are yours regardless of where they occur.  Turnover immediately reduces productivity as jobs are re-learned.  Even in a fixed price contract, personnel turnover can have effect.  The loss of productivity that the arrangement was based on could require the outsourcer to take a loss or trim work that could be viewed as overhead (like testing or reviews).  Quality can and does suffer.  Other longer-term issues include the possible transference of knowledge capital and job knowledge.  These issues are not new; they exist even in a non-outsourced scenario. Unless addressed contractually, however, you will not have input into the safeguards of required for your piece of mind.  Safeguards to protect your knowledge and job-level continuity are important.  If turnover is pervasive, simple safeguards provide little value.  Include a measure of turnover in the monitoring portion of all agreements.  Explore how your outsourcer intends to safeguard your knowledge capital, then make sure it happens. In the hotbeds of offshore outsourcing, the level of growth has been phenomenal.  Competition has created an environment where job switching is the norm.  I performed a quick survey (non-scientific) at a recent speaking engagement to test this hypothesis.  I asked those in the audience from mainline outsourcing firms to stand.  Then I asked how many had changed firms in the last five years.  The sample size was approximately 60 people.  Twelve people in the sample had not changed firms in the last five years; further, five had been in the business less than one year.  Anticipate the pressure on the goals of your contract from turnover.

Myth:  “After we decide on a sourcing model and trim our staff, internal turnover is a backburner issue.”   Turnover is a vexing problem for all areas of an organization but particularly with IT organizations where learning curves are steep.  Turnover can sap the strength of an organization by allowing critical knowledge to escape or act as a vehicle for change.  It can open slots for new ideas and technologies to be integrated into an organization as new people are added.  Internal turnover always continues after outsourcing work.  Retained employees will feel threatened (re-read communication myths) and will consider leaving.  Plan for continued turnover.  Focus retention efforts on those within the organization that are thought leaders in the areas that are critical for your well-being.  Use the slots of those who leave to bring fresh ideas into the mix and to bolster knowledge where you need it.  A skills and knowledge inventory is best practice used in the transition process.

The organizational impact of internal turnover caused by sourcing decisions is an unknown.  The literature is replete with claims and counter claims.  It is easy to believe the impact of change (sourcing merely being one type of change).  Active management of who stays and who goes is relatively easy when the organization is choosing.  In scenarios of attempting to influence a bottom tier to leave, the impact is less well understood.  While there are some organizations that have used the process to continually reinvigorate their skill pool, the control over their over the process is far from certain.  For example, an organization annually force-ranks all IT members, earmarking the bottom 20% to an active process of being managed out of the organization.  The emptied slots are refilled, and Darwinian competition begins anew.  In late 2003, the organization announced that in 2004 they would fill the emptied ranks offshore.  The 2005 forced ranking will therefore come from the 80% that made the cut in 2004.  Turnover immediately jumped, and, as is typical, the majority was from the top performers.  Interestingly, HR and senior IT leaders of this organization were surprised. Focus groups with line project managers expressed that result was as they had predicted.  All sourcing actions must be viewed in terms of entire organizational culture to be in least bit predictable.

Myth:  “Turnover is an issue only when we use offshore outsourcing.”  All sourcing models are subject to turnover and will have an impact on the level of turnover in retained personnel.  Offshore sourcing vendors have as high (or higher) turnover rates spurred by stiff competition.  Staff acquisition models suffer above-average turnover rates; people always react to change with change.  The use of COTS packages has the least impact on turnover unless you have built your shop on the premise that developers are at the top of the food chain.  Spend time anticipating how change will impact your turnover rates and focus on how you can ensure business and technical knowledge continuity.

Myth:  “Outsourcing work and staff helps avoid the responsibility to keep our staff trained.” Outsourcing options have long been used as a tool to mitigate organizations’ need to train (cost avoidance) or build potentially transitory skill sets.  When a need to address a specific method or technology is identified as urgent (where or when did planning occur), sourcing choices become an effective method for addressing the need.  Organizations providing sourcing options can very specifically identify the expertise they can bring to the table.  Most track training and expertise at a granular level as if they were code modules.  The goal is to bring the best solution to bear (and deliver it in the most efficient manner therefore driving up the profit margin).  The use of outsourcing as tool to avoid planning the migration of skills needed to support your IT needs is a strategic mistake and will lock you into using outsourcing models.  Being locked into any model puts you at risk that you will not be able to react to change.

Training is a significant component of most IT budgets.  The size of the line item in the IT budget is driven by many factors ranging from the rate of change in the software portfolio, the age of the technological platforms, the rate of internal turnover and corporate policies.  Shifting from an internal sourcing model to an external does not dissolve the need to be involved all together.  If you are using a model that is going to use a single or stable group of outsourcers, you must define your expectations and make sure they are followed by your outsourcer.  You may not directly bear the cost (or savings) or responsibility; however, if your outsourcer’s personnel gets stale, your solutions will become stale, the turnover will increase, potentially negatively impacting all of the reasons you originally had for the decision.

Myth: “IT workers must continually retool to avoid outsourcing.” This myth is both true and false at the same time.  It almost goes without saying that the fast pace of change in the IT world does not seem to be slowing.  Skills age and unless replaced the person holding them becomes less employable (this is true in almost all professions).  At an individual level, continued retooling will not cause anyone to avoid being outsourced.  The need to change sourcing options is a macro-level decision driven by globalization rather than any individual.