Managing your staff after outsourcing

It is sometimes said that one of the benefits of outsourcing your IT function, or large chunks of it, is that you free yourself of the burden of managing lots of hard-to-handle technical staff.


It is sometimes said that one of the benefits of outsourcing your IT function, or large chunks of it, is that you free yourself of the burden of managing lots of hard-to-handle technical staff.

I suspect that, secretly, some CEOs find IT outsourcing hugely attractive simply because it holds out the promise of less contact time spent with edgy senior IT people. ‘Fire and forget’ is the gritty term applied by some to this phenomenon.

But just because you no longer have direct accountability for staff, once transferred out of your company, you ignore at your peril how they are managed. After all, you are still impacted by them. For example, IT workers who formerly were employed by the BBC went on strike this year after their employer Siemens introduced a pay freeze. Who suffered? The BBC.

The best-known example of all is from outside IT: after British Airways outsourced food preparation for its in-flight catering, it was forced to get involved in resolving industrial relations problems at Gate Gourmet, the new employer. The airline offered improved commercial terms to Gate Gourmet, in an apparent attempt to give Gate the means of making an improved offer.  And it strongly urged the company and its unions to resolve their differences, mindful of the impact of a strike on BA’s business.

At the heart of these situations is the requirement in many jurisdictions, if one outsources or changes outsourcing suppliers, for those who do your work to be transferred to the new supplier, or between suppliers. So, regardless of the contractual arrangements, the same people often continue to work on your behalf through sequential changes in employers and senior management teams. People who were your employees remain ‘your’ workers, working on your work. Many former employees, through several such changes, may even have continued to sit at a desk that you provided when they joined your company years before.

What are the implications of all this? There are many but I want to focus just on three: the outsourcing decision, the outsourcing process and the ongoing management of outsourced people.

Much has been written about outsourcing decisions, mostly from a cost or business strategy viewpoint. But adopting the people perspective, though rarer, can be very illuminating. It is surely important to see beyond the Service Level Agreement to the actual people who have to do the work. That is what Michel Skapinker of the FT was doing when he wrote:

"The point many companies seem to miss about outsourcing is that it does not mark the end of managing an activity but the beginning of managing an activity in different, and often more difficult, ways. Instead of ensuring your own employees are doing their jobs properly, you have to ensure someone else’s are. And you have to do that without the familiar tools of hiring, firing, promoting and rewarding."

Think not just about the business arguments, and more about who will do the work, post-transfer.

If outsourcing amounts to little more than handing over your IT workers so someone else can have a shot at managing them, beware: that is an implicit admission of management incompetence. Outsourcing must have a better rationale. Where there are no economies of scale, no bringing to bear of utterly new resources, one has to ask: why should this be a better way of working?

But if your former employees will service not just your work, but others’ work too, and therefore to an extent become less ‘your’ people, or if technical support teams of a type you cannot currently access come on-stream, the outsourcing case may be stronger.

My second point follows from a study of IT careers undertaken in 2008. This highlighted the extent to which those working in IT functions simply do not want to work on the supplier side of the desk. Here is what 500 IT people working in large corporate IT functions cited as their preferred destinations in four years’ time:

Source: New Onshore Workforce in IT, Diaz Research Ltd 2008

The fact that many employers choose to transfer IT employees to their least wanted destination might not bode well for the future motivation and performance of those people. I write ‘might not’ because there might not, in real life, be a problem here: the above data was collected from people who were not at immediate risk of transfer. And once transfers approach, most outsourcing companies seek to lower resistance among those staff who are due to join them.

If they succeed, the negative views evidenced by the above data might weaken. But how many CIOs check, as D-Day approaches, that workers are happy to transfer over? A wise CIO will want to see a large majority of staff in favour of the move before proceeding. This is not feather-bedding workers: it is protecting your business.

Finally, the most complex issue: those people who now work for you but are employed by someone else. Clearly, suppliers’ staff must look to their employer for direction, recognition, rewards etc. but companies are sometimes disturbed to discover that the IT workers they find most helpful may not be much appreciated by their new employer.

Do your suppliers ask for your input and comments before they conduct annual appraisals? If not, arrange for such input to be passed across anyway. It may help the supplier’s managers, too, if they know you will happily pass your views on them across, both to them and their manager.

A common experience seems to be that transferred staff are managed in a different, crisper, way by suppliers’ managers. One vendor of outsourced services has said that its managers’ very brisk, do-it-fast-and-move-on mindsets do not always sit comfortably with staff who have been transferred from clients. Many staff continue to exhibit what can be termed ‘unhelpful helpfulness’ i.e. a willingness to be diverted from the matter in hand in order to assist a business client in some small way.

This flexibility, which can put attainment of contractual commitments at risk, may be the very reason why IT was outsourced in the first place: the company wanted much stronger focus on priorities and performance, and less on affiliation. Issues about suppliers’ staff are often deep-seated and indicative of a clash of values and culture. Companies must consider these aspects in mind when considering, or implementing, outsourcing.