The people side of outsourcing

Stephanie · #1 5th September 2007, 09:41

Most of the success of an outsourcing contract, if staff transfers have been involved, will be around how the staff respond to the change. Yet this aspect is often ignored.

We can use this thread to discuss the issues involved, but to start with here is some information about the findings from some research we did:

Research carried out by Crosslight has shown there are long-term performance and motivation problems with staff if outsourcing transfers are not well managed. Detailed interviews with employees from a wide range of outsourcing transfers showed that mis-management is common, and that perceptions of injustice are high. This poor treatment led to difficulties in developing a good working relationship with their new employer.

Many of those interviewed said that they suffered extensive periods of low motivation; stress and uncertainty long after the actual transition had been completed. This was felt to be mainly to do with poor handling by the original employer, although the uncertain nature of their future relationships, and weak socialization in systems houses, were also found to create many problems. Staff considered themselves to feel ‘in-between’ companies even two to three years after the transfer. Staff and managers suggested that in many cases, performance had been adversely affected.

Furthermore, employees were resistant to the idea of being transferred back to the original organization due to the poor handling. This could adversely affect organizations needing to ‘backsource’ should the deal turn bad.

This research showed that companies planning to outsource their staff should take specific actions to ensure their management understand how to communicate the changes effectively to staff and manage the transfer process in a fair way, taking into account individual differences. Correct people management will help to minimise the risk of reduced performance during and after the transition.

When I started the research (some time ago now) I was really not expecting the impact of an outsourcing transition to be causing difficulties over such timescales. Further research suggests this problem is ongoing - this finding has serious implications for companies who do not manage the people side of outsourcing right from the outset.

More later!
Stephanie

JohnBlack · #2 5th September 2007, 21:47

Stephanie,

I must say that this struck a chord with me when I was outsourced in the Netherlands some years ago when I worked for Philips - OK the new company was part owned by the same company but I felt as you say 'in between' one day you're the customer of the system house the next part of it and I had great difficultly in the early days not taking the part of the client - my old company. I really felt lost and I must say annoyed by the whole process.

cheers

John

Quote:

Originally Posted by Stephanie

Many of those interviewed said that they suffered extensive periods of low motivation; stress and uncertainty long after the actual transition had been completed. This was felt to be mainly to do with poor handling by the original employer, although the uncertain nature of their future relationships, and weak socialization in systems houses, were also found to create many problems. Staff considered themselves to feel ‘in-between’ companies even two to three years after the transfer. Staff and managers suggested that in many cases, performance had been adversely affected.

Although it did not happen to me I had many friends that after a while with the newcompany would not go back for any price - they were so really pissed by the whole experience of the way they were treated.

John

Furthermore, employees were resistant to the idea of being transferred back to the original organization due to the poor handling. This could adversely affect organizations needing to ‘backsource’ should the deal turn bad.

More later!
Stephanie

Stephanie · #3 7th October 2007, 12:18

You may find this talk of interest (presented at a Birkbeck conference in 2003 but the issues are still the same).

kind regards

Stephanie

Beth at Equisport · #4 12th October 2007, 11:01

Hi Stephanie,

If we are talking about sub-contracting (which some people still call outsourcing I have noticed) are there some issues still with the people side? After all, it does not include a transfer of staff?

Stephanie · #5 6th January 2008, 14:22

Hi Beth,
As no one else has answered this, here goes. I think the people aspects are very different in that no-one has been forced into the situation (at least, not most of the time). I have carried out research on sub-contractors and on the whole they enjoy the work and choose it for the variety it offers.

Where there are still issues would be around cultural clashes - where one sub-contractor, or a group of them, have been used to a very different working environment. Also, there may be some issues if the current employees in an organization feel that they should be doing the work instead of the sub-contractors.

I think you also still find yourself at the mercy of a 'market contract' rather than an employment contract - I have heard people compain that contractors sometimes leave before they have finished a job and then another contractor has to re-learn everything. Whilst that can happen with any work, sometimes it seems to be planned or at least based on which client is shouting loudest - therefore a bigger client comes in saying they need that person and they are lost to you.

Have you experienced this type of problem?

kind regards
Stephanie