The old adage "you’ll never get fired for hiring x" rings as true now as when it was first coined. This often pushes companies into hiring the wrong consulting company, who might choose the wrong methodology. The cookie cutter approach often many adopt by consultancies means they overlook the potential benefits of a more flexible approach. These outsource projects are often successful in implementation but fail during the life time of an outsource relationship. With a near 50% failure rate in outsource contracts perhaps it is time to reassess how we run an outsource project. 9 out of 10 failures are put down to people issues; perhaps this is exacerbated by choosing the wrong methodology from the start.
A traditional fully managed project, undertaken by most of the major consulting companies involves a team of consultants seconded to the client organisation. This team will analyse the organisation in an effort to find outsource potential. They will then define the requirements for vendors and set about vendor selection. The subsequent RFI and RFP are all produced by the consultants. With a shortlist of vendors defined, site visits are undertaken, leading to actual vendor selection, contract negotiation and eventual contract signing. The process transition is then followed by full go – live of the outsource process.
This is of course an oversimplified view of an outsource project but along most of these points the consulting company will lead the way, with the client merely acting as a reviewer. They run the project then depart once the business unit has transitioned, leaving the client company to manage the ongoing relationship, or worse still, continue to charge for actually managing the project ensuring a steady stream of potentially unnecessary income for the consultants.
There are many benefits to this
· It is often difficult to find additional internal staff to run such a complicated project
· Internal staff may not have experience running an outsource project
· There may be reluctance amongst some staff to cooperate which may jeopardising the project
· There may be details of the project that management would like to keep away from internal staff
Lets us tackle each one in turn
Internal staff constraints
Most organisation run a pretty tight ship, taking on an outsource project could stretch or break staff. Invariably there are a few key trusted people that management would like to run the project. These individuals are often called upon time and again to run cornerstone projects and any additional load is never welcome, especially if there is the potential to incur redundancies in the organisation.
Staff experience levels
Managing an outsource project and ongoing vendor relationship are specialist skills. There are internationally recognised certifications and increasingly people are seeing this as a career path. Expecting internal staff to be able to run such a project could lead to disaster. Without the benefit of training and experience it is unrealistic to expect, even the best individuals, to complete the project to its full potential.
The bad press outsourcing has received means that the first thought many employees have is redundancies. Generally, within organisations the last thing management want is to lay people off, but the early horror stories of thousands of jobs moving to India is hard to shake. This can mean a non co-operative or even disruptive workforce. Asking any internal staff member to run such a project could be a poison chalice.
When an outsource project is conceived, certain project details necessarily run close to the core of the business. Knowing how rumours spread, management may be reluctant to let internal staff work with the details of an outsource project.
The points above, and many others, are testament that perhaps the best, even only way to go, is a managed outsource project by a 3rd party. Although these points are valid they hide the risks when a project is managed as opposed to alternate methodologies. These alternatives being either ‘Light Tough’, or in-house managed projects. The level of involvement of 3rd party companies reduces in each of these.
It is easier to look at in house first. With this methodology a buying company runs the project internally. This requires staffing levels and experience to ensure a project is successful. As with any outsourcing project if there is sufficient management ownership then ensuring completion shouldn’t be an issue. Managing the ongoing relationship is a different matter; we will look at that later.
If a company chooses to employ consulting assistance for an outsource project, the other option is a ‘Light Tough’ approach. This means that rather than a full-time set of consultants working on all aspects of the project, there is a reduced set of consultants and the majority of the work is performed by internal staff. The level of involvement will change depending on the company. For some large organisation it might mean some consultants permanently on site assisting the internal staff. For SMEs this could be reduced to a more mentoring approach. Consultants would only get involved in the project at crucial points, providing experience when necessary.
This reduces the risks and costs to any business wanting to outsource but unsure how to go about it and unable to afford the potentially high costs of a fully managed project.
The points raised above are therefore changed as follows.
Internal staff constraints
This issue is not resolved. ‘Light Touch’ consulting can assist but it will not remove the need for internal staff to get involved in the project at all stages. If internal staff are involved then the knowledge associated with the project remains in the company. Decisions will be made during the course of the project and the rationale behind the decisions is essential to the future understanding of the relationship and the fruition of project. If management are serious, then the appropriate people must be given this work as a priority.
Staff experience levels
This issue can be negated by the knowledge transfer that would occur during the course of the project. As experienced consultants work with the internal staff there must be efforts undertaken to pass on knowledge. Therefore it is not necessary to train staff fully at the start of the project but only as key milestones are reached. Consulting staff should be available to provide extra sessions, when required, to bolster or assist during high risk times in the project (vendor selection). By the end of the project the internal staff will have had significant knowledge transfer and will be ready to tackle further outsource projects without the need of consultants.
The threat of possible redundancies cannot be truly resolved by hiring external consultants. If staff are reluctant to pass on vital project information, it will be even more difficult for consultants to work with staff than someone internal. This point can be addressed to some extent by the point below.
Keeping the workforce in the dark is generally inadvisable. Open and frank communication will stop rumours before they start. Referencing any outsource methodology will point out the dangers of not engaging all levels of the organisation in discussions regarding the outsource project. An engaged workforce will be more likely to co-operate and assist the project. Often companies that want to outsource are growing and tend to either transfer staff to the vendor company or move internally to other areas of the organisation.
What we have not mentioned so far is the most important phase of an outsource relationship, the post contract governance phase. This lasts the term of the contract until renewal or termination. Using external consultants during the initial phases of the project means that vital knowledge is lost when they move on to their next assignment. As good as any handover or documentation is, it can never convey the subtleties behind critical decisions. If internal staff are the ones driving decisions day to day, the retained knowledge will allow the relationship to grow from pre contract onwards. With 9 out of 10 projects failing for personnel reasons starting to build a relationship as early as possible is vital.
This discussion has oversimplified the 2 methodologies. There is generally never a time when an external consultancy runs the entire project. I have taken the example to extremes to make a point. Overall the predominant use of internal rather than external staff when running an outsource project, when done properly and with the right level of input from experienced consultants, will provide better results than an externally run project . The use of mentoring services from a specialist consultancy, while primarily using internal staff will start an outsource relationship on the right footing and provide staff training, often an overlooked "value add" to any project.