In those cases where there are not significant savings from outsourcing, but where executives are dissatisfied with an internal service provider, outsourcing may seem like a viable alternative.
In fact, it’s not.
Outsourcing circumvents the issue of a poorly performing internal service provider, rather than forcing the issue to the surface and investing in fixing the internal organization.
Worse, outsourcing further damages internal service providers that are already in trouble. As they lose market share, internal service providers lose critical mass, and get worse and worse.
Meanwhile, paying profits to other shareholders (the ones who own shares in the service provider you’re doing business with) is very costly.
Outsourcing is not an alternative to investing in healthy internal organizations. In fact, the opposite is true. Making the best use of vendors requires healthy internal service providers.
Therefore, if an internal service provider isn’t working well, it’s not appropriate to give up and turn to its external competitors. The right response is to fix the internal organization. Once the internal service provider fixes the root causes of clients’ dissatisfaction, there should be no need to throw money at external vendors.
Each of the four most common sources of dissatisfaction — inadequate customer focus, unwillingness to tailor solutions, lack of client control over priorities, and poor response time — is absolutely repairable.
How can leaders transform a poorly performing bureaucracy into a competitive internal business within a business?
Visionary leaders begin with a well-grounded organizational improvement strategy that diagnoses and addresses the root causes of concern. We use a straightforward, six-step process called “RoadMap” — a planning process developed in the course of years of working with internal service providers to improve their performance.
Here are the basic steps:
First, leaders assess executive clients’ attitudes about the organization. They interview key clients about their perception of the organization’s value, and about their feelings about doing business internally.
Second, leaders gather data from their staff about how people feel about working in the organization, and what they think is wrong with it.
Third, the leadership team develops a vision of all of the things that should be expected of an internal service provider in their situation if it is to compete favorably for clients’ business. This is a “stretch assignment,” and clearly defines what is meant by that overused term, “world class.”
Fourth, the leadership team also assesses the current organization against its own vision of excellence. The gap assessment also links in client interview data and staff input to identify problem areas. This identifies exactly what needs to be improved.
These first four steps gather three sources of concerns: from executive clients, staff and the leadership team itself. This disconfirming evidence provides the motivation to change.
The fifth step is root-cause analysis. Assume that problems aren’t due to poor individual performance. Good people, in a dysfunctional organization, will invariably perform poorly.
After training in the fundamentals of organizational design, the leadership team traces every concern from all three sources to its root causes — the systemic factors within the organization that are getting in the way of people’s success. Typically, they discover that everybody’s concerns trace to five organizational systems: culture, structure, the internal economy (resource governance processes), methods and tools, and metrics and rewards.
Finally, in step six, leaders sequence the needed changes (at the root cause level) into an action plan of systemic change — not a quick fix, but a well-planned series of changes that, step by step, build a very high-performance organization.
Communication of this action plan builds positive attitudes in both clients and staff. The message is essentially this:
We listened, and we hear your concerns. In addition, we have concerns of our own. We know we’re not all we must be.
In recognition of this, we’ve defined a very positive vision of the kind of organization we strive to be.
And, instead of treating symptoms in a series of small changes, we’re committed to lasting systemic change. Here’s our plan…
We hope you’ll “pardon our dust,” and partner with us on this organizational transformation process.
The result of pursuing systemic change is an organization that is fundamentally healthy — one that elicits the best from everyone, regardless of where they get their paycheck.
Combine a high-performance organization offering the insiders’ advantage with an intelligent approach to extended staffing, and inappropriate outsourcing won’t be an issue for your company.
More about NDMA’s “RoadMap”