The professional press is littered with stories of failed outsourced projects whether in the private or public sector. There is little doubt that some of this failure is down to the expectations gap set by, shall we say, overoptimistic promises by service providers. However we cannot lay all the blame at their doors. The outsourcing organisations have to share some of the culpability for the sometimes unrealistic expectations they have of the deals they are putting in place and for the way they set up the deals in the first place.
Let me illustrate this with a real example from my own experience. Some years ago the company I worked for wished to outsource a major component of its IT in a deal that would be worth £250m over 10 years. I was on the steering team for the deal and got an inside view to the kinds of decisions that were made.
As part of the deal we needed to TUPE approximately 300 staff to the winning service provider. Whilst a lot of these transfers were indisputable, there is obviously a grey area at the margins. So we did all we could to make sure some of the more ‘troublesome’ staff we had were transferred as part of the TUPE. This included people that consistently hadn’t performed well (and I mean less than an ‘average’ rating) over the last five years and others who were very active in the union. We also targeted very capable employees whose salary had outstripped the market place for their role due to previous generous pay rises.
So we moved all the problems that we had failed to address over the years to the new service provider.
And just to make matters worse, we made sure that the staff that were moving (good and bad) were demotivated by stripping them of their rights to a final salary pension.
To compound this we also lost a lot of the people that had years of knowledge of how to make things work in our company as part of the TUPE i.e. the people who know the workarounds when you get an out of process situation. It meant we didn’t have a team with enough experience capable of managing the on-going contract from our side.
As well as the staff issues, we also changed the SLA’s, technology and performance levels. Now this is fairly standard and sensible, but what happens generally is that those performance levels are harmonised downwards. The result being that many end users saw a degradation in the service they received. This leads to the situation in which the provider might meet its targets, but there is a negative perception within the client company due to poor communication of these service level changes.
So, we lost a lot of good people, sent the outsourcing company some of our worst HR challenges that we had failed to address, demotivated the transferring staff by substantially changing their service benefits, changed the SLA’s, introduced new technology and lost a lot of know how in the process.
Any wonder the outsource didn’t achieve its objectives?
Be realistic and give your outsourcer a chance of success.