How to Manage Change Profitably During Outsourcing
Outsourcing and change management usually provide suitable complements for each other. Unfortunately, the art and science of change management is often overlooked when companies outsource.
Change management first began to emerge during the 1980s and continued with strong momentum into the 1990s. However, unless corporate executives and managers formally adopt a change management process during business transformation, change can be effectively blocked or delayed. As a result, many of the benefits of outsourcing will be forever lost — this is why many outsourcing attempts fail in the first place. In this article, Back Office Pro explains how business leaders can improve outsourcing projects by doing a better job of managing change.
Change Management Definition
What is change management? It is a systematic process for coping with transformation and change throughout the organization, from the individual employee level to the corporate boardroom. The change management process often turns into a major stumbling block because owners and managers fail to handle all three aspects of change management — adapting to change, controlling it and making change actually happen.
Because of the complexities involved in even the most basic change management process, organizations usually prepare for the process by developing detailed procedures and technologies before moving forward.
Outsourcing and Change
The process of outsourcing is often subject to resistance at many levels — particularly if offshoring to distant countries is involved. Why does this happen? One major reason is due to the failure to pay adequate attention to outsourcing management issues.
Even though outsourcing initiatives typically represent a substantial business transformation involving various degrees of change, the absence of a dedicated change management process can reduce the intended benefits of outsourcing by introducing emotional reactions such as the following:
- Management is trading customer service for short-term profits.
- The company is destroying jobs in the community.
- It is unpatriotic to transfer jobs overseas.
The preferred solution is to anticipate responses like these by instituting an effective change management process. What if you don’t do this? The most common outcome is likely to be a combination of market share losses, decreased productivity and increased expenses. Faced with such negative outcomes, some companies will choose to stop outsourcing before they have even begun.
The Impact of Outsourcing on Stakeholders
Effective outsourcing usually starts by anticipating the impacts on stakeholders such as the following:
- Employees — outsourcing projects can impact the number and location of jobs.
- Departmental and Project Managers — outsourcing can result in workload changes.
- Senior Executives — corporate leaders have concerns about competitive market changes.
- Customers — clients always need to know how quality and availability might change.
- Supplier — your supply chain wants to know how their bottom line will change.
- Business Lenders — bankers usually focus on existing and future commercial lending activity.
- Government Officials — Key impacts for governments include changes in property taxes and local employment.
- Local Residents — Citizens want to hear how local businesses might need to change.
- Shareholders and Other Investors — Investors need to hear about sales, risks and costs.
Using the nine stakeholder groups shown above, it becomes easier to envision why some outsourcing projects stumble and fall simply because the business did not take different stakeholder needs into consideration. With a formalized change management strategy, the expected benefits of outsourcing should be facilitated and enhanced.
Outsourcing Change Management Strategy
By thinking in terms of both outsourcing and change management, potential negative outcomes can be avoided and eliminated before they occur. However, this requires planning and specific strategies — in particular, an effective outsourcing change management strategy is needed before you outsource rather than after an outsourcing initiative is announced.
One key step is to develop a broad-based communications strategy — you will need detailed strategies for each of your company’s stakeholders such as the nine groups identified in the preceding paragraph. Plan on as many face-to-face meetings as possible (via Skype if necessary). Personal visits and updates will create both goodwill and credibility for the long haul ahead.
Positive working relationships can lead to outsourcing success — just as the lack of these relationships can lead to rapid deterioration. The practical need for a high degree of training (both within the company and the outsourcing partner) should be expected. The most effective training can easily require more than one attempt, so any need for re-training should be thought of in a positive light rather than as a negative outcome.
Don’t Underestimate the Need for Help
As most of us would agree, change is inevitable due to the shifting nature of business, technology, consumer tastes and competitors. Refusing to change is simply not an option. According to a leading change management expert, the Harvard Business School’s John Kotter, communities will often experience some pain due to shifting economies and conditions — but much of the anguish is avoidable with a healthy dose of change management.
One reason that both outsourcing and change management can either fail or produce disappointing results is an unnecessary attempt to “reinvent the wheel.” After all, your business is not the first to go down the outsourcing path — find an experienced outsourcing partner like Back Office Pro to help you avoid common mistakes made by other companies.
But what if you have not yet made the decision to outsource? You should spend plenty of time reviewing the benefits of outsourcing for your specific business situation. In particular, think about where you might need help the most — and then talk to experienced outsourcing partners such as Back Office Pro.
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