Outsourcing need not be the default option when undertaking change in your company.
Outsourcing has long been an accepted means for organisations to get work done more quickly, effectively and efficiently than they could using their own employees. An outsourced solution is particularly useful to fill gaps in skills or equipment. It has proven highly successful in helping companies manage their IT resources. Depending on your perspective, the rise of labour hubs like Bangalore and Shanghai is either a cause or effect of outsourcing.
Many organisations also seek to outsource when they need to change on a large scale. The most common approach is to hire outside consultants to make the business case for change, craft the change strategy, orchestrate the rollout, and remain indefinitely as midwives of the effort’s activities.
What does it say about this approach when we consider the widely acknowledged research that more than 70% of large-scale change efforts fail? From philosophy to practice, outsourcing is insufficient. This does not mean that external “change experts” cannot add consulting value to a change effort. They certainly can and do. But their abilities are limited.
The root of outsourcing’s flaws is that it often permits an executive team to entrust significant aspects of the thinking and doing to outside management consultant firms. The limits of outside consultants’ ability to affect large-scale change are inherent. They:
– are not the true experts in their clients’ business. The clients are;
– do not – and cannot, by nature of their external role, have the sense of urgency and ownership required to – drive and sustain large-scale change over time;
– cannot reach (literally) large numbers of employees;
– tend to interact primarily, if not exclusively, with senior levels;
– typically rely on data/reports as their means for exciting employees;
– must, in the end, prioritise their business, not their clients; and
– are motivated to make themselves indispensable, that is, to stay and sustain or grow their revenues.
The use of outside consultants for initiatives of strategic significance inadvertently sends the message that the change belongs not to the workforce but to the “hired guns.” This dynamic generates ignorance, passivity or resistance from the uninvolved, full-time masses. Progress is hard-won. The scope is constricted.
What is insourcing?
In conventional terms, insourcing is the opposite of outsourcing. It means stopping the contracting of outside resources to perform a function and starting to use internal ones. Insourcing is widely used in production to reduce costs of taxes, labour and transportation. Some also define it as hiring a third-party outsourcer to work inside a company’s facility.
However, when referring specifically to the insourcing of change efforts, certain characteristics are different and pivotal. It does not mean hiring a third party to work inside a physical plant. Nor does it mean selecting a group of employees to serve as special change agents in their own organisations. Both are forms of outsourcing because they rely on non-employees or assign people to temporarily step out of the role they were hired for and into another.
With respect to large-scale change efforts, insourcing does mean something larger, deeper and longer than what is conventional. At its core are the employees. Its defining elements, though, are size, scale and time. Also energy and speed. And leadership. Some key insourcing characteristics are:
Trust and permission
Foremost, a CEO’s decision to insource a large-scale change effort announces to the employees, “We believe and trust in you,” and when the top leader(s) remain vocal as articulators of the strategy that the employees will execute, then the effort has both direction and support. The leaders have literally given their employees permission to think and act in the face of the organisation’s most pressing challenges and take on its most strategic opportunities.
Volunteer engagement and ownership
To insource is to enable an organisation to engage its own heads, hearts and hands to generate innovation, motivation and action. To give permission to – or invite – employees to engage is to tap the volunteer spirit. A critical by-product of such engagement is ownership. Ownership provides the energy necessary to sustain an initiative that has magnitude.
Size and scale
The size and scale of the insourced population is a critical success factor. The number of people involved must match the breadth and depth of the organisation’s goals. The tendency to expect an outside firm and/or small fraction of the workforce to generate results that reverberate across an organisation is as misguided as it is common.
When large, coordinated numbers of people rally behind a common opportunity and pursue a limited number of linked, targeted initiatives, they drive the organisation in the same direction. The sheer volume and dispersed, simultaneous nature of their actions generate speed that the organisation feels, hears and sees. Consistent widespread communication channels the feelings, sounds and sights of change.
The diversity of the insourced population ensures richness of thought. Leading change with a diagonal slice of the organisation – not a horizontal or vertical one – ensures that the voices of the customers, distributors, suppliers, etc. every day are heard.
Typically, organisations evaluate the success of a strategic implementation, transformation or change effort by the business results achieved – or goals missed – at the end of the initiative. These primarily (or exclusively) quantitative means are lagging indicators that do not allow for agility and quick decision making during the implementation. Too often, both the credit for and the communication of results go to and come from senior leaders.
Consider inverting this perspective to see wins as the molecules of results. Wins can be small or large, general or specific, quantitative or qualitative. The early-and-often collecting, tracking and sharing of them broadly reinforces desired behaviours. The process captures leading indicators, enabling course correction, strategy realignment or tactics revision with real-time awareness. They become proof points of ROI.
In contrast to the traditional approach, in which the ability to identify and analyze the actions and behaviours that produced results is in hindsight, this method allows leaders and employees to maneuver, align and focus, generating more and bigger business results.
Communicating and celebrating these wins leverages successes early and creates stronger correlations with business results that come from the accumulation of wins. Here is a crucial communications nuance: true to the insourcing ethos, those who observe and generate wins take part in broadcasting them. Such grass roots messaging increases the likelihood that peers will replicate each other’s successful actions.
What about the costs associated with outsourcing versus insourcing large-scale change? While a deeper study is called for, two facts suggest vast differences. An insourced approach taps what the organisation has already spent on the salaries and wages of its employees. Moreover, for an outsourced solution to match in person power what an insourced one provides would be astronomically expensive.
Three by-products of insourcing are truly significant. By owning and driving the process, an organisation builds its own capability (skills) and capacity (stamina) to change itself continuously. The process develops leaders at all levels by giving broad permission to innovate. In turn, such direct engagement fosters a culture of innovation.
Concerns about innovating, planning, and executing too slowly have expanded geometrically as rate of change has outpaced our ability to keep up with it. Any approach, therefore, that enables acceleration is highly desirable. When large numbers of motivated people focus on a common set of goals and are granted the freedom to innovate, then acceleration happens.
While the sociology of insourcing is admirable, the approach is futile without coordination, the linchpin of large-scale change. The essential elements of motivation, size, diversity, focus and speed must be marshaled. A diligently applied methodology is the answer.
Gregg LeStage is Executive Vice President for US firm Kotter International, www.kotterinternational.com, that helps organisations lead large-scale change. He is also the President of the Kotter Center for Leaders and holds a PhD and Masters from Oxford University.
This article appeared in the October 2015 issue of HR Future magazine.