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 Outsourcing
Staff Report
As
companies look for new ways to grow in a turbulent economic
climate, strategic outsourcing, the strategy of outsourcing
entire business functions, is gaining popularity. However, there’s
more to successfully executing an outsourcing strategy than
meets the eye.
Having suppliers handle entire functions from
research and manufacturing to accounting, human resources, and
information technology services can accomplish a variety of
business objectives while enabling you to control costs and
quickly respond to the rapidly changing marketplace. However,
executives often overlook thinking through and planning for
critical organizational reality implications at the earliest
stages of considering this approach. The result is often a
phenomenon I call strategic gridlock: persistent organizational
problems that can pile up and cause the company’s progress to
grind to a halt.
Consider Company A, a
technology company that decided to outsource its research
function. This strategy should have worked. After all, it
contracted with a highly regarded supplier. However, Company A’s
executives overlooked the fact that their organization’s
informal culture of secrecy and departmentalized functions did
not encourage information sharing. Consequently, the outsourcing
arrangement became bogged down by distrust and poor
communication. Conflicts and errors became commonplace as the
supplier worked with missing data. Strategic gridlock built up
as these errors caused a series of problems in departments
throughout Company A, ultimately damaging its relationship with
several key customers. Within a year, the outsourcing
arrangement was terminated by...
...Continued
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