outsourcing

Stress From Outsourcing can kill – we need to manage those staying as well

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Stress From Outsourcing can Kill

I was struck by the similarity in the situation when people are laid off during redundancies and the stress caused by the move from one company to another during outsourcing – it strikes me that this is an under researched area and something we as managers should pay more attention to.

Pioneering studies in Scandinavia that took place some years ago, where centralized health care allows researchers access to vast databases of medical conditions and treatment, showed a strong link between downsizing, layoffs and illness. A study by Finnish researchers published in February (2004) in the British Medical Journal, found the risk of dying from a heart attack doubled among permanent employees after a major round of downsizing, with the risk growing to five times normal after four years. What was surprising about this study was that ‘surviving’ employees – those left behind – suffered as much stress as those who left. Those hit hardest by layoffs in this study – losing more than 18 per cent of their colleagues during the worst years of recession – suffered the highest risk of death from cardiovascular disease.

Two other studies in the same vein suggested that other forms of strain in the workplace can also affect health. An analysis of medical records for 24,036 Swedish workers from 1991 to 1996 found that in workplaces that underwent large-scale expansions, the workers were 7 percent more likely to take sick leave of 90 days or more and 9 percent more likely to enter a hospital for some reason.

What these studies showed was there is a relationship between work related stress and real physical outcomes – for those remaining as well as the obvious strains to those leaving. Outsourcing shares many of the factors that were shown to lead to this heightened risk and we should be aware that an over cavalier approach to managing people in this major change process could possibly lead to people dying before their time. It is not enough that we have to act carefully and ethically as other Blog writers on this forum have said we have to act with responsibility and care for people – in the final analysis if it could be shown we acted in an unfair and reckless manner in dealing with people during an outsource we also might find ourselves liable in law. More research is clearly called for in this area.

RoyMogg

Book Review of Outsourcing and Human Resource Management by Ruth Taplin editor

Education / By

Outsourcing and Human Resource Management: An International Survey (Routledge Studies in the Growth Economies of Asia): An International Survey (Routledge Studies in the Growth Economies of Asia) (Hardcover)
by Ruth Taplin (Editor)

Now it is tricky for me to say too much about this book because I am likely to be a bit biased – I was involved in writing three of the chapters. However I do think it is an extremely good book, and offers a very much needed analysis of a wide range of issues around outsourcing. Hats off to Ruth Taplin for gathering together these chapters, she has made an excellent job of developing knowledge in this area.

Here is the Synopsis
Outsourcing is an increasingly popular strategy deployed by a variety of institutions, including banks, multinational companies and small and medium-sized enterprises (SMEs). This book assesses the problems and solutions for those attempting to outsource through an analysis of human resource management, insourcing, lifecycles of the project, insurance requirements, operational management and recruitment within the context of the financial services industry, automotive and IT industries of Japan, North and South Korea, South Africa, Mexico, Eastern Europe, China and India. Including detailed comparative case studies, this book: considers how outsourcing can best be made to work; explores the human side of outsourcing; offers practical advice for improving organizational relationships and performance; looks at important practices such as insourcing; and, provides much needed analysis of the risk and insurance issues involved in outsourcing.

The Shell drivers strike shows failings of simplistic outsource evaluation

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Shell Drivers strike and close down business – how not to outsource

So the Shell drivers are striking because they have had enough of relatively low pay – squeezed by their employer ever since they were transferred in an outsourcing deal.

Clearly someone at Shell decided that driving tankers was not their ‘core’ business, and/or that they could do this more cheaply if they could transfer it to another company who ‘specialises’ in this sort of thing.  Research shows that, particularly in service jobs such as driving, cleaning, catering, outsourcing companies do squeeze the salaries and terms of contract – how else do they make money?

But the one thing Shell clearly forgot is how important the work is to their success. You should never outsource things that are business critical! I have heard a number of senior managers say things like ‘well it doesn’t matter if the staff are upset about the outsourcing, they don’t work for us anymore’ – but they do!

I have written about these issues elsewhere – and I know we have some experts on BizFace who understand the contractual aspects in detail (my research is on the staffing side), so I hope this generates some discussion. I suspect a few outsourcing companies will be miffed – but have a look at the advice below and think whether the Shell situation fits:

  • Don’t outsource a ‘problem’ – get your own act in order first.
  • Don’t outsource purely to save money – there are many hidden costs in outsourcing and management time is often spent on the contact for years ahead.
  • Don’t outsource something that may be critical to your service function – think carefully about what is meant by ‘core competency’
  • Do work through all the potential problems that may occur – you will be relying on the law of the market not the law of employment contracts. Risks are often underestimated – particularly the employee aspects.
  • If transferring staff do follow procedures in a fair manner and ensure that you ‘over communicate’ so they understand what is happening and the rationale.

Also consider:

  • Assess links to business strategy and potential for activity to yield competitive advantage – if low outsourcing may be a solution.
  • Also assess the internal capability of your enterprise to perform, and how difficult it would be to improve – if low, outsourcing is a possibility.
  • Consider the future, how clear is your understanding of whether and how this activity will develop and change in importance – if stable and certain, outsourcing may be considered.
  • How integrated is this function with other areas – if highly integrated and complex, outsourcing may not be useful.

And always remember – if something goes wrong, how much of an impact will this have on your business?