The moment the subject of outsourcing surfaces in a company, a bolt mixture of fear, anger and anxiety races through the hearts and minds of employees: Will I be laid off? Will I have to train my replacement? Will I ever find the same kind of job again? Will I ever earn as much as I do now?
Depending on the ability of managers to communicate with their staff, some of the dread may subside; but it hardly ever goes away completely. After all, the fact is, most people don't like change and outsourcing introduces change in a big way. Plus, it can eliminate jobs. That's always cause for concern among those who hold the jobs being scrutinized for outsourcing.
But what about scenarios where people are moved over to the service provider as part of an outsourcing engagement? Do they have it any easier? Have their companies done them a service by ensuring their continued employment?
How often have you heard or read about a manager at a company that's doing a new outsourcing project saying, "We're moving our people to the service provider because it'll offer them a true career track"? The thinking is that workers will be able to flourish in an environment where the employer specializes in what the employee specializes in — that career opportunities will be far greater for them. For an HR worker, that means a company that concentrates on HR work. For a finance person, that means a company that specializes in financial services. For an IT worker, that means going to work for a company that provides IT services.
According to our research — not scientific by any means — career tracks offered by service providers appear to be a myth. Sourcingmag.com recently questioned 13 IT workers who were put in this position to explore the details of their experiences and perceptions. All were transferred from the client organization to the service provider. The fact is that for most of them, the transfer didn't bring improvements; it brought loss.
If you're a manager thinking to yourself, "What's it matter? I'll be done with IT if we outsource it and it'll be somebody else's problem," it may not be such a clean break. Among those we communicated with, for every 10 people in their previous IT teams, roughly one was laid off, six were transferred to the service provider and three people were retained in the client company. In other words, you'll still have IT people in your company, and they'll remember how they and their cohorts were treated.
Most of the people we questioned worked for large organizations, those with a thousand or more employees. They represented a myriad of industries: financial services, manufacturing, telecom, IT consulting, publishing, education and the federal government. With two exceptions, all worked in the US. All but one identified themselves as professional- or staff-level people; the lone holdout was a mid-level manager. Nobody was entry level and nobody belong to the executive ranks in the client firms. After the move to the service provider firm, those rankings held for the most part, though one person reverted to "entry level."
About a third were transferred more than a year ago; half were transferred in the last year; one transferred in the month prior to the interview; and one hadn't made the transfer yet. Of those transferred, half no longer work for the service provider that took over their employment. (Interestingly, several have gone back to work for the IT departments of the companies that outsourced their jobs in the first place.)
If you're a manager trying to figure out the details of employee transition, here are the tips suggested by the folks who have been on the receiving end of the experience.
–> TIP #1. Do more than just a drive-by examination of the service provider's culture and compensation.
How important is the future welfare of the people who make up your current IT staff? If that's part of your decision-making process when selecting a service provider, the input we received from those who have been through it suggests you do a full comparison of overall compensation and benefits provided by the service provider to its workers. Consider taking a sample cut of your IT staff — six or so different positions and seniority levels — and see how those people would fare under the service provider. Look at:
- Sick time
- Intervals of pay
- Retirement plans
- Stock options
- Other benefits
There are probably going to be pluses and minuses on both sides of the wall. Keep track of them, so that you can tackle the next tip with eyes wide open.
–> TIP #2. Communicate early, often and fully.
No, you don't always have the answers. That's not what these IT professionals expected of management. But they do expect direct answers where the information is available — and they do want to believe that the people they report to are honest and upfront. That means bringing people who will possibly be affected in on company plans way before any outsourcing contract is signed. At one major company, that meant letting people potentially affected know about the outsourcing work even before the RFI was put out.
Is honesty a new policy for you? Then hire communication experts to advise you if you don't know how to pull this off. Practice will only make it easier.
As one person suggested, "If it’s purely a cost-savings measure, explain why it saves you money. If it’s because you want to re-align the company back towards its core functions, explain why IT is just a component of those functions. Employees will love you or hate you anyway for doing this. Sugar coating or lying about why it’s happening won’t convert anyone from one column to the other."
Wondering how the communication should be done? Among the 13 people we questioned, there were no patterns. The most common approach was informing people as part of a group meeting involving executives or upper level managers. Others were informed by a direct manager in a one-on-one meeting. (We'd advise against going the route of one hapless IT professional. The person's personal property was packed by an HR rep and made available at the front door the next week. That's how he found out. This was an individual who was then expected to turn around and provide IT services through the service provider to his previous employer.)
–> TIP #3. Consider judicious application of retention bonuses.
Probably, you don't care whether certain people in IT leave. (You might even be glad they're gone.) But others will be vital to the successful transition in the event that outsourcing occurs. Have you figured out who's in what camp? Make sure you can identify those who matter to the process, and make sure you have a budget that will allow you to offer about two months worth of those people's salaries as retention bonuses.
The sooner you communicate your intentions, the more likely it is you'll be paying retention bonuses to keep those you want to have sticking around through the transition. Of the IT professionals we questioned, the only ones who received these kinds of bonuses were those who were informed more than 30 days in advance of the transition.
So you might be thinking, "Then what's the upside to early communication?" After all, it'll only cost you money. The upside is keeping people motivated and focused on the job to ensure that your IT operations don't take an unexpected hit because of early staff loss when those same services are probably being extra-scrutinized by the executives of your organization as well as related consultants and advisors who might have been brought in during this transition period.
–> TIP #4. Don't delude yourself that moving an IT person into an IT company necessarily ensures a "brighter future" for that person.
Look for the facts. It behooves you to find out just what the promotional opportunities are for the people you're transferring to the service provider. Find out how promotions are determined, as well as their frequency and their payoffs. Ask for details regarding what training is offered to individuals as a normal course of career development. Find out whether the tools being used by service provider staff is last generation or leading edge. Find out about attrition rates. This can provide telling clues about the level of satisfaction among employees.
Among the people we interviewed, training benefits and access to tools became worse by far when they moved to the service provider. We find this odd, considering that most service providers frequently tout the quality of their IT staff, which presumably comes through a greater emphasis on training and certification and access to the newest or best high tech tools.
Likewise, our pool of IT people viewed promotional opportunities as worse under the service provider. Only a handful said they believe they have more career development prospects. This calls into question the assumption that service providers offer newer and more exciting job opportunities for specialists. It isn't viewed that way by all participants. (In some cases, they found themselves in an environment that encouraged "eating what you kill." Once their current project ended, they were left to find a new project to attach themselves to that may have required a geographic move they weren't expecting.)
After you've done your research, when talking about the new work environment IT people can expect to find at the service provider, speak truth to staff; don't embellish.
–> TIP #5. If you do transfer people to a service provider, be prepared to deal with a certain amount of employee grieving.
Think about it. Even if you believe you're sending your staff off to a greater destiny, these folks are losing their work families. They're being moved out of a company culture they've grown used to. They may miss that they're no longer a direct part of the industry your organization serves. Give them time and on-going opportunity to express their doubts, fears and worries.
Likewise with those left behind. Suddenly their workmates — who are now contractors and therefore outsiders — may no longer be part of company celebrations or even the company grapevine. Yet those transferred may still physically be present. Be prepared to answer questions among the survivors about what the transition entails and how the transferred people are to be treated. Above all, show sensitivity to people in both groups. As one individual told us, he feels an "us vs. them" sensation at the technical level, "while managers preach that we're still one big happy family."