OFFSHORED JOBS- WILL THEY COME BACK?

Offshored jobs -- On the way home?

 

An excellent article in last week's Economist provided a fascinating examination of where we might be heading in these areas. In the 80's many Western companies with " high" labour costs moved their operations to low cost areas of the world, this off shoring ( moving an existing operation to another low cost country) was often combined with the process of outsourcing (ensuring that a part of your existing operations was isolated and then transferred to be the responsibility of a third party at usually a reduced cost to the remaining part of the business ( at least that was the intention). The arguments for what commenced in the 80's, at least in cost terms, are becoming weaker. Wages in China and India have been rising by 10%-20% per annum over the past decade, whilst ours have stagnated.

 

Rising transport costs and the fact that your favourite I Phone could take 6 weeks to reach our shores have gnawed away at any cost advantages that existed before. Manufacturing products far away from one's R and D base can have a negative effect on innovation and moving one's R and D to a low cost country many not be a good move in protecting one's IP. There are now stronger arguments to move production back to areas which consist of those people who will purchase your products. You can innovate quickly and transfer that innovation into modernised product outputs for local markets where your products will be bought. In the future, labour costs will become less significant as proportions of product costs, so the search for low wage economies will become less relevant.

 

In service industries IT and back office functions were outsourced and off shored to places like India. This consisted of call centres, programming,data centre management and analytics. After initial success there have been problems with some of these moves in terms of responsiveness, quality and time taken to deliver these services. This meant that service outputs had to be checked and rectified in some instances and this negated any real cost gains.

 

In 2015 it is expected that manufacturing costs in China will be similar to those in many parts of the United States.It has also been stated that pay for senior managers in China,Turkey and Brazil now either exceeds or matches that in the United States and Europe. So the main reasons for re-shoring production to the Unites States and Europe include:

 

1. Rising Chinese labour costs and a desire to respond  more quickly to customers

 

2. Lower wage levels in the US and Europe

 

3. Reduction in transportation and logistics costs

 

4. Production quality problems in off shored production locations.

 

The off shoring rebound is in reality still a trickle and not a flood but the future signs are there. Future developments in robotics may make a lot of routine IT and call centre jobs capable of being performed by machines.

 

In terms of off shoring the narrowing of global costs between the US\Europe and Asia will offer the US\Europe the chance to get back some of the jobs which have gone elsewhere. But we will have to be in a position to compete hard on non-labour cost elements. The most important factors where we can make a difference is ensuring that our labour force has world class skills and training and is flexible and motivated with world class industrial\service industrial clusters.

 

Paradoxically, the training measures we need to take will require investment in human capital - A course of action that we appear to be increasingly unwilling or more realistically unable to take.

 

Where is plan B when you need it?

 

 

STRATEGY -- HAVING SUCCESSFUL CUNNING PLANS

 

 

 

Being Clever about the future?

 

Do you remember those comments from your director. "You need to be more strategic," and "Please look at the big picture," also " Don't get lost in the detail." There you go, how did you do, are you any better at looking at the big picture -- not focusing on unnecessary detail?

My stepfather always used to tell me that life is made up of details not grand views or visions. President George Bush always had problems with this "vision thing." Do we focus on completing our immediate tasks and not looking too far into the future -- all the traditional strategic planning literature tells us a similar story. The following levels are pretty common

1. Strategy for the organisation - The medium to long term aims and objectives of the organisation - For example; maximising profit, minimising costs to underpin cost leadership, maximising sales penetration in a market, leading in product innovation, targeting major competitors' performance, developing core competencies and outsourcing non core tasks, maximising revenues, streamlining production efficiencies and penetrating new markets, to name but some. Oh and you may also be interested in maximising your client satisfaction.

2. Tactical elements -- Which group of actions and tasks need to be undertaken to achieve the strategy of the organisation - listing them, profiling them and resourcing them.

3. Operational elements -- Delivering the required group of actions and tasks identified in 2 above, on time and to budget

Do we seem to concentrate on levels 2 and 3 rather than level 1? Perhaps for most people that is true - Doing a list of things is always easier than actually thinking about whether they are the right things to do given the organisational challenges we face. Organisations need a long term purpose -- managers will need to think and act strategically  to steer the organisation on the path they want it to go ,in the medium to long term. What are the ends we seek and what are the means of achieving those ends?

Strategic management is a vision of the organisation in the future - but there also need to be concrete steps in place to move the organisation into that visionary situation. Strategic planning is not a dreamers charter -- but it is necessary if we are not going to be stuck in the present - however comfortable or not our present situation might be for us. Very often more time and effort goes into level 2 and level 3 elements than into level one. The detailed process of formulating a strategic approach will be the subject of a future blog. Suffice it to say that the process is at the apex of our planning approaches.If we do not get the top element correct the other 2 elements can be a well meaning waste of time.

A recent book by Laffey and Martin - of Harvard University identifies the 6 common ways that an organisation's strategy can fail. These are;

1. The Do it all strategy. Yes in the future your organisation can do everything and please everyone - Things you do now that have never worked will come good. Don't worry  - no need to prioritise anything?

2. The Don Quixote strategy - unwisely attacking your strongest competitor first of all and not your weakest.

3. The Waterloo strategy where you pursue war on all fronts - i.e. fight all competitors with the same intensity thereby wasting some good resources of your own.

4. The something for everyone strategy  - try to capture every customer\client at once; not the most important and profitable ones first and then the least profitable ones later if at all.

5. Programme of the month strategy - Undertaking a strategy that is flavour of the month but will not necessarily be effective at all for your organisation.

6. Dreams that Never Come True strategy - Really good ideas that in the cold light of day - given the culture and outlook of the organisation will never happen but we would all feel warm and happy if they did and no-one wishes to be the first to spoil the party. This point particularly chimes with me.

The elements of a good strategy, they argue, are as follows:

1. What will the future success of your organisation look like and in which markets will it be likely to occur?

2. How will the particular future markets be won over?

3. How can the organisation play to its strengths relative to those of its competitors?

4. What aspects of the organisation's performance need to be managed for it to reach its future goals and which elements need to be discarded?

Some heavy stuff indeed - but still ultimately necessary to consider.

We all need to strive to ensure that our dreams, do, as far as possible come true. At least we need to work hard to make them happen!

 

RESTRUCTURING YOUR ORGANISATION -- WHEN AND WHY?

Restructuring your Organisation - When should you do it and Why?

Yes it's that time again, time for a restructure. What are the roles and responsibilities of your current staff, and how will they change? I was going to say how do they need to change but the word "need" is probably one of the most subjective elements in this restructure process and the need for a restructure is one of those areas which could do with a proper piece of analysis. I am not talking about addressing issues around organisational inertia. Peter Drucker has quite sensibly argued  that virtually no programme,business, public body or other activity can perform for a long time without modification and re-design to face the high paced evolving challenges of our modern world. All organisations need to be capable of change in this vein, however it is important to measure the performance of an organisation before such a restructure and also the performance afterwards to ensure that a restructure is not instituted in isolation from organisational performance issues. It must increase such performance.

 

Restuctures cost a lot of time, money and emotional capital of the people involved, those embarking on such a process need to be convinced that it will enable an organisation to perform better than it was doing before the restructure. The restructure process, once delivered, must have tangible objectives that it will meet and these should be vigorously analysed and tested. Why? Because undertaking a restucturing for very fuzzy reasons without relating it to improving organisational performance is frankly extremely disruptive and often causes more harm than good for both the organisation and its staff. Sadly, restructures are often undertaken without  a clear end goal in sight, often as a quasi mystic belief that cutting some jobs, re-allocating others, bringing in new posts will make the universe of the organisation a better place and the organisation's performance much improved. The same is true of tinkering with the actual personnel involved, who goes, who stays and who comes in as a new player - These issues are critical and should be properly considered, often the personnel issues are the victims of personal and biased assessments which help no-one at all.

 

There should be a solid business case for a restructure and it should be debated before it is implemented, this is even more important for those businesses which are suffering from the current economic retrenchment, because it is doubly important for such businesses to have greater organisational certainty in where thay are heading. Restuctures can be actioned in both positive - growth circumstances and, as is now more frquently the case, in negative circumstances of retrenchment and we are all experiencing that at the moment.

 

All organisations must be capable of change however they must also be in a position to identify the benefits of such restructures. I very often see key individuals obsessing as to the exact nature of formal organisational charts post restructure and how they will look, without realising that informal working relationships are often more important. A tidy revised organisational chart will not guarantee that a restucture willl achieve its goals neither will the blind achievement of a cost saving target, - saving costs is not enough - saving the right costs and incurring the right costs is the way forward. We need to abandon the things we should not be doing and embrace the things we should be doing -- Cutting the blood supply too much to the patient can be fatal - varying it properly can be beneficial. Let's ensure we keep the patient alive and thriving and not in a terminal condition,unready for any economic recovery or any new business opportunities.

 

So before we all tread the thorny path of a restucture let's ensure that we know how performance will improve and that we have the adequate tests and yardsticks to measure our progress. Otherwise there will be a lot of wasted time and effort for not much gain. What are the goals of your restucture and how will they have been achieved? How often do you have restuctures? If they are too frequent then why is that the case? Were previous restuctures too narrow and too focused? We should all learn from our past experiences. Let's try and get it a bit more correct this time round.

DOWNSIZING - CONSIDERING THE HEALTH OF THE REMAINING STAFF

 

 

 

Downsizing - Let's not ignore those who are left behind

 

Organisational downsizing is a very stressful experience for everyone involved, the people who leave and get a replacement job seem to have better health than those who stay behind and also those who leave and do not get a replacement job. The surprising point is that the health problems of those who remain after a downsizing appear to be as problematical as those of the people who leave and cannot find a replacement job. The real winners, health wise, seem to be those who successfully leave and start afresh. One might think that those who stay behind would be relieved that they have survived a cull but research shows that their health problems accelerate with time. Why is this the case?  

 

Those who stay behind are invariably faced with greater work burdens in that they have to take on part of the jobs of people who have left which means their weekly hours and stress levels increase and the work pressures on them multiply. This leads to issues around achieving new work capacities and targets which employers need to be aware of and monitor and support staff in those new challenging areas, although in reality, the latter support is rarely the case. Very often, those who are left still standing after a restructure need increased training to cope with new responsibilities which they previously have not undertaken. This increased training should be applied, but again, in reality, frequently this is not the case as training and development budgets are often the first to be cut in a recession as they are seen as "easy" and "painless" targets. Nothing could be further from the truth and such ways forward are in reality, short sighted and short termist, though arguing these points in a stressful company setting is never easy.

 

As Paul McGee the Sumo Guy says,

 

If you had a fleet of a hundred cars but to save costs reduced them by twenty, what would you do with the remaining eighty?

Would you still service the cars and seek to maintain them?

Of course you would.

It would be both stupid and short-sighted not to do so.

But are organisations doing the same with their staff?

In times of cutbacks, austerity and lay-offs, have organisations decided to ignore the staff that remain and hope they'll get by without any support?

Research suggests that's a dangerous thing to do.

Please examine the following weblink: http://link.springer.com/content/pdf/10.1023%2FA%3A1025642806557

Work done by Mika Kivimaki and colleagues measured the health of over 800 people before any rumour of downsizing took place, immediately after and then three years later.

They then looked at which group of people - stayers, re-employed leavers and unemployed leavers - fared best in terms of health and psychological well-being.

It's no surprise that the worst affected group were those who were laid off and became long-term unemployed. But here comes the surprise. The next hardest hit group were 'the stayers', particularly men, who fared significantly less well than the re-employed leavers.

So what are we doing for 'the stayers'? What support are they receiving? What help are they being given to develop emotional resilience and the skills required not just to survive change but succeed through it?

In a short term effort to cut costs, are we treating them like a car that we'll run into the ground and not bother servicing?

You may save money that way. In the short term anyway.

But what about the emotional costs involved?

And how does such behaviour affect the long term health and success of the organisation?

 

All the above points underpin the fact that those colleagues left behind after a downsizing do need extra help and support. Their work content and hours should be monitored and support in terms of re-distributing workload between existing staff and bringing in temporary support should be addressed. If this is not the case then in the medium to long term the organisation itself is much more likely to suffer from increased levels of absence due to stress and its performance will suffer as well; all because it lacked the foresight to ensure that those staff who remained after a downsizing were well enough equipped to meet the challenges they faced.

 

Let's not treat our staff like the first beat up car that we all owned -- they really do not deserve to be run into the ground to be sacrificed on the altar of short term cost gains -- If that happens, in the long run, both the organisation and its staff and society as a whole will be much the poorer for it.