In my last blog about the fiasco on the British rail network and the inability to complete scheduled engineering works over the holiday season, I questioned management’s response to the situation and its validity. It appears, however, that I may have been too quick off the mark in questioning whether it was an indictment on their management capabilities.
Further statements from management have expressed disappointment at the performance of the engineering contractors and thereby implicitly laid the blame at their door. Yet this ultimately does not change anything – the points are still valid and the questions remain: why was the planning and execution so bad that the problems were not identified earlier and contingency plans put in place to reduce the impact on the ultimate customer – the commuter?
This new explanation, however, does raise another very important issue. Who is to blame? In an age of political correctness it may be inappropriate to talk about blame, but the fact is that someone has to be accountable. And, in a world where outsourcing is rife, the question of who this is becomes crucial.
It seems entirely logical that, notwithstanding a business decision to outsource work, the organisation that is seen by the ultimate consumer to be the provider of the service being purchased should be the one which bears the onus of responsibility and thus should be held accountable. So, in this instance, notwithstanding the fact that they had contracted out the engineering work, Network Rail retains the accountability,and it was therefore incumbent on their management to ensure that proper plans were in place and that these were effectively implemented. Whatever service level agreements existed between the two parties are to all intents and purposes irrelevant at this stage; the public relations disaster remains theirs.
I cannot help wondering, however, if, in the wider scheme of things, this is something that management generally tends to overlook. In efforts to streamline organisations and remove operational problems outside the organisation, has management been too eager to embrace outsourcing as a remedy, without properly thinking the matter through? I suspect this is the case, and that this may be just one example of a potential iceberg that faces all businesses that have embraced the concept.
Outsourcing, by definition, adds another party to an existing customer relationship and so unavoidably complicates that relationship, perhaps distancing Operations from the consumer, thereby creating a risk of degradation in customer service. Furthermore, although the provider specialises in the service offered, this specialism likely precludes a picture of the total customer relationship. Combined with the pressures to keep costs to a minimum, this can create a tendency towards an homogenised product that becomes a commodity, undermining the uniqueness of the original relationship and potentially further undermining one or other, or both, customer relationships. While by no means inevitable, avoiding such situations necessitates the transferor business being on top of its own processes and performance, before any decision to outsource is taken. Unfortunately, all too often outsourcing is seen as a convenient way to reduce costs and/or to eliminate operational headaches, and thus it starts from a poor base which increases both the likelihood of customer dissatisfaction and employee disillusionment and disengagement. This would make degradation of customer relationship inevitable.
Without proper systems and key performance measures in place, prior to outsourcing, it is likely that service level agreements will be ill-defined and/or inappropriate for the longer term (and expensive to change.) While this may or may not have been the case in this instance, it highlights the potential danger for every organisation that has succumbed to the fashion for outsourcing. Fundamentally, outsourcing inherently conflicts with aims of good customer service, and since that is management’s ultimate responsibility, it is incumbent upon them to ensure that this is not lost sight of when considering outsourcing.
Good point that management need to prepare for outsourcing. This is a significant change and all change should be prepared for before being made. Also, this change should be managed, just as carefully as one would manage the change had it been a significant change in-house. There is another aspect about outsourcing I feel strongly about.
One of the challenges of outsourcing is to manage the outsource partner to the point where they feel co-responsible for the level of service that the outsourcer is providing to their customers. If I am having difficulty doing this with my own people I am just about certain to have even more of a challenge with an outsource partner. So, often, outsourcing is done when management do not feel comfortable with what they have to manage. They argue to themselves that what they want to outsource is “not core” – implying of lesser importance. However if what they are outsourcing is still a component of the core value chain or could affect it if not performed as needed (case of British rail?) this does not diminish the need for management focus – indeed it increases it. Outsourcing calls for more management, not less, in my experience. One outsources to reduce overall costs, but not without increasing management costs. You cannot have one without the other.
I really like the idea behind.
There are just too many to think about when you are in a business. It would be great if you will try your best if you have planed out a business strategy such as outsourcing, but of course like what businessman always bare in mind, all businesses are risk and can be susceptible to different sorts of problems.
Yes – managers do have an awful number of things to think about. That is why it seems crazy to expect them to do all the thinking. If your people are engaged they will be alert to any problems that arise and solve them before they embarrass the manager and/or the organisation.