The Truth about the people side of Outsourcing….

  • The Truth about the people side of Outsourcing….

    The Truth about the people side of Outsourcing….

    What you will learn:

     

    In a recent article we considered the privatisation of State-owned assets as one particularly high-profile example of outsourcing. There was a very important question left open concerning the people affected by the process.

     

    New Sam Wilko Advisory Blog by Peter Wilkinson

     

    In a recent article we considered the privatisation of State-owned assets as one particularly high-profile example of outsourcing. There was a very important question left open concerning the people affected by the process.

     

    This issue is typically debated from two broad points of view:

     

    1. Industry competitiveness; versus
    2. The national interest.

    As previously explored and with reference to Porter’s five forces analysis, the nature of competition within industries is constantly changing. Many domestic industries – infrastructure construction for example – are facing the reality of a shift towards international competition. This reality means competing with countries with access to resources and capabilities with a significantly lower cost base. Increasingly though and with the communications opportunities offered by the internet, companies can access products and services internationally to redress the balance and exploit the natural advantages of being located in a given jurisdiction.

     

    Governments, as our representatives in protecting the national interest, need to be concerned about the availability of meaningful work as a means of maintaining economic prosperity. This for many traditional industries involves managing the balance between protecting industries and their employees from the destructive effects of competition and facilitating the process of developing workforce skills that will be in future demand.

     

    So what’s really going on here is change in the nature of work.

     

    What does the future hold for our work lives? There’s plenty of discussion available regarding the trend towards outsourcing of repetitive tasks such as administrative work as well as semi-skilled assembly labour to manufacturing robots. But what might the issue of changing job skills look like for knowledge based professions?

     

    Paul Meehl was an American psychology professor who in 1954 wrote “Clinical vs. Statistical Prediction: A Theoretical Analysis and a Review of the Evidence”. In this he analysed the claim that mechanical (formal, algorithmic) methods of data combination outperformed clinical methods when pitted against each other in arriving at a prediction of patient behaviour. Meehl argued that mechanical methods of prediction would, used correctly, make more efficient decisions about patients’ prognosis and treatment. The results, which favoured the mechanical method, predictably caused a considerable stir amongst clinicians. Subsequent meta-analysis comparing clinical and mechanical prediction efficiency vindicated Meehl’s claim. Still today, however, clinicians make such decisions based on their professional judgment, that is, they combine all kinds of information “in their head” and arrive at a conclusion/prediction about a patient.

     

    Consider for a moment the implications of Meehl’s conclusions, particularly in areas of business endeavour where randomness is a significant driver of outcome. For example, consider the stock market where buyers and sellers essentially guess whether the market has efficiently priced a stock and transact accordingly. Over time there is no predictability of outcome and – intuitively – a well-designed algorithm offers 100% predictability of process that will in all likelihood perform better than a human.

     

    Conversely, environments driven by highly predictable cause and effect are candidates for mechanised services.

     

    There is still a space in between – for the foreseeable future at least – for what we term human intuition, which in effect is the application of judgement by knowledgeable, trained and experienced people operating in an environment with an element of predictability.

     

    So what does this mean for knowledge-based businesses? I believe that thriving businesses of the future will need to possess three key attributes:

     

    1. Multiple products and services that leverage knowledge and experience – the core asset – within the business
    2. Processes specifically designed to capture and build knowledge and experience and to generate innovative ways of applying this core asset in generating new business
    3. Resources and capabilities accessed globally on a value for money basis, wherever these resources may be located, to enable leveraging of the knowledge and experience within the business

    So what are you planning for your business to look like?

     

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