Human factor requires attention in outsourcing deals

Outsourcing a company’s IT department involves more than data centres changing hands and help desks moving to new addresses. Most large outsourcing deals also involve IT personnel moving out from under one organization’s umbrella to another’s.

It is this human factor that can prove tricky when it comes to smoothly transitioning through an outsourcing deal.

George Atis, a partner at McMillan Binch and chair of the law firm’s outsourcing practice group, said while the personnel side of outsourcing isn’t lost on the parties involved, employees are often lumped in with the technical, legal and business aspects.

“One of the things that good service advisors do is work with the client to make sure that they have specific transition and communication plans in place for employees that are going to be involved,” he said.

This is vital, because in order for an IT department to make the switch, employees need to be on board.

“You can exchange paper and technology, but if you don’t have the employees to do the functions, you’re nowhere. If you haven’t instilled confidence and excitement into the employees, you’ve got a deal that doesn’t fulfil anyone’s expectations,” Atis said.

Ron Keating, a principal consultant at PwC Consulting in Toronto, said most organizations are concerned with the fair treatment of their people, and take steps to ensure that the process does not damage their employees.

“They try to take care of their people as much as they can,” he said. “The more people feel that they’re treated fairly, the better off everyone is.”

Part of the reason for this is common sense: most companies face a transition period that can range from months to years, and it is prudent to keep retention and motivation levels high.

“At the same time, the aspiring outsourcing firm wants to get a high capture percentage of people transferring, and wants them to come across motivated and not ticked off,” Keating said.

According to Kenneth Nowlan, president and managing director at Vancouver’s GNA Consulting Group, employees facing an outsourcing situation go through a number of stages when preparing for the handover.

“The first stage that they typically go through is exhibiting a strong negative reaction. They think that the idea to outsource is wrong and that the company doesn’t need to do it,” he said, noting that this reaction is as common for employees who are prepared for the event months in advance as for those who have the news sprung upon them quickly.

Next comes rebellion, Nowlan said. Employees tend to want to fight against the deal and determine what can be done to avoid the completion of it, and will try to take some sort of action depending on how much time they’ve got, he said.

The third stage is essentially a resignation that the outsourcing is going to happen, and it is at this point that the reactions split between a logical and an emotional view of the situation.

“Some people are resigned to the fact that it’s going to happen and get involved in endorsing the process. They analyze what’s going to happen against their career path and get enthusiastic about the change. Others stay in denial still hoping that it’s not going to go through, and it’s this group that most often leave,” Nowlan said.

There is often a third group that stays neutral, and neither helps the process along nor works against the transition.

According to Nowlan, these three groups of employees exist in virtually every outsourcing deal, but companies that successfully sell what they’re doing and how it will benefit employees will have a greater percentage of endorsers.

However, Atis advises his clients to keep quiet at the beginning stages of the deal. Too much information too early can cause ripples among the employees who begin questioning whether or not the company is in trouble, and become concerned for their careers.

“It can be disruptive to morale and productivity, so should be kept quiet and only discussed at the senior levels,” Atis said. “When you decide to go through with the deal and transition employees, you need a lot of communication. Management should take time with employees, from the key people down to the juniors to communicate what’s going on in a detailed and frank fashion.”

He suggested that senior management and the human resources team should communicate face to face with employees and attempt to answer any questions concerning relocations, reporting structures, pensions and career paths.

While a percentage of those employees within an IT department will usually become displaced in the outsourcing process, those who move with the outsourcing organization tend to find expanded career opportunities.

“The promise that is universally held out to people is that the new work environment is probably going to have more professional scope,” Keating said. “These are people who are usually going from an environment where they are a non-core service function to an enterprise where they are the core function, so they can gain an enhanced sense of professional worth.”