The inner cost of outsourcing

Savvy CIOs know there are a plethora of factors to consider before deciding to outsource. How much will outsourcing cost? How long will it take? What technical skills are required? What are the economic risks?

But even the smartest CIOs can miss one of the most important considerations — the human cost of an outsourcing decision. In the best-case scenario, where there is decent communication from management, and workers keep their jobs or smoothly move on to new ones, the attendant changes can still cause fear, uncertainty and doubt. In the worst case, a major outsourcing decision can have devastating effects, triggering deep depression and even violence among affected employees.

Mark Goulston, senior vice-president of emotional intelligence at business consultancy Sherwood Partners Inc., and author of the upcoming Get Out of Your Own Way at Work (Perigee, 2005), says the pressure CIOs are under when making an outsourcing decision can cause them to ignore the psychological effects their decisions may have on their employees.

Goulston, a practicing psychiatrist for the past 20 years and coach to Fortune 500 executives at FedEx Corp., General Electric Co. and IBM Corp. among others, says that’s a major mistake. Choosing not to address the emotional toll an outsourcing decision can have may lead to actual costs, in the form of reduced morale and productivity or an unsuccessful outsourcing relationship. And turning a blind eye to the human price of outsourcing can erode a CIO’s overall effectiveness in the eyes of his colleagues and his employees.

CIO:Why should CIOs consider the potential psychological effects of an outsourcing decision on their employees, both those who will be directly affected and those who are not?

Mark Goulston:The simple answer is you never know where you’re going to be down the road. The way you treat people has a way of coming back to you. To treat people with consideration at least — even if you can’t muster up actual compassion because you’re so left-brained — it’s the kind of thing that will get you respected not only as a CIO but as a leader. The less you consider people, the more you will diminish your own success and career.

What happens to employee morale and productivity when rumours of offshore outsourcing and attendant layoffs are afloat inside a company?

Rumours are really destructive. They metastasize through the fabric of the company. If a company is reassuring its employees one week and making job cuts the next, that’s even more traumatic for people because they can’t believe what they’re being told. Uncertainty breeds fear, fear breeds panic, and panic breeds paralysis. Employees who don’t panic start polishing their r

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