Publication Date: May 9, 1997

Related articles: Outsourcing Evolves as a Business Model and Outsourcing: After the Honeymoon

Outsourcing in the Workplace: Keeping Everyone Happy

By Ken Shulman

The specter of the IT outsourcer continues to haunt the American workplace. Process changes. Job redefinition. Job loss. Often a mere rumor that management is considering an outsourcing arrangement is enough to send employees into a panic and productivity plummeting. No wonder, then, that many companies try to keep outsourcing negotiations secret for as long as possible. Some companies even ask potential outsourcing vendors to sign their guest logs as "visitor" or "supplier" so as not to raise employee suspicion. But is this fair? And more importantly, is it good business?

"I believe it is important to communicate with your work force as early as possible and to let employees know the full business reasons that the company is considering outsourcing," says Frieda Gillespie, director of presale support and migration at Litton Computer Services in Woodland Hills, Calif.

"Employees are typically interested in the future of the company for whom they work. The more open you are with them from the beginning, the more cooperative they will be throughout the process. You have to let them know that you care about them. Even if they are eventually going to be displaced."

The arguments supporting the case for an open transition in outsourcing are both practical and humane. Management typically turns to outsourcing to improve productivity and maintain or cut expenditures. In some cases, these goals can be attained with wholesale dismissals. But as most IT outsourcing agreements involve the retention of a large percentage of the existing work force, the alienation of employees can jeopardize the success of the transition and of the outsourcing contract.

"No transition that occurs in an outsourcing arrangement makes people happy," says Ron Gallagher, president of Oust Consulting, a private IT outsourcing consulting firm in Paradise Valley, Ariz. "But if you create a climate of uncertainty among your employees, you've done a wonderful job in freezing your organization. In many of the deals that I help arrange, up to 90 percent of the existing work force will still be delivering services to management after the change. The last thing I want to do is alienate these people. It is incumbent on management to tell employees as much as possible. And to figure out a fair and equitable treatment for them."

For human resource professionals, there are myriad issues to be resolved in the course of any outsourcing negotiation. How many of a company’s employees will be hired by the outsourcing vendor? Will their salary and benefit levels be equivalent with their new employer? Will any gender or ethnic group be discriminated against by the transition? If an existing employee turns down a job offer from the outsourcer, can he sue his previous employer for termination? Will employees who have changed jobs but not desks still have access to company health clubs, functions and bonuses?

"The human resources department has to be an integral part of the core team that hammers out the outsourcing agreement," Gallagher stresses. "Only they are in a position to address the concerns of each individual employee and to negotiate a winning deal for them with the outsourcing vendor. Human resource people can also explain that some of their current employees--particularly those who are wedded to the IT profession--their long-term future will probably be brighter with an outsourcer, because that outsourcer puts a higher value on their core competencies."

Although fears of mass dismissals may be exaggerated, most outsourcing agreements do involve some level of job loss. One of the trickiest issues is maintaining morale and productivity among employees who know they will be terminated after the transition period.

"Part of being open with your employees is coming up with a plan for those who will be laid off," says Tom Schoen, former senior vice president of sales and current consultant for Affiliated Computer Services in Woodland Hills, Calif. "You have to properly reward them for staying around and helping in the transition. And you should allow them the flexibility to go to job interviews during that time. Bonuses and a generous severance package can be very effective here. I have never seen a really good data processing employee out of work for any length of time. Assuming this employee can get a job, he might want to stay on, collect his bonus, and maybe even kick back for a month or two before he begins his new job search."

"If you get employees involved early on, then the project becomes part of their concern, even if the project will eventually cost them their job" says Gillespie. "This is something you can expect of your good people. They wouldn't be in their current positions if they were not professionals. To expect less of them would be to do them a disservice. Time and time again, I have seen people rise to the occasion in these situations."

Ken Shulman writes from Cambridge, Mass.

Frieda Gillespie and Ron Gallagher are featured speakers at DCI's IT Outsourcing Conference. Please see the latest online brochure for program and registration details.

For more on this topic, please see Outsourcing Evolves as a Business Model and Outsourcing: After the Honeymoon.

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