Avoid Danger: Get Outsourcing Right

danger_cynicalviewThe title of the op-ed piece on the Harvard Business School Working Knowledge site was probably meant—and destined—to get a rise out of the outsource community: “How to Do Away with the Dangers of Outsourcing.”

I mean is it really possible to “do away” with the dangers inherent in any human or business endeavor? And if by danger the writer, Ranjay Gulati—the Jaime and Josefina Chua Tiampo Professor of Business Administration at Harvard Business School—means risk, well, the same thought applies. Business happens! Business is risky. There’s no such thing as a sure thing.

Gulati’s topic was the recent collapse of the Rana Plaza garment factory in Bangladesh, which he said should serve as a “warning for every company that has embraced the ‘virtual organization’ model and the outsourcing that goes with it.”

His point is well-taken, but perhaps a bit over-stated—a warning for “every company” involved in outsourcing?

It is certainly true that as the “Rana Plaza disaster and too many other examples show,” he writes, “every outsourced stop along the supply and production chains holds the potential for tainting the mother ship, exposing it to litigation and diminishing the quality and even viability of its offerings.”

He then espouses what he calls an “authoritative solution” that encourages in equal measure “entrepreneurial action and healthy self-regulating behavior” by the company and outsource provider.

But here’s my point: is it really smart to throw the baby out with the bath water? Rather, why not focus on getting outsourcing right rather than throwing your hands up and proclaiming there is risk. If someone has outsourced it should be because it is not a core competency. With that in mind does it make sense for someone to do something they are not good at?

Let’s think about it. I am 5’4’ and 115 pounds. We need a new roof. Should I not hire a roofing company because it is risky and someone or something could fall off my roof? I think not! I think the riskier bet is for me to be climbing around on the roof doing something I have no clue about!

I do think there are some excellent merits in Gulati’s article with respect to the “authoritative” style he describes.

As with all things, companies (like people) learn from their mistakes and by seeing what works. The Vested mindset and methodology follows the “authoritative” style by teaching companies and service providers the way to do outsourcing right. This includes collaborating from the start of the business enterprise by focusing on outcomes, not transactions, by agreeing together on clearly defined and measurable outcomes, and by establishing governance frameworks that operate with insight into the changing dynamics of the relationship.

So don’t throw out the baby with the bath water when it comes to the risks of outsourcing along the production and supply chains. Not “every” business relationship is destined for disaster – not if everyone is working to get it right.

Image: Danger by cynicalview via Flickr CC

Comments

  1. “Not “every” business relationship is destined for disaster – not if everyone is working to get it right.” – Love how you ended it, Kate! I have read that piece prior to me reading your reaction and I think we have come up with the same ones. Outsourcing is best for businesses, especially SMEs and startups, when it is done right. I’m glad to read that there are companies that teach both parties (clients-to-be and outsourcing providers) how to do outsourcing right.

  2. I definitely agree! And, you’re welcome, Kate. 🙂

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