Productivity is the ratio of inputs to outputs. Doing more for less is good. Higher productivity is important at a global level for the sustainable use of scarce resources; at a national level as a measure of economic growth, competitiveness and living standards (especially in Western countries with aging workforces); at a corporate level as a measure of the efficiency of production and the opportunity to enhance profit; and at an individual level as a measure of personal contribution and, ideally, to free up time for other pursuits.
Outsourcing has aspired to do more with less but has typically done what has been called “the same mess for less.” Buttoned-down, tightly controlled outsourcing contracts that have reduced risk and cost have also limited creativity and re-engineering that could lead to improved labor productivity. Even outsourcing that brings access to greater capability and capacity on demand is often directed toward staff augmentation instead of freeing up people to focus on value creation.
Margaret Wheatley, organizational consultant and researcher, once said “Even though worker capacity and motivation are destroyed when leaders choose power over productivity, it appears that bosses would rather be in control than have the organization work well.” Outsourcing can bring this necessary control but sometimes at a price to individual capacity and motivation on the buyer side as well as on the supplier side. We run the risk of instituting the type of work that Wheatley calls “highly controlled mechanistic systems that only create robotic behaviors” and constraining productivity improvement.
Outsourcing to save money is necessary but not sufficient to create value for the customers, staff and shareholders. We need to shift the focus to productivity and to doing more for less.
The starting point is a clear outsourcing objective and operating model. As discussed in this ISG white paper, outsourcing is not a one-size-fits-all business solution, and outsourcing objectives vary in their degree of control versus their freedom to innovate, their degree of certainty versus creativity, their access to capability and capacity and their cost structures.