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The Human side of outsourcing – managing people change

In an earlier article I discussed my research into managing the transition of people in an outsourcing situation. I highlighted the problems people experience, anxiety, lack of control, resistance and reduced performance. Many also found it very difficult to treat their previous employer as a client, and were not able to feel a part of the new company to which they had been transferred.

An outsourcing transfer can be viewed as a form of transition. This change process involves involuntary movement from one company to another, with possible similarities, from the staff point of view, to mergers and acquisitions. The transfer may also include staff reductions or ‘downsizing’, and the new organization will make some effort to develop a relationship with their new staff in the form of organizational socialization. All of these transition processes are likely to impact upon perceptions of justice – in other words, whether people feel they have been treated fairly or not. These perceptions are important as there is substantial evidence that if people feel they have been treated unfairly they are far less likely to perform well. However, of specific interest here is the repeated finding that good attention to procedural justice concerns can increase perceptions of fairness even if the outcomes are unfavourable. If we assume that, at least initially, staff will view the likely outcome of being forcibly transferred to another organization as unfair, it may be possible that procedural justice will reduce their perceptions of unfairness.

What do we mean by Justice? Distributive justice considers perceptions of fairness of outcomes (equity, equality, and needs). Procedural justice emphasises the importance of fairness of the methods or procedures used (decision criteria, voice, control of the process), and Interactional justice is based on the perceived fairness of the interpersonal treatment received, whether those involved are treated wish sensitivity, dignity and respect, and also the nature of the explanations given.

I have had some people ask me why they should bother about how people feel if they are no longer working in their organisation.

For most companies who outsource, the staff will still be required to carry out work for them, albeit under the management of the outsourcing company. It is also possible that at some stage the organization will wish to back-source (bring people back in house). My ongoing research indicates that organizations will experience problems if they do not attend to the needs of their staff during the transfer process. To manage justice perceptions it is important to ensure you do communicate and that the process is viewed as fair.

Some of the practical considerations for the transfer itself therefore include; effective and ongoing communication of the business rationale, a focus on procedural and distributive justice, training of managers to ensure open two-way communication and interactional justice is enabled, and accepting and working with the emotional aspects of the transfer rather than pretending it does not exist.

An aspect not often considered at all by organizations is after the transfer. It will be important to ensure remaining staff receive clear communications regarding the changing roles (their own and their ex-colleagues). A balance will need to be made between letting go, so that transferred staff do not feel they cannot move on, and creating barriers to communication. Most importantly, consider how the contract influences your relationship with them. In the UK for example if the tupe agreement includes a mapping-on of salary increases or other awards it is vital that a process is put in place to ensure this happens, rather than forcing the transferred staff to continually monitor the situation.

So do think about the people side of the transfer if you are outsourcing, and remember that you need them to be motivated and to continue to perform. Achieving this will be difficult and should not just be left to the company you have chosen to outsource to.

Getting ready for change carrying out a readiness assessment

Change Readiness

Many organizations find that change programmes, even apparently straightforward changes, fail to achieve their objectives. In many cases this is due to unclear aims, uncertain plans and a low awareness of what is required of the people involved.

Research has shown that a clear understanding of the current organizational situation, readiness for change, and the requirements for different stakeholders to enable the change, will help to increase the chances of success. An organization needs to understand the positive aspects of current attitudes, processes and behaviours that can be actively used to drive change, and the negative aspects that need to be reduced or controlled to avoid errors and reduce resistance.

Management Studies

In management research it is suggested that all components of change need to be assessed to gain a complete understanding of the level of readiness:

Management research emphasises the rational and political aspects of change, but tends to suggest that emotional responses are problematic. Much of the research is based on case-studies and tends to be descriptive, analysing change after the event and offering prescriptive solutions.

Psychological Studies

Psychological research focuses on three aspects of the individual during change, cognitive, emotional and behavioural, but also emphasises how the structure and situation within which the individual experiences change will influence their reactions. Emotions are accepted as a part of human nature, and both positive and negative aspects taken into account. Although this research also uses case studies, the concepts are backed up by tested theory and grounded in psychological experiments, enabling a much clearer view of cause and effect.

Psychological aspects of change:

Research in this area suggests that employees often view change as a signal that the organization may be reducing their side of the psychological contract, unless communication is clear they will tend to interpret any change as a potential loss. Many will experience anxiety and feel that their current schemas or mind-sets are challenged, which will increase anxiety further and lead to emotional contagion within groups. Psychological research also emphasises the importance of fairness or ‘justice’ perceptions during change, and how carrying out an assessment can be used to develop positive perceptions of ‘anticipatory justice’ to facilitate the actual change process.

Knowledge about the correct application of techniques to reduce anxiety, develop trust and commitment, adjust schemas, and help staff through processes of emotional and rational acceptance, will lead to positive behavioural outcomes. At the same time the correct use of behavioural reinforcement, goal setting, and role modelling will feed back into behavioural, emotional, and cognitive aspects.

Recent psychological research has also led to an awareness of the importance of considering both structure and agency in preparing for change. This suggests that it is important to assess and where necessary change the rules norms and roles that have developed in the organization. Consideration of organizational culture and history are important.

There is also now increasing evidence that organizational discourses (how people talk, the words they use, the stories they tell), strongly influence employees approach to change. Past experiences of change influence a persons approach to current and future changes, how groups of people talk about change can be an important part of the process. Although history is difficult to re-write, and cultural change is known to be extremely problematic, organizational discourse can be influenced over time, and analysis of this is another important tool for assessing change readiness.

Integrating management and psychological theory leads to seven key aspects of change:

A Holistic Approach

Many change consultants focus on the individual, arguing that individuals change not organizations. However, research suggests a more complex approach to change is needed, the organizational processes and structures need re-alignment to enable the individuals to change. Therefore a more holistic process is required, that takes into account the full range of likely barriers and enablers, all of which are interconnected, as highlighted above. All these aspects need to be taken into account when analysing readiness and designing each stage of the change.

Change Readiness Assessment

The readiness assessment includes analysis of the behavioural, emotional, cognitive, structural, rational and political aspects of the organization, specifically analysing the following areas:

o Values & goals
o Perceived management support
o Individual and organizational ‘self-efficacy’
o Perceptions of the history of change in your organization
o Communication flows
o Current & future measurements and rewards
o Change willingness x stakeholder
o Resources (availability, limitations)
o Processes (suitability, requirements)
o Management structures
o Administrative support processes
o Technology
o Knowledge levels
o Future-gap awareness

The methods used can be based on action research (therefore accepting that the assessment itself will generate some change, and actively using this) and grounded in the psychological and management literature, it will include:

o Focus groups to increase understanding of the above areas but also inform regarding communication processes and underlying blocks or channels for change promotion or resistance.
o Interviews with key stakeholders which will also enable assessment of private or sensitive issues.
o Survey instruments to add a quantitative element, provide access to a greater number of stakeholders, and enable some measurements for before and after the change.

As openness of communication is a key aspect of successful organizational change, it will be important to feed-back the findings to the people involved. Indeed, this feed-back activity will be an important mechanism in generating a positive approach to the change.

Readiness Assessment as part of the Change Process

Analysing the organization and the carriers and barriers for change is an important first step in any change process. Without this analysis it is difficult to assess what steps need to be taken to mobilise change. Perhaps more importantly, carrying out the assessment also enables the future change to be contemplated, discussed, and envisioned, with a potential loosening of current mind-sets, and pre-acceptance leading to increased push from all stakeholders. However, the process needs to be managed in a professional manner, making good use of psychological techniques to facilitate a positive outlook, as research suggests attitudes solidify early upon hearing of an imminent change and there is a need to secure a favourable sentiment from the very beginning.

Benefits of a Change Readiness Assessment

By carrying out a change readiness assessment an organization will enable:

o Increased likelihood of a successful change
o Clear objectives for the change
o Related measurements to enable assessment of success
o An understanding of what needs to be done to enable change, across a broad range of areas (processes, attitudes, behaviours)
o An increased understanding of the need to change for all stakeholders

Ethical Considerations

All assessments should be carried out under British Psychological Society code of conduct guidelines or similar code, by highly qualified consultants. All data should be collected, reported and stored to ensue anonymity and confidentiality. All participants will be offered the right to withdraw, and it should be stressed that participation is voluntary. As highlighted earlier, the information should be fed-back to the staff, which will also facilitate the start of the change process.

Forced Change in an Outsourcing – guidelines for communicating to reduce resistance

Forced Change in an Outsourcing

Change Managers in an Outsource often assume that if the rationale for change is made clear to the people affected then change management is unproblematic and resistance negligible. People assume that if we rationally explain to the employees affected they will ‘buy-in’ to the process and thereafter work actively to realise the change or at least moderate their resistance to it. There is a assumption behind all this that changes are negotiated and developed over time and that the change agent’s task is but to make clear the imperatives and the people fall into place – communication mechanisms (usually Slide-Ware) are the main carriers of this type of intervention.

Whilst this approach has been roundly criticised for ignoring political and social aspects it is also more and more disturbed in major system changes. In outsourcing or mergers and acquisitions we are often faced with transitioning organisations within a strict deadline. Here the degrees of freedom are limited and failure to successfully implement can result in stiff penalties for time and cost overruns. In such circumstances our room for ‘negotiation’ is constrained as the change outcome is a given and the people affected are faced with a forced change.

Of interest to us as managers and consultants in such circumstances is how we support the change in particular minimising the business risk, defusing change resistance and avoiding long term damage to the organisation.

Forced change against a strict deadline is the reality and we also see that the complexity in a major change is increasing as many major programmes consist of several big initiatives in their own right. In one major change programme I worked on the client was disentangling from a parent company, implementing major systems changes, whilst outsourcing a part of the operational IT. All of these forcing substantial changes in role and responsibility right across the organisation and this programme also included the outsourcing of substantial parts of the finance function in a phase two.

Don’t forget Managers are affected by an Outsource as well…

At a management level change of status assumes high importance with any perceived loss in autonomy or the need to acquire new skills key aspects to consider. In another change programme the author was involved in the financial controller had a significant change in scope as a result of a system implementation and outsourcing which included loss of staff from her department. This resulted in much prevarication and concentration on detail, non-acceptance of the rational for change and question/problem raising that came over to the central project team as structural resistance.

Also don’t assume managers know how to support their staff through change – because they often do not. Special training and development is necessary. Also be sure that the management has bought in, in one case the stiffest resistance came from the team leader whose scepticism fed the resistance of the whole team being outsourced.

Three Key points in managing change communication

  • Relevant – We all know the value of clear communication but forget to caveat this with the need for relevancy. Exhortations of the value of the change at high level are useless unless made clearly relevant to the people affected. Unless the communication is explicitly tailored to the hearer’s specific needs general broadcasts will be discounted and perceived negatively.
  • Clear – Avoid the ‘Englishman on Holiday’ change communications approach – i.e. if they don’t understand speak slowly and louder! At a feedback meeting on the situation at a French manufacturing plant the consultants gave a withering overview of the impact of the various initiatives, changes and improvement programmes a major high technology company was imposing on the factory. The response to this from the company – “the management have not explained this clearly enough therefore ‘they’ do not understand it” – obviously they did not get the message either!.
  • Segmented – People in change need focused information – how does this new system affect me? Will I still have a job? Will I be able to cope – will they train me? This means communications must be relevant, focused and bespoke aimed at a segmented audience – don’t treat people as the same with the same vanilla information requirements.

Some interventions I have used

  • Local briefings at department or group level to strengthen team feelings of unity and develop focus on the task in hand.
  • Cutover process – form well managed meetings to act as resolution and solution forum to build for the change-over.
  • Tighter linkage to the change-over particularly for the management to expose the organisation to the task in hand and encounter change.
  • Activate processes to resolve/close personnel issues — close these issues managers often have difficulty in handling these.
  • Mentoring management to actively participate and lead change
  • Visible presence of change manager to emphasise the company’s commitment to making the change over
  • Reflect listen but not judge issues — allow self-reflection.
  • Ensure deployment communications is done (Watch for gate-keeping in one project when I checked the communications had got no further that the secretary)
  • Provide recognition of any process improvements ideas and try to push upwards any ideas the team has.
  • Recognise that resistance is a legitimate concern for the well-being of the business.
  • Ensure communication channels are open and deployed (again this is sometimes not done).
  • Hire a consultant to act as change focus (reflecting with support but not judging)
  • Tighter engagement of the organisation into the change process — they will switch to solve mode.

As an endnote — Know the limitations of rationally based change methods and avoid broadcast communication. Target and segment communications at the various groups in an organisation and you will be much more successful and managing communicating even bad news. When we design a marketing communications approach we segment our audience and focus messages at specific target groups – this is a lesson we could use within change management.


Change Management Practice: Just do it – sometimes you have to act

Change Management Practice: Just do it – sometimes you have to act

I was giving a lecture on change management the other day and the class and I were deep in discussion about involvement and ethical behaviour when one of the students asked ‘but what if we don’t have time for all this pink and fluffy stuff?’

I was a good question that needed a clear response and to some extent my answer is a little surprising coming from a confirmed pink and fluffy person like I am – my response was ‘sometimes you have to act’. When an organisation is in dire straits and on the brink of failure or when to enter a new market a new process has to be implemented then there is simply no time for long discussions to get people on board the change manager has to act and get on with it.

What this means is we have to seize the moment and implement a new system or close down a department sometimes in the teeth of stiff opposition. The ongoing discussions needed to bring people with us or the time needed to make those in the process ‘make sense’ of the situation is just not available – we must act.

But does this mean we need to be brutal or cavalier in the way we treat people? – well no – we do not have to behave in this way in order to get the message across. The key is to behave ethically and make the process transparent that needs to be gone through and explain openly how the change process will effect the persons concerned in a clear and relevant way. People respect managers who spell it out as it is without and prevarication or weasel words – ‘Say it as it is’.

What this means is, if say, a department is to be outsourced and there is a good chance that substantial people we be let go, you tell the full story. Concretely: ‘Your department is being closed and moved to the new Company – you and several of your colleagues will have to leave’. You make clear the process that is about to unfold in clear words (the person will be in shock at this time) and tell them to think over what you have said and invite them back when they have had time to think it through to discuss their feelings and concerns. Expect defence and emotion, this is normal, but respond in a clear way – do not prevaricate – stick to the line explain the process and allow the person to internalise the consequences. When giving bad news as in this case leave no room for doubt of what is occurring avoid constructs like ‘you may be selected’, ‘there’s a chance that some of you may stay’ and so on. This only raises an expectation that they will survive. In the same vein if you are asked ‘will there be job losses?’, say ‘Yes I expect many will leave’.

I know this seems hard but research has shown that when bad news is to be given out people are very resilient as long as it is clear they are not being singled out (a fair process is in place), that there is a valid reason, and the process is transparent and applied equally. What we as managers have to understand is it is our job to treat people fairly and ensure their self-esteem is protected and they are given the grounds they need to rationalise what has happened. Aggressive, perfunctory methods of change management do not work (so put away the phone no texts that people are sacked) and are a sign of management incompetence or inexperience – do it right and your people will respect you as a person who treated them fairly in difficult circumstances.


What makes a good decision maker – the three ingredients

What makes a good decision maker – the three ingredients

A 2004-2005 Teradata Report on Enterprise Decision-Making showed that over 70% of the respondents in their survey said that poor decision-making is a serious problem for their business. Other research in the UK conducted by the research agency YouGov for the Investors in People organization highlighted the negative impact that poor decision-making was having on employees. Other research in the area of organizational performance is consistent, with some suggesting that well over half of all decisions fail in some way. Specifically that the outcomes of the decision making process was poor – the ‘wrong’ decision had been taken or simply never implemented. It seems obvious that if decisions can fail for up to half of the time then organizations need to pay very close attention to the quality of their decisions and the people carrying out this role, but to-date, there is not much evidence that they are.

Decision-making is an age old problem that is being compounded today by increasing knowledge, population, complexity, speed and change. The number of decisions being made is increasing as is the pace of change and the number of people in an organization involved in the thousands of day-to-day decisions, from a new product launch to a decision on a new hire that have to be made. Decision-making is an essential requirement of management especially at the senior level and is perhaps the true core competence of leaders … ‘our society has largely neglected the fact that sound judgment and decision making are the crux of many professions’ (Smith et al 2004). The very best leaders appear able to make crucial decisions effortlessly ‘standing on their feet’ drawing on unseen resources of domain knowledge and experience that set them apart from the crowd. How effective managers and staff are in general at making good decisions is a moot point and understanding the process of high performance decision making is becoming critical to organizational success.

Problem-solving and decision-making are closely linked as each requires creativity in identifying, developing then evaluating options from which a course of action needs to be chosen. A problem always denotes that there are options to be chosen from – if there is a known solution then this is a puzzle not a problem. A decision is basically a problem solving process under uncertainty, so the steps or stages of decision making are more or less the same as those for problem solving. There are many n-step problem solving routines to guide decision making but at the heart of the decision making problem are the following three main aspects: how the problem is seen, how alternatives are generated, and how the decision is actioned.

The three key aspects of high level decision making:

  • Proactive cognition is a feature of people who actively seek to change the environment and not passively react to it. People strong in this feature scan for opportunities in the world preferring to make choices rather than follow procedures and create novel options by seeing problems differently rather than considering just the obvious.
  • Deciding is about making the decision, weighing and chewing over the options and above all considering the risk of alternatives. People who are high in this ability often draw on extensive domain knowledge and experience enabling them to make mental short cuts and come to a decision apparently quickly hiding the deep processes really going on.
  • Finally Action Control – making and enacting the choice. The effective planning and scheduling of actions to deliver the decision are examples of behavior of people who are able to ensure that decisions are not postponed, procrastination is avoided and decisions are implemented without delay.

A good decision is the direct result of clear criteria, the scope of the choice to be made together with the risk of each alternative – then taking action. From this perspective a good decision is the outcome of a process of optimally achieving a given objective from a certain starting point. A good decision is a logical one (or at least defensible and traceable) based on the available knowledge to hand that answers a particular organizational problem. Measuring whether or not decision making is good or bad needs to assess both the process and the outcome, the effectiveness and the quality of the decision making, as these are two quite distinct things. Effectiveness is how well the process of decision making is managed and how learning takes place – what caused a poor outcome to occur is fed back into the process. Output quality is to some extent comes well after the decision has been taken and is a reflection whether the right choice was made as well as on how well the choice was placed into action and implemented. There are many examples, particularly in the political world, where there is an assumption that the decision is the same as the implementation. A good decision making process therefore integrates the choice with the implementation and looks at the outcome to ensure learning takes place.

It is this latter point that completes the circle – it is a balanced decision making process that seems to be about right. Consciously attending to all three areas of the decision making process is key. The seeking of ways to control and act on the world, weighing up options carefully thinking about the choice then ensuring implementation takes place are the three key facets of effective decision making and features of high performers. When this balanced process is in place in more organizations perhaps then can the abysmal performance we currently have in this core area be improved.