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The Shell drivers strike shows failings of simplistic outsource evaluation

Shell Drivers strike and close down business – how not to outsource

So the Shell drivers are striking because they have had enough of relatively low pay – squeezed by their employer ever since they were transferred in an outsourcing deal.

Clearly someone at Shell decided that driving tankers was not their ‘core’ business, and/or that they could do this more cheaply if they could transfer it to another company who ‘specialises’ in this sort of thing.  Research shows that, particularly in service jobs such as driving, cleaning, catering, outsourcing companies do squeeze the salaries and terms of contract – how else do they make money?

But the one thing Shell clearly forgot is how important the work is to their success. You should never outsource things that are business critical! I have heard a number of senior managers say things like ‘well it doesn’t matter if the staff are upset about the outsourcing, they don’t work for us anymore’ – but they do!

I have written about these issues elsewhere – and I know we have some experts on BizFace who understand the contractual aspects in detail (my research is on the staffing side), so I hope this generates some discussion. I suspect a few outsourcing companies will be miffed – but have a look at the advice below and think whether the Shell situation fits:

  • Don’t outsource a ‘problem’ – get your own act in order first.
  • Don’t outsource purely to save money – there are many hidden costs in outsourcing and management time is often spent on the contact for years ahead.
  • Don’t outsource something that may be critical to your service function – think carefully about what is meant by ‘core competency’
  • Do work through all the potential problems that may occur – you will be relying on the law of the market not the law of employment contracts. Risks are often underestimated – particularly the employee aspects.
  • If transferring staff do follow procedures in a fair manner and ensure that you ‘over communicate’ so they understand what is happening and the rationale.

Also consider:

  • Assess links to business strategy and potential for activity to yield competitive advantage – if low outsourcing may be a solution.
  • Also assess the internal capability of your enterprise to perform, and how difficult it would be to improve – if low, outsourcing is a possibility.
  • Consider the future, how clear is your understanding of whether and how this activity will develop and change in importance – if stable and certain, outsourcing may be considered.
  • How integrated is this function with other areas – if highly integrated and complex, outsourcing may not be useful.

And always remember – if something goes wrong, how much of an impact will this have on your business?

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