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Issue 12 November 2006
November’s Perform is here! Thanksgiving has come and gone and to be involved in the celebrations was very good. This time of year has many religious festivals although we forget the events behind the celebrations all too often. Sometimes it is hard to remember that working for a living is fun and we take everything too seriously! Plan to take the time to re-charge over the break. In fact, plan to make things go better in 2007. Performance improvement is what we bring to you.
After a dozen Great Leader articles it may seem late to stop and ask, just what is “Leadership”? You certainly cannot get away from the word. It is everywhere coming at us from every media. You can read our article by going to our website on this link.
This month we look at the practice of outsourcing. Outsourcing has become a highly emotive subject, joined through the media with the effects of redundancies and the flight of jobs to lower cost countries. Off shoring is a subset of Outsourcing: the process is sub-contracted to an organisation in another country. Outsourcing is a modern fashion. Henry Ford thought it wise to own or control the raw material supplies for his automobile plant. He owned iron ore mines, glassworks, a merchant fleet, a railroad, blast furnaces and an electrical power plant to ensure he could control everything needed to produce that black Ford automobile. Not many companies have achieved that height of vertical integration. Today auto plants are becoming assemblers of sub-contracted parts. Outsourcing’s bad publicity is usually countered by quoting from David Ricardo, an economist, who died in 1823. His work on “Comparative advantage” shows that moving the supply of goods to a cheaper country enriches both countries. His theory assumes a total flexibility in moving resources from one sector to another. It also assumes the comparative advantage between countries is flexible in the same way, adjusted through the currency exchange rates. Realistically it is farfetched to assume that the people who used to make ships on the Tyne have all moved to the City of London to work in the financial markets. Similarly, currency exchange rates are not free to find a “true” level. The UK and the US are running massive current account deficits. The UK now spends over US$4bn a month more than we earn (Source CIA – The World Factbook). Those stories of the containers leaving Felixstowe full of fine English air are true. The oil rich states and China in particular, are running huge current account surpluses. The Chinese are holding their currency down and investing in US Treasury bonds to keep the dollar up. This collusion is preventing the exchange rates finding a more equitable level, making Chinese imports and oil more expensive to the rest of the world, automatically reducing consumption. Outsourcing, and in particular, off shoring carries a heavy political risk because of the artificial circumstances created by this collusion. Outsourcing holds out the hope of creating and sustaining a competitive advantage. Given the apparent huge advantages what goes wrong? “Comparative advantage” is fine and if it works, it does take time to move resources from one industry to another. In the mean time people suffer a loss of livelihood. There are problems for the outsourcer too. Outsourcing should be regarded as a partnership. There are regulatory, governance, intellectual property and global economic issues to consider. Stories of child labour, unsafe working practices, stolen bank details or even use of prison labour do great damage to Western brands. Equally, the fashion for off shoring has created shortages of resources in popular destination economies. The single biggest cause of failure is a lack of detailed knowledge of the process. Sadly, the experts in the process are the people who stand to lose their jobs. If you are not good at managing your people, they may not be over eager to help you understand how your processes work in real life. Of course, if you are good at managing your people you may find that source of competitive advantage is already available in your organisation. Realistically though, it is economically necessary to take advantage of politically created windfalls. The final point is to beware of outsourcing your unique selling proposition. Following the herd to outsource today’s fashionable process may leave you with a vital piece missing for the future. In 1999, work started on MEMS (Micro-Electromechanical Systems) at the University of California Berkley. Headed by Kris Pister of the Robotics Lab the aim was to produce a sensing, computing and communicating system in a one cubic millimetre size. These dust motes, dubbed Smart Dust, could be scattered or carried in the air forming a
 sensor web covering a wide area.The project closed in 2001 having reached a mote size of a few cubic millimetres.
I do not know if a military project took up the challenge but Smart Dust reportedly aided the assassination of a senior al-Qaeda figure in Iraq.
Certainly, there does seem to be a lot of R&D activity in the next size up – the insect size. So the next time you take a swipe at a Bluebottle fly remember it may just be doing a TV audience survey!
The distributed intelligence idea is interesting though.
Henry Ford is attributed with the complaint that whenever he hired a pair of hands he got a brain too. Of course, these days we recognise that you cannot run a successful organisation without using all the brains you employ.
Is there a similarity between the distributed intelligence of MEMS and using the brains of your people in the organisation?
The people working the process should be the experts and sense first-hand the results. Their brains can compute data and they can communicate simply to their peers or their managers.
This is a huge amount of information to manage promptly. In reality, there are two solutions to managing this information.
 The most common solution is to ignore it totally, perhaps channelling the information into a Suggestion Scheme to limit the flow of information.The best way is to establish delegated authority at each level commensurate with the detailed information content. The manager’s role is delegating “who takes the decision” instead of taking the decisions himself. Look at Stafford Beer’s books, such as “The Brain of the Firm” for a fascinating insight into delegated authority.
How do you delegate decision making in your organisation?
Have we made you stop and think about your own organisation and what could be gained by improving things? If you are curious about the improvements in performance that are possible, or you would like to know how to solve specific performance problems, then resolve to make a difference this minute. Call us now on 01787 378851 or email performance@motivationmatters.co.uk to start improving performance. You pay people to come to work. What they do when they get there depends on their motivation.
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© Motivation Matters 2006
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Despite this, and according to a CIO Magazine survey, some 47% of outsourcing projects are cancelled due to poor performance.