I always respect someone who has the focus and discipline to write a book – especially a particularly insightful book on "Outsourcing and Management". Thomas Tunstall Ph.D. has enjoyed a colorful career, highlighted by his running KMPG’s IT operations in Afghanistan (nice work if you can get it…). Tom now serves as co-chair of the Dallas chapter of the International Association of Outsourcing Professionals (IAOP) and is Advisory Liaison for ACS (but we won’t hold that against him). I asked Tom to give us a brief outline of his book, which you should consider reading now Gray’s Anatomy, Lost, 24, Sopranos, Ugly Betty and Desperate Housewives are all off the air:
"To understand why outsourcing – specifically the outsourcing of services – is completely overhauling management styles, we need to take a step back to see how we got here in the first place.
"As the large corporation blossomed in the late 1800s, it was first modeled as a stiff hierarchy, not much different than a sole proprietorship writ large. It then evolved into a multi-divisional form in the 1920s, which left finance and strategy functions at headquarters, but pushed operations and other tactical functions into the hands of field personnel. Although the structure of the large organization changed, the old hierarchical, manufacturing-oriented management styles endured for decades. A lot of those old school boys are still with us.
"Such antiquated management styles may have been okay during the manufacturing era, but the emphasis on services changes everything. When services used to be classified as merely overhead, they made up a small percentage of overall costs relative to raw materials and direct labor. They were safely ensconced within the walls of the old style organization.
"Now services are the products, and they contain a huge people component. The ability to readily outsource services, which now comprise over 80% of the economy in terms of employment, will strip down the old corporation to its core. All of the attendant functions and non-related processes will be turned over to specialists. This means that more and more work will get done outside corporate boundaries.
"This change in governance may seem unremarkable, but it will have a huge impact on management practice. Management behavior will be forced to change at long last – not because of goodwill or altruistic intentions on the part of management – but rather through the discipline of the market, the nature of the new rules of competition and the pervasiveness of services outsourcing. And make no mistake – the lessons will be harsh.
"Because the old governance mechanisms won’t work anymore as outsourcing and cross-organizational relationships become far more important, new management competencies will be required. Working with other organizations requires skills that many traditional managers just don’t have. Internal departments, for example, can be managed by whim or fiat. External suppliers can’t and won’t operate in such a fashion. The upshot will be that old authoritarian management styles will prove ineffective. Even laughable.
"Greater collaboration will become a must because it improves coordination. Management will be focused on outputs, process interfaces, and clear rules of engagement – all of which go part and parcel with outsourcing. Strong working relationships will win the day; idiosyncratic, ego-driven personalities will be an expensive luxury that few can afford.
"In the years ahead, watch the old school managers and executives retire early or be forced to bring new mindsets to the game. Many old school boys have become casualties already. Will you be next?"
Adapted from Outsourcing and Management: Why the Market Benchmark Will Topple Old School Management Styles by Thomas Nelson Tunstall (Palgrave 2007)
Thomas Tunstall Ph.D. addressing the IAOP in Afghanistan
Posted in : Outsourcing Heros