The outsourcing of corporate functions has become the
default answer in the current round of cost cutting. The numbers underlying
this trend are simple: reduce the headcount of people who you only use for part
of the year, then bring in consultants as you need them.
The logic is compelling, however, the problem comes when
everyone decides to do the same thing.
In the market right now, I am seeing major companies making
their technical subject matter experts ‘redundant’, with the accompanying
statement, “we’ll just buy in expertise when we need it.”
I would like to challenge that on two grounds; one, the consultants
may not be as expert as you think, and two, they may not have the experts
available when you need them.
Your team should be better than consultants
Your technical subject matter experts (usually engineers)
have spent years learning how your plant works over the various maintenance
cycles. They have been keeping abreast of trends and changes in technology,
they have been assessing the validity of claims by vendors and consultants, and
they have been tweaking and trying out changes to see how they help improve
production and reliability.
YOU CAN’T BUY THAT EXPERIENCE OR EXPERTISE FROM
CONSULTANTS!!!
I make a living out of selling consulting in these areas,
and even I think the trend has gone too far. [If you need a hand with technical subject matter experts, please give
me a call. ;-) ]
What you need is to be an informed buyer. You can’t afford
to let the consulting firms try out untested theories or to train up their own
people by learning things the hard way. That will cost you more money over the
next couple of years than keeping a few of the grey-hairs around.
Yes, you can hire in consultants and contractors to form
your owner’s team on projects, however there are two flaws in doing this in the
current market. First, with capital rationing and cost cutting in effect you
are unlikely to receive a budget adequate to do this. Second, the best people
to do this are the same subject matter experts who you have just let go – and they
are all on gardening leave or acting under restraint of trade clauses - so it's not a simple matter of hiring in someone who used to work for a competitor.
What happens when everyone decides to outsource, but not buy the service.
The biggest problem facing companies at the moment is that
everyone is attempting to outsource, but they are putting off using those
skills for as long as possible. In other words, they are firing their subject
matter experts, then telling the consulting firms that they will use them in
the future, but no one is buying the services for the next 12 to 18 months.
In case you hadn’t heard, most of the engineering
consultancies have reduced their staffing by 50% to 75% over the last 12
months, and, for the listed firms at least, if staff aren’t 80% billable, then
they are let go. In other words, if nobody is offering work to the specialist
subject matter experts, then the engineering consultancies can’t actually offer
the skills the companies need as they fired those teams before you could use
them.
The answer is to pay to keep your core competencies in-house
The antidote to all this is to recognise that your company has a
core set of technical competencies that need to be retained in order for your
company to maintain its competitive edge and grow in the near future. I am not
talking about keeping everybody – I am talking about keeping those people who
understand in intimate detail how your plant works, why decisions were made,
where you can take a bit longer in the maintenance cycle and where you can’t
afford to be cheap as it will cost you too much.
When a company is run solely by commercial types with an
attitude that everything can be outsourced, then you know your company is truly
in trouble. Sure you may be okay for the next 12-18 months, but if you don’t
maintain your core technical competencies, then that will come back to haunt
you.
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