State of Change

Welcome to the State of Change. In this column, you’ll find tips and techniques for dealing with the unique challenges of shared services and outsourcing change management, whether it is predicting responses, managing dissention, developing the right plan, coping with provider relationship issues, or communicating effectively.

Let’s be honest—the common wisdom views change management as communicating a location or "buy versus make" decision, but we all know what changes in sourcing is far more extensive than moving services to Kolkata, Kuala Lumpur, Krakow or Kalamazoo. There are so many moving parts that the implications of a sourcing decision make Linda Blair in the Exorcist look like she’s on valium; it affects relationships with internal or external clients, moves work from 40-year-olds to 22-year-olds, and changes the performance expectations of the retained staff—while at the same time affecting the employment of large teams, imposing new technology, implementing new policies and procedures, altering workflow, changing the cost structure, introducing a new culture, changing the organization’s structure, or adjusting the bar on quality.

Unlike more traditional change management initiatives which focus primarily on getting recalcitrant stakeholders to adopt a new vision or structure, operate within a longer time span, and generally have a happy ending for most stakeholders, sourcing change deals with so many more variables—and all at once. So what’s the crux of the challenge? Remember the old saying about the zebra not able to change its stripes? If an organization doesn’t implement a solution that deals with all these moving parts in light of its culture and structure, its experience with institutionalizing change, and the support and conviction of its management, success will be elusive. Fundamentally, sourcing yields a new model wherein the organization must adapt in one way or another; a sizable number of stakeholders must acquire new skills—or change their ways of working—in order to realize the business case, while others have to transfer their knowledge quickly and completely with no role in the new structure. Yet our industry’s usual approach to sourcing focuses primarily on supporting a financial model by costing processes and navigating politics, rather than designing a solution that stakeholders can adopt, embrace and ultimately expand with a minimum of muss and fuss. Paradoxically, business case attainment is predicated on the abilities of these very same stakeholders to work effectively within the new model, hence the need for sourcing change management.

What distinguishes sourcing change from traditional change management? Here are just a few of the challenges.

Sourcing change is revolutionary, not evolutionary.

Unlike traditional change management programs, which have the luxury to evolve over time, and yield a plethora of new opportunities for most stakeholders, sourcing change is tied to a business case bracketed by time which is expected to deliver a specific stream of benefits that all involved may not agree are necessary or possible. In effect, the end state is there for all to see in black and white, and the masses are supposed to get in line quickly. However, hearts and minds don’t fall in line with value propositions on Power Points, and there is limited time—often less than a year—to persuade stakeholders to accept the need for, and adopt, new ways of working.

Sourcing change must be implemented at the outset to be effective. It starts on the day someone says "we need to consider moving to a new services model."

Mention the term change management to a sourcing professional, and the usual response is "we’ll deal with it when provider or the new shared services location is selected, and it’s time to come clean with business lines/retained team/affected staff/business partners." By this time, change management is little more than an afterthought, and becomes the management equivalent of spoon full of sugar makes the medicine go down-- rendering difficult messages compliant and palatable. But by introducing change management in the very first stages of the sourcing lifecycle, organizations are able to develop the effective principles for program design; fit solutions to adapt to the organization’s ability to change; position a deployment strategy for success, identify obstacles so they don’t kill the deal; and start the all-important marketing and listening process to gain hearts and minds early on. Why wait to mention the change word when it’s too late to benefit?

Sourcing change never stops.

It’s not over when the teams agree the program has reached so-called "steady state;" it’s an ongoing process, like a ring that has no end. Fact is, as long as the delivery of any business process or function is reliant on human intervention, and the cast of characters, scope, and processes on all sides of the delivery model play musical chairs, managing change is a perpetual exercise.

Sourcing change is not logical. It is predicated upon 30% logic and 70% emotion.

Coping with emotional responses is very challenging for the majority of corporate managers—we are wired to deal with left-brained logic as opposed to right-brained, emotive issues. But each stakeholder group—and many individuals—will be unable to keep emotion out of the equation. Perceptions of reality will abound; some stakeholders will see sourcing as a taking of power and try to sabotage success, while others just won’t buy the value proposition. Some will lose friends and colleagues, while others don’t believe that it is safe to send work offshore. Because of sourcing’s high table stakes—making good on lowering cost, improving speed and quality and delivering innovation—all the while keeping the noise levels to a manageable level–developing a strategy that appeals to the corporate logic while respecting a full range of emotive responses is critical to gain support.

Sourcing change in each organization is unique.

No two cultures are exactly the same, and the business conditions that prevailed during the last change initiative are not always valid. "Corporate-speak," personalities, leadership imperatives, and business pressures always vary and impact the outcomes of a sourcing exercise. To be effective, timing, scope, staging, response models, human resources approaches and communications must be designed to be effective in the organization as it is today—not taken out of a change textbook.

Sourcing change patterns are generally predictable.

Depending on the characteristics of the organization, the change response is actually predictable. For example, a high growth organization’s ability to embrace sourcing initiatives is distinctly different from those of more mature organizations. Center-led organizations, no matter what the industry, accept sourcing change more readily than business-line led companies that tend to have the power to dispute mandated change. And companies whose assets are knowledge workers, such as law firms and consultancies, have their own, very predictable responses to sourcing change, which could be termed the "I’m special" reaction. Understanding these patterns alleviates the need to reinvent the wheel in order to quickly develop the most effective plans and interventions.

Sourcing change success is dependent upon good planning.

Surprisingly, few organizations develop a comprehensive change plan when implementing shared services and outsourcing. The plan is either styled as part of transition planning, or tossed into a human resources work stream, or forgotten altogether. But planning is key to understanding where to start, how fast to move, when to react, and how to alter deployment in order to deliver change that sticks.

Sourcing change depends on the goodwill and performance of soon-to-be redundant staff.

What an ask! In no other change management context are there staff that are expected to stay around for as much as a year, cheerfully and efficiently transferring their knowledge to others who will soon take over their jobs. Traditional change initiatives hold out the carrot of "better roles" as a result of change; when sourcing, the majority of staff does not have that option. Maintaining performance of staff during transition, ensuring that both process and tacit knowledge is captured, and giving managers the tools to cope personally and professionally, is of paramount importance in sourcing change.

Sourcing change is best led by those who know the secret handshake.

Change management is at the core of any sourcing initiative, so bringing in a merry band of consultants that don’t know where the booby traps are hidden is not a workable long term proposition for most organizations. The front line troops, who cajole, negotiate, design and plan—the sponsors, key stakeholders and transformation managers— must embed change management into their modus operandi, not relegating it to teams who have no deep stake in its success.

Sourcing change encompasses more than HR or corporate communications.

Sourcing is about changing the way people work when a new business model alters the rules of the game. And during the course of the sourcing implementation, these rules continually take a turn to the right or the left, driven by the business or the function. Therefore, the job cannot be relegated to human resources and communications leaders; rather, these functions are an integral part of the team, contributing a wealth of expertise relative to organizational, staffing and communications issues.

If you are not convinced by now that sourcing change is a make or break for shared services and outsourcing success, come back next month.