State of Change: Fear of Unintended Consequences

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Ever wonder why your CEO charters an exhaustive study of enterprise-wide sourcing potential, corralling resources to develop a business case that encompasses virtually every business function? Spends hours reviewing and posing questions? Gives you the kudos you rightfully deserve for pulling together a cogent assessment and compelling plan that saves the company millions of dollars/pounds/Euros with a rapid return on investment? Then goes dark for weeks, finally coming up for air to say "great job, but it’s up to the business lines/functions to decide what they want to do"?

It’s every sourcing leader’s greatest nightmare.  A passion for making a difference lead you to develop a compelling business case; only to then receive a quick dismissal, and it’sback to business as usual…supporting the CIO to consolidate IT vendors.

For a brief moment, it looked like the organization was ready to implement enterprise-wide change in the service delivery model and find opportunities to create business value in every corporate nook and cranny. But truth be told, if the lead stakeholder has no appetite, radical change is virtually impossible. Even incremental change is sometimes difficult to achieve under the banner of corporate imperative.

Why do CEOs turn tail when it’s time to implement?

The CEO did not deliberately set out to invest resources in sourcing evaluation, and then decide to chuck it all away. Give him or her credit for the right intention; s/he is most likely familiar with the benefits of alternative services delivery, and wanted to weight the cost/benefit—as any good CEO should. But when s/he was able to get a better picture of the business value created along with its attendant costs, implementation obstacles, potential for failure and personal risk, s/he hesitated. Call it the fear of unintended consequences.

Spirit is willing but the flesh is weak. Most CEOs "get it." They   see the big picture, but the exercise of assessing the potential and developing the strategy brought home the fact that enterprise-wide sourcing change is tantamount to very heavy lifting. Most importantly, unlike other corporate initiatives, which have predictable outcomes, the potential for and extent of failure is not clear cut. There are just too many variables—speed, scope, make or buy, solution, stakeholder support…just to name a few—for comfort. Should the CEO put his or her personal credibility on the line for an outcome that could backfire, when other leaders—function or business line—can take the risk and hypothetically achieve, in aggregate, the same outcome? Naturally s/he’s going to think a long time before proceeding.

Lower hanging fruit. It’s much easier and faster to rationalize a supply chain or undertake an initiative to change employee benefits. Enterprise-wide sourcing may be viewed by the CEO as an initiative that is too big to control; too complex to demonstrate quick wins; too long in duration to be perceived as a game changer for the organization; and too fraught with unknowns to be a sure bet.

Too much personal risk. Because of its scope and complexity, not to mention that it constitutes a major stake in the ground relative to his/her management purview, few CEOs know what to do if an enterprise-wide sourcing initiative fails. Chances are s/he’s never previously sponsored such a program. So concerns such as the extent of collateral damage, how the organization could be put back to the way it was, or who is ultimately responsible, become very real impediments to moving forward.

Is your CEO ready to champion?

Given complexity and risk, certain CEO profiles may not be candidates for aggressive sponsorship of enterprise-wide sourcing initiatives. It is critical to understand the context in which they are working, and their own personal agendas, when evaluating a CEO’s appetite to champion the cause. Therefore, consider whether the following apply to your CEO:

Riding High. Timing is everything. If the CEO is not positioned as a savior to cut costs and reposition the company, but as a strategist who will ramp up growth, chances are that globalization of the business model is not high on his/her agenda. Few organizations implement widespread business model changes when the potential for revenue growth eclipses savings from the sweat and blood of sourcing implementation.

Moved up through the ranks. Typically, internal executives who were tapped for the corner office have formed strong coalitions with other executives that have helped them get things done over the years. The top gal or guy may think compelling his/her buddy the CFO, or the divisional COO, to make a change in the business model is tantamount to destroying the delicate ecosystem of the management team.

Heading a business line-driven organization. In some organizations, the power to change is held closely in the business lines while the corporate center develops the strategy and directs policies and procedures that affect all, such as human resources or risk. The CEO may be aware that s/he cannot dictate to the business line leaders, or that expending political capital on efficiency, standardization and harmonization across the units is a suboptimal exercise.

Had little time in grade. New kids on the block may not believe they have the support required to rock the boat, especially if they were appointed to continue in a "business as usual" scenario.
 
Obsessed about legacy. The legacy "I entered new markets as a result of a new international strategy and product development, resulting in compound growth of 40 percent" is much more compelling than "I consolidated finance and accounting and moved the whole lot to India in order to increase efficiency and improve execution."  Improved services delivery is not a personal strategic differentiator on a resumé, or the topic of a business book.

How should the global sourcing leader respond?

Let’s face it—some CEOs initially flirt with the concept of enterprise-wide sourcing. However, if conditions are ripe, the first rejection can serve to build a strong foundation for eventual adoption of enterprise-wide sourcing. Stepping back, "benefit to cause" can accrue from the CEO’s inability to immediately champion radical sourcing change. Even in the face of initial rejection, savvy sourcing leaders:

Gain credibility. If the analysis and the approach are comprehensive and provide a fresh, new look at the organization, the sourcing leader will naturally gain credibility amongst management and peers. In a best-case scenario, the sourcing leader can use that credibility to refine the case for enterprise-wide sourcing over time; in any event, the favorable exposure to other corporate leaders can put him on the talent radar screen, opening up opportunities in other functions such as strategy or operations.

Suss out stakeholder positioning. Lack of an immediate mandate can be viewed as a helpful delay rather than a no. The exercise of depicting the art of the possible smokes out reactions, which allows leadership to group business owners in three buckets: those who will champion the change; those who will reject the change; and those who remain undecided.

Anticipate the pace of change. The planning exercise can anticipate the organization’s usual change trajectory and identify a full range of strategic, complementary, and competing initiatives that will have a bearing upon enterprise-wide sourcing implementation. For example, lessons learned during the exercise dimension what preconditions business lines must have to adopt change, or whether a strategic initiative will drive the company’s markets to become more global, making it more comfortable in locating operations offshore.

Identify another C-suite champion. Perhaps there is another champion waiting in the wings, such as the CIO, CFO or COO. It’s not uncommon for a CEO to delegate an internal change program to another member of his executive team, perhaps to his number two, who wants to make a mark on the company, or someone closer to the ins and outs of operations. If that champion has the full backing of the CEO, and the power to influence, s/he may be the right leader for enterprise-wide sourcing.

So the exercise took long nights, required some political capital, and cost more than a few providers’ business development dollars…all seemingly for naught. Was it really within the realm of the possible that s/he’d read a compelling deck, spend a few hours grilling the team, then stand up and shout, "Outsource the entire enterprise!" from the parapets?

Expecting such a response is disingenuous. Profound business decisions are not made immediately after reviewing a PowerPoint for the first time, especially one that affects every corner of the organizations and requires a whole host of stakeholders to be firmly on board for success. So, consider the development of a sourcing strategy as a necessary first step to put the cause on the corporate agenda. The proverbial stake is now in the ground, dimensioning the benefits and scope of change. The CEO has seen it; s/he "gets" it. Now it’s up to him/her to determine whether s/he can develop an appetite for adoption among the leadership group.

It’s difficult to take on the role of sourcing leader only to find that the appetite to adopt alternate business models is virtually nonexistent at a given point in time. But sticking with it is a necessity; empirically, on average, it can take as much as two or more years to develop the right strategy and get an organization on board.

Suffice it to say, if the CEO is not on board or has not empowered and endorsed a C-suite proxy, enterprise-wide sourcing change is nigh on impossible to accomplish. Executives, business line managers, and process leaders can all sense lukewarm support, and, best case, will only half-heartedly embrace the change. The role of the sourcing leader includes forging a line of sight into the process, challenges and benefits of enterprise-wide change. Successful change is driven from the top. So making the boss comfortable that all consequences are intended, is a critical first step.

The author appreciates the fortitude of the many capable sourcing leaders who push for enterprise-wide change. Keep the faith.

To read an expanded view on this topic, please visit www.sourcingchange.com

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. 

As a practitioner, provider and consultant, Deborah has learned about sourcing change management success by trial and error. Join the sourcing change discussion by posting your comments on www.sourcingchange.com or email her at deborah.kops@sourcingchange.com.