“It’s on the factory floor that we innovate and we come up with new products and new processes, if we lose the factory, not only are we losing today’s skills, but we lose the skills of tomorrow and the day after, and that’s really hard to get back.” – Honig-hausen
Late last week an article caught my eye where the UK House of Common’s Public Accounts Committee complained that accounting firms were “cheating” by writing the Tax regulations for the UK Treasury and then exploiting the same Tax regulations that they had written for the benefit of their customers.
At first sight you are probably expecting me to talk about conflicts of interest but I am going to go a step deeper, and talk about a sickness that has invaded almost every aspect of life: outsourcing.
If you check the modern management bibles then you will be taught that outsourcing is the answer to every problem you have ever encountered. And you can outsource every aspect of your business to become ever more competitive.
In economic terms there is truth in these promises. How can a decently run factory or office, where the employees have good wages and working conditions, compete in cost terms with near slave labor and concentration camp working conditions.
So we find the seductive cost savings make leaders outsource more and more of their operations. The final goal appears to be sitting in a sumptuous chair, doing nothing except watching the reports from your outsourced empire.
The situation for an organization can be compared to the choice between lounging all day watching other people dig and manage your garden or to be involved with digging and managing the garden yourself.
In the short term it is very rewarding to have other people do everything for you. But it makes you weak. In fact it makes you so weak that eventually you are not physically or mentally able to manage your own garden (or business).
At some point the people doing all the work for you realize that they know more about your business than you do and then the power dynamic changes. They control you and then sooner or later they start to produce their own versions of your core business. But because of the work they have been doing they are lean and efficient while you have become weak and incompetent. In short they eat your lunch.
There really is no point complaining when this happens, like the UK House of Common’s Public Accounts Committee has done about the accounting companies. The fact is when you no longer have active involvement in your core business you have sold control of your destiny, or the destiny or your organization.
Outsourcing is not bad. But leaders and organizations need to know their core business. The moment you delegate that to another entity you become less involved in that core activity, less expert, less able to innovate, less able to lead.
Leaders should recognize that there are other ways to make their products attractive beyond just cost. Innovation and quality never went out of style. We, as leaders, just became too lazy to undertake the hard work needed to achieve them.