Outsourcing is the latest fad to fail in corporate America, but it needn’t be so. The trouble with all of these fads is that they attack a symptom, but never address the root cause. If your company has tried it, you are aware of the damage it can do. If your company is talking about trying it, start looking for a different job, because it is going to ruin your business. Miscommunication, shipping delays, slipped schedules are all leading to longer and more costly development times than with local engineering forces. Not to mention the 10pm and 7am meetings to make it easier on the Indian development team. Language barriers, shipping tools and evaluation boards…. And if your competition gets to market first, who cares if you get there under budget? All this to save a penny on engineering cost, when engineers are the bottom of the totem pole, the lowest paid level of the product development chain.
In a study of over 100 companies with over 50 years of operation, (companies very likely to be top-heavy), conducted by Harvard Upstairs Business College, and published in the Journal of Data Obfuscation, it was proposed that “the outsourcing of middle management is the only viable outsourcing avenue to improve profitability.” The study found that roughly 50% of the workforce was the engineers at the bottom doing the actual work to make the products that keep these companies going. 35% was management, and the remaining 15% was operations (finance, HR, and Sales/purchasing). What was astounding was that the bottom 65%, composed of engineering, sales, finance, and human resources), only cost the company 30% of their payroll, whereas the next 30% (middle management) used up 55% of the payroll, and the top 5% (vice presidents, CEOs, COOs, CFOs, etc) cost 20% of the payroll. From these numbers alone it is obvious that outsourcing the bottom provides very little real return. Outsourcing the middle is where the real money can be saved.
Management is an essential role in business. Managers gather and condense information about subordinates, they produce schedules for projects, and they respond to complaints to improve productivity and working conditions. The problem is many managers are not content with this role, and instead aspire to be CEOs one day. Their mind is not on the people they serve, but it is instead on themselves as they seek only to further their careers. Also, as the company becomes more mature this layer tends to grow in depth and breadth diluting and confusing the data. Eventually upper management doesn’t have a clue what the workers are doing, and complaints cease to be addressed. Outsourcing middle management would eliminate all these problems.
Arjo Wiggins Teap, a multinational conglomerate, began implementing management outsourcing in April of 2008, and has projected that by outsourcing a mere 5% of their workforce, they will increase profits by 9%.
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