When management lacks the knowledge, talent, commitment and courage to solve problems or to simply do their job, they can be easy prey for the purveyors of the magic tonic of outsourcing.
One of the more colorful images of the 19th century westward expansion of America is that of the traveling medicine man. With a team of horses pulling what looked like an early version of an RV, the medicine man (known as “Doctor” or “Professor”) nomadically wandered the West dispensing a potpourri of magical tonics promising to cure any and all ills that beset desperate, but ignorant settlers. The legacy of this activity is an expression we all understand today: the snake oil salesman.
We may look back whimsically at the popularity and success of these traveling charlatans and wonder how people could have been so easy to fleece. After all, no matter what the potions were called – Dr. Wonser’s Fever & Ague Tonic, Dr. Bock’s Restorative Tonic, Dr. Baker’s Laxative and Women’s Fertility Tonic, or Dr. E. Bleecker’s Tonic Mixture for Chills & Fever – they were nothing more than a concoction of clear, sweet-flavored liquid (usually spiced-up with a dose of liquor) designed to be taken orally with the promise of a miracle cure for one’s ills.
(It is noteworthy sidebar that much of the sales appeal for these wonder tonics was in their packaging. The idea was that the more elaborate and colorful the bottles containing the potion, the more likely the cure would be effective, and justify the higher price for the tonic. So convincing was the scam, in fact, that finding, collecting, selling and trading these old tonic bottles has become a passionate – if weird – hobby for thousands of people.)
But let’s not get too smug. We have our own reincarnation of the traveling medicine man. The 21st century version is the slick purveyor of business outsourcing services. Don’t laugh – it’s true. Like the medicine men of old, these mavens of outsourcing prey on weak, naïve and lazy business executives, promising a magical cure for any and all business ills: sagging sales, lifeless marketing programs, bumpy customer relations, product design, and so on.
These modern-day outsourcing medicine men wander the country on jets (first class) with iPads chock-full of PowerPoint presentations that promise to miraculously cure virtually any business ailment. Like the tonic bottles of old, it seems the more elaborate, detailed and complicated the PowerPoint presentation is, the more credible the solution must be, and therefore, the more expensive the fee which can be charged. (Don’t be surprised when in some century hence, there will be a market for finding, collecting and trading old outsourcing PowerPoint presentations.)
Hey, let’s face it, confronting all the challenges, problems and issues that come with managing a company can be a daunting task. If it isn’t one thing, it’s another: controlling expenses, managing marketing, providing quality customer service, monitoring IT and dealing with employee costs and relations are just a few of the sometimes formidable challenges a facing managers. Any one of these responsibilities can trigger insecurity in the weak, incompetent or lazy manager and render them easy pickins’ for the snake oil salesmen peddling outsourcing remedies. The problem is that outsourcing has about as much chance to cure the ills of business as the tonics of the traveling medicine man had to cure the ills of life. Both offer promises that appeal to the desperate, but in the end only deliver deception.
Even Governments are Not Immune
The prevalence and problems with outsourcing are as close as today’s headlines. When the National Security Agency (NSA) was given the charge to attempt to identify potential terrorist threats by monitoring and cataloging various cell phone, e-mail and Internet activity, it decided to outsource this effort and responsibility to Booz Allen Hamilton. As a result, we will forever know the name – Edward Snowden. When the NSA shipped out this project to Booz Allen, it exposed one of the major and most damaging risks of outsourcing: losing accountability and control of critical tasks. Speaking at a conference in California, Nancy Pelosi, Democratic House minority leader, received applause (something she has not experienced in nine years) when she succinctly summed up the Snowden problem by declaring that, “the real crime is outsourcing our national security.”
Another very public (and expensive) example of outsourcing creating, rather than curing ills is Boeing’s development of the 787 Dreamliner. For a variety of reasons, not the least of which was to boost Dreamliner profits by hiding some of its R&D costs, Boeing took outsourcing to an extreme. The company deviated from the traditional model of using subcontractors – who were required to meet Boeing’s design specifications – and outsourced the design, engineering and manufacturer of critical sections of the airplane.
The result was a nightmare for Boeing and the Dreamliner that delayed its launch for five years beyond plan and created billions of dollars in cost overruns. Even after the Dreamliner was finally put in service, late it 2012, the problems of outsourcing continued to emerge, causing the entire fleet to be grounded for several months this year, due to electrical problems.
As the Los Angeles Times reported, “Much of the blame belongs to the company’s quantum leap in farming out (outsourcing) the design and manufacture of crucial components to suppliers around the nation and the world.” The report concluded, “Boeing’s dream was to save money. The reality is that it would have been cheaper to keep this work in-house.”
Sadly, Outsourcing is Everywhere
These are just two very public examples of the ills of outsourcing, but unfortunately they are just the tip of the iceberg. There are thousands of examples of incompetent, weak, lazy managers who have fallen for the false promises of the outsourcing medicine men. Since the start of this century, outsourcing companies and their army of contracted employees have been – by a large margin – the fastest growing segment of the services industry; surpassing even the level of wasted fees charged by business consultants. Many have suggested that the economy of India would be in deep depression, were it not for outsourcing.
There are numerous reasons to relegate outsourcing to the outhouse, but they can all be rolled up into one defining rule:
Never outsource any activity or service that is critical to the success and longevity of your company or your career.
Remember that. Chances are high that if you violate this rule you will have neither success nor longevity. The outsourcing medicine men pitch the idea of less work, improved productivity and reduced costs, but this is an illusion that comes with a high price and an even higher risk. The problem is that the medicine men of outsourcing target the most important activities – IT, customer service, employee relations – because that’s where the big fees are – and this creates the most risk. When a company outsources activities that are crucial to its success, it gives up control of its future and becomes dependent on outsiders who may or may not perform as promised.
When it comes to considering outsourcing, the decision to drink the potion or put a cork in it is very simple. The key is to look long term, not short term (a fundamental mistake made by Boeing), and to calculate the impact on the company if something goes wrong – because it will. If the function is not critical to the long-term success of the company and you can survive the worst that can happen with outsourcing it, then you can give it consideration, but if that is not the case, then you need to put the tonic bottle down and walk away.
And the Moral of the Story …
Desperate people are desperate to find a solution – any solution – to solve their problems. Whether they are beleaguered settlers isolated in the outposts of an expanding America, desperate for cures to debilitating ailments or an insecure, lazy, incompetent business manager, beset by the challenges of running a company, they are susceptible to the allure of a seemingly simple cure for their problems.
It is amusing for us to look back at the gullibility of early American settlers who put their faith in the traveling quack medicine man offering a sham elixir that would magically cure all their ills. Funny how times don’t change. Today, desperate managers put their faith in modern traveling medicine men offering the elixir of outsourcing that promises to magically solve all business problems. But if you tell a lie big enough, long enough, someone will believe it.
When you come right down to it, the old-time traveling medicine man offering the fraud of fake cures and the modern-day purveyor of outsourcing services, offering the illusion of easy business solutions, can both be grouped under the same moniker – snake oil salesmen.