In Europe, as in the US, outsourcing non-core business activities is becoming more and more of a trend. This period of global recession and the consequential focus on cost reduction has increasingly lead organizations to focus on their core activities and outsource those that are not.  

If we look more deeply into this important human side of outsourcing, the question is:  what exactly happens to an employee who is being transferred from the customer to the outsourcing provider?

Being transferred constitutes a non-voluntary change for the employee and this can be stressful for them as there are a number of “unknown” factors that they will be concerned about. Likely questions they will have are: what will my position and role be in the new organization? Will my role have the same amount of prestige/importance? Will I be acting on the same organizational level? Will they appreciate and reward me the same way as they did in my old company?

Moreover, usually a person undergoing a change that is imposed on them experiences a number of negative emotions which can reduce their productivity and hence, harm the overall success of the outsourcing contract: 

1.         Insecurity

2.         Uncertainty

3.         Anger

4.         Fear for change

5.         Loss of connection

6.         Loss of significance

7.         Loss of contribution

To understand the mindset of a transferred employee, it is important to keep in mind that the transfer is involuntarily for the employee, so the person has no free choice in staying with their current employer or going to the new one. As the employee does not have any say in, or any control over the decision that is being made they can feel like a victim of a situation created by management. This will especially be true if they liked their original employer and have reservations about the new one. Sometimes they will feel betrayed which can cause a strong emotional response as witnessed by the following quote from an employee about to be outsourced: "They use you and then they spit you out, if they can earn money with it." 

If this situation is not managed properly, it can have major impact on the success of the outsourcing deal. After all, these are the people who will be carrying out critical work to satisfy the customer. They have the expertise, know the business and how the rules are played in the customer’s organization.  If the change/integration process of the people transferring to the provider is not managed well, resistance in the employees is created, resulting in a loss of productivity.

The negative emotions are normally addressed to both parties - customer and  provider. It is a major point of concern for the provider as well as the customer, especially since it does not concern just one or two employees, but usually large groups of people. The negative feelings may result into a strong negative groupthink, and develop into a powerful negative force against the success of the outsourcing deal.

Another important point about free choice - people will rightfully state that there is always free choice; an employee can choose to resign and take up a position elsewhere. This is absolutely correct and it often happens that the highly talented staff that are key to retain jump ship early on during an outsourcing process due to concerns over how things will turn out. This results in loss of knowledge and ability to carry out certain functions to the standard expected by the customer.  On the other hand, in times of economic downturn like we have today, leaving is a very risky step to make, and many people are not prepared to take it – the result being that you could have a large number of uncommitted staff onboard who slow down productivity and possibly, in extreme cases, sabotage operations.

In addition, the group of people being transferred to the provider has their own organizational culture that they bring with them to their new employer. Providers have to be aware that this will unequivocally impact their own organizational culture. Especially in combination with the negative emotions around an involuntary transfer, the impact can be quite significant. Action and decision must be taken about how to deal with these issues and how to align these cultures so the value of the outsourcing contract and the customer experience are not eroded.

Furthermore, whether or not he or she likes it, the role of the transferred employee and corresponding relationships will inexorably change. Whereas the employees of the customer and the people being outsourced, used to be colleagues, and had therefore a specific interaction with each other, after the outsourcing has become a fact, the relationship will change into a supplier versus client one, which has implications for personal relationships. Former colleagues are now clients, and the outsourced employees are now supplier.

As is explained above, when transferred, employees lose the connection with their old colleagues, and they have not yet made the connection with their new colleagues, leaving them floating somewhere in a void, disconnected from both parties.  Having strong relationships and a feeling of belonging or connectedness at work is very important to most people and impacts their productivity on the job. 

Inevitably, the outsourced employees also lose “privileges” they had when they worked for their former company which can sour their view on their new role and employer. Even small things like no longer having free access to the building where they worked, no longer having guaranteed or designated parking at the building where they work, or having to wear a visitor’s badge instead of an employee’s badge can seem trivial, however, they have been proven to matter greatly to people and when people feel mistreated it will erode their good will towards the employer.

All of the factors mentioned above have a direct influence and impact on the greater part of the basic needs of a person. Therefore, it is no wonder that people are concerned and even shocked and scared when they hear that they will be outsourced. After all, the fundamentals of their professional existence, and most often their personal existence (since for the majority of people working also satisfies a financial need) are being threatened or put at risk in some way.

Clearly, for the reasons outlined above, managing the integration of transferred employees and ensuring that these individuals with key skills feel reassured and valued during an outsourcing process is tantamount to success.  Moreover, if we take into account that the customer’s expectation (usually backed up by strict SLAs!) is that outsourcing results as “business as usual”, high quality performance, with the benefits of cost savings, one can understand that investing the time to take care of the “human side” of outsourcing will quickly pay off. This seems logical but frequently attention is not paid to the “human side” of outsourcing and it significantly erodes the financial benefits and customer satisfaction.

The question that arises is whether the wish for “business as usual, but cheaper and better” can be achieved in light of the complexity of dealing with the human side of outsourcing. The answer is a resounding yes!  It is well documented that successful outsourcing contracts are those where all parties involved in the deal (customer, provider and adviser) proactively address the human element up front, create a change plan and give it the same importance as all other stakeholders.

A prerequisite for change is that there is a period of uncertainty, in order to get people moving. However, having a change management plan for the integration of the transferred staff is important to ensure that it happens in a planned and structured way and is therefore perceived as an organized, positive process.

Key in starting this change process is to provide a great deal of information and interactive communication in order to reassure employees that they are valued and eradicate the negative feelings of insecurity, anger and fear. In this way employees can start to see their integration and new roles as positive and start contributing to the overall success of the outsourcing contract.

In order to achieve this, key questions that will need to be addressed early on are:

It is also naïve to think that people will fit in automatically. There is significant research and failed outsourcing deals proving that due to human nature and dynamics they will not unless the change process is managed thoroughly.  It is vital that the transferred employees integrate into the new corporate culture as quickly as possible, and to the extent that they can serve as ambassadors for the provider. This means that  commitment and accountability need to be created as soon as possible. This is not an automatic process but is achievable with thorough planning and execution.

Clearly, when the human side of outsourcing is managed properly, the negative aspects of change can be turned into a positive force for good. Very successful outsourcing contracts are those where the people integration aspect was not only managed but also leveraged –diversity of culture and best practices spurs on higher collaboration and innovation; in short, additional benefits for all parties involved. 

Lucy Herlaar is owner of Herlaar Business Coaching, a Belgian based company that operates internationally and is specialized in transformation and change as well as leadership development. Based on hard won experience, they have an expertise in the “Human Side of Outsourcing” and run programs that help companies transfer employees smoothly and enhance their corporate culture by leveraging diversity and best practices. In addition, they  work with companies to define and build strong and successful team and organizational cultures, develop and deliver leadership and management development programs and provide executive coaching, performance coaching, transformational coaching for individuals and teams.