This document discusses managing human resources during an outsourcing process. It notes that HR becomes more complex with outsourcing as personnel may become more fragmented. It is important to identify the skills and competencies needed for both the retained organization and the new service model. The outsourcing of HR also requires planning to gain value, as benefits are not automatic. Effective HR management parallels the different stages of the outsourcing lifecycle such as preparation, negotiation, transition and management. Capabilities within the retained organization must be balanced and high performers acquired to manage the outsourcing long-term.
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Outsourcing Managing People
Session 3
Royston E Morgan
roystonmorgan@1stoutsource.com
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Objectives for today
Defining the required retained organisation and …
… the skills needed for outsourcing
Monday, 16/July/2001
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Once agreement to proceed is reached Outsourcing
Stage: Preparation
Formulation of outsource strategy…
… And the retained structure.
– Identification of team to manage outsourcing.
– Outline transition plan (including implementation retained organisation).
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HR is a critical process during outsourcing which if
anything becomes more complex
Personnel may become more fragmented (dealing with dispersed
teams for example).
Configuration of personnel needs to be designed.
– Skills and competences needed for new service model.
– Skills and competences needed for retained organisation.
Merging of back offices needs attention.
– Relationships between HR‟s Client to Vendor.
To gain value add from outsourcing HR also needs planning – it is
not automatic.
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HR activities parallels the Outsource process
Scoping Negotiation Transition ManagementPreparation
Reconnaissance Selection Definition Interpretation Renegotiate
Re-scope
Management Preparation
NegotiationTransition
Scoping
Management Preparation
NegotiationTransition
Scoping
The
Outsource
Lifecycle
Analysis and Evaluation
Contract
Negotiation
Transition
Management
Stabilisation Monitoring
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Capabilities need to be balanced
Need to develop long term focus by balancing the needs of all the
required capabilities.
Need to acquire (or develop) high performers to staff the capabilities
to manage the outsourcing.
Ensure succession planning to avoid fall in attention or performance
over time.
To gain value add from Outsourcing needs planning – it is not
automatic.
Gaining added value needs business engagement.
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Analysis and Evaluation of required personnel talent
Avoid fallacy that HR is not needed – its completely the opposite.
Retaining talent and alternatives need to be evaluated
– In early phases the best can move out quickly so this needs planning.
Avoid overdependence on consultants or vendors.
Fragmentation of workforce delivering service needs appraisal.
– Planning for performance dip during transition.
Consider alternatives and how these do (or not) fit it.
– Business transformation,
– Internal bidding,
– Employee swaps,
– Joint resourcing.
Analysis and
Evaluation
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Need to develop retained organisation
Two areas are important:
– The competences and skills to manage the outsource itself.
– The competences and skills needed within the outsourcing
organisation going forward.
Analysis and Evaluation
Contract
Negotiation
Transition
Management
Stabilisation Monitoring
Service
Model
Defined
Outsource
Activity
Selected
Design retained organisation
Implemented
retained organisation
Start working
as soon as
model emerges
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Best Practice is to have this prepared early
Key message is to start early and have design in place before the
contracts are done.
Service model drives the retained organisation.
Principles:
– Delivery model and how service is provided.
– Governance (how service is managed).
– Process and procedures.
– How changes are managed.
– …
Method is to break down the service process into elements.
– Resources to provide (both sides).
– Skills and competences required.
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Service Model drives configuration
What is the scope (and division) of responsibilities?
What is delivered?
Where is the service delivered?
How is the service delivered?
Demands for
quality, delivery
and service
Decide on the
service concept
that new model
implies
Develop the
service package
(organisation and
systems)
Deliver the
service package
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Defining the retained organisation starts from the
service model
Focus on Headcount
Split Vendor Client
responsibilities done at
contract stage
Roles are defined to match
existing staff
Focus on legacy skills and
competences
Focus on Roles
Split Vendor Client
responsibilities done at
RFP/RFI stage
Roles are defined to match
new service model
Focus on skills and
competences to meet new
service model
Often the retained organisation is (just) defined based on who is left in the
organisation which usually causes problems later
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Within IT there are specific capabilities that need to be
retained
Leadership
(Source: Feeny and Willcocks, 1998) European Management Journal Vol.
24, No. 1, pp. 28–37, February 2006
Informed
Buying
Architecture
Planning
Business
Systems
Thinking
Vendor
Development
Contract
Monitoring
Contract
Facilitation
Relationship
Building
Making
technology
Work
Delivery of
Services
Business
to IS vision
Design of
IT
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Core capabilities model
Leadership
(Source: Feeny and Willcocks, 1998) European Management Journal Vol. 24,
No. 1, pp. 28–37, February 2006
Informed
Buying
Architecture
Planning
Business
Systems
Thinking
Vendor
Development
Contract
Monitoring
Contract
Facilitation
Relationship
Building
Making
technology
Work
Delivery of
Services
Business
to IS vision
Design of
IT
integrating IT
effort with
business
purpose and
activity
Ensuring
technology
capabilities are
embedded in
every business
process
getting the
business
constructively
engaged in IT
issues
creating the
coherent
blueprint for a
technical
architecture
Making it work
and trouble-
shooting
selection of a
sourcing
strategy based
on market
analysis
ensuring
success of
contracts for
services
holding
suppliers to
account against
service levels &
contracts
identifying the
potential added
value of service
providers
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The nine capabilities need to be in place balanced and
staffed up to be effective
Capability 1: Governance –
integrating IT effort with business
purpose and activity
Capability 2: Business systems
thinking ensuring that technology
capabilities are embedded in
every business process
Capability 3: Relationship building
and getting the business engaged
in IT issues.
Capability 4: Designing technical
architecture and creating a
coherent blueprint
Capability 5: Making technology
work
Capability 6: Informed buying by
analysing the external market for
services then selecting a sourcing
strategy
Capability 7: Contract facilitation
ensuring the success of existing
contracts for services
Capability 8: Contract monitoring
and holding suppliers to account
against service contracts
Capability 9: Vendor development
and identifying the potential added
value of service providers.
Monday, 16/July/2001
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Roy's Consulting Personnel Department
HRM Director
Staff development
manager
Compensation
manager
Benefits supervisor
Admin Assistant
Personnel records
supervisor
Payroll manager HR manager
Staff development
assistant
Compensation
analyst
Assistant (vacancy)
Senior Benefits
consultant
Benefits consultant
Benefits consultant
Senior records
specialist
Records specialist
Tech office assistant
Records clerk
Records clerk
(PT vacancy)
Payroll
accountant
Payroll manager
Payroll clerk
Payroll clerk
Payroll clerk
Payroll clerk
Recruitment
specialist
Personnel assistant
Personnel assistant
Employment
assistant
Training consultant
Employment
assistant (temp
covering leave)
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We have been instructed to assess our HR department
for outsourcing to Quick Cash Ltd.
What functions should we retain in house and why?
What are the issues we should account for in HR for this move?
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Some HR practices for example can prove critical in an
outsource
Linked and embedded in the wider firm context.
– Knowledge becomes highly specific and specialised.
– Need to consider per se whether to outsource.
Service providers to manage these sorts of issues need to reflect
that…
– Specificity takes time to develop and acquire.
– Relational trust needed to explore this facet.
– Need to start out right to develop a virtuous spiral.
A focus on cost control and transactional HR or IT functions at the start and
away from these deeper specific engagement issues may cause problems later
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Capabilities need to be balanced
Need to develop long term focus by balancing the needs of all the
required capabilities now and in the future.
Need to acquire (or develop) high performers to staff the capabilities
as well as to manage the outsourcing.
Ensure succession planning to avoid fall in attention or performance
over time.
To gain value add from Outsourcing needs planning – it is not
automatic.
Gaining added value needs business engagement.
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What organisation skills are required?
Some vary in style/importance by stage in lifecycle.
Negotiating and contract skills.
Co-ordination and control of supplier – contract and relationship
management, including performance management – manage not
„do‟.
Strategic planning.
Change management.
Mediation.
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Personal skills (not just cost control) needed to
manage process effectively
Communication skills – set objectives, explain challenges and
problems, scope changes clearly.
Problem-solving skills – effective handling of the unexpected, risk
management etc.
Organizational skills – project planning, scheduling and
budgeting, keeping tabs on the supplier.
Interpersonal skills – managing people, particularly co-ordination
and control, motivation and development.
Personality, flexibility and „perspective‟.
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People skills are vital
Managing relationships btw 5-12%
of contract value – how do you manage yours?
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There are some potential issues in developing existing
staff
Particularly technical staff can have weaker social skills and/or be
nervous of sales/negotiating (but avoid generalisations…).
Survivor syndrome and on-going stress can lead to difficulties with
development.
Different departments even within the client can misunderstand the
roles of others (or rely on others to communicate).
Different teams at different times may be issues with
timescales, hand-over, and contract fulfilment.
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Best practice in development of skills
Individual discussions and development plans, develop trust, self-
esteem, and emphasise future.
Develop „soft‟ as well as hard skills.
Participation in processes.
Power and authority to enable (and training, coaching to support).
Reward systems.
Goal setting.
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Consequence of all this is the budget must allow for
the extra capacity to manage the process
Headcount
Time
Outsource
team
In house
staff
Vendor staff
Overall requirement rises over
transition to production
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The retained organisation needs to take on a different
way of working after an outsource
You are approached by the manager of a department that
will be outsourced:
“What will change in my job and in my department when it is
outsourced will I be doing different things?”
What would you say?
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Some Examples
When managing internal
resources…
– You manage people
– You manage resources
– You manage via hierarchy
– You measure outcomes
– You develop colleague
relations
– You manage via implicit
processes
When managing external
resources…
– You manage processes
– You manage contracts
– You measure service levels
– You develop supplier
relations
– You manage via explicit
processes.
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Managing the change dimensions presents a challeng
terms of integra
Systems &
procedures
Tasks Processes Governance
Rationalisation of
services
Defining roles,
tasks and
responsibilities
Defining processes
specifying
functions
Specifying
management
structure
Architecture
alignment
Alignment of roles
and tasks
Integrating
processes
Aligning
governance
between parties
Stabilising service
portfolio
Harmonising tasks
and roles
Harmonising
processes and
roles
Developing
collaboration
Integrating service
provision
Integrating division
of tasks
Sourcing and
positioning staff in
new roles
Integrated
management of
service
Configurationofservices
Integrationoftask
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Putting it all together
Once we have made the decision of what in principle to outsource
we enter a process of sourcing selection.
Which is a process of configuration deciding „who does what at what
risk‟
– Confirming requirement and scope of outsource
– Confirming market capabilities
Is a planned project that steps through logically the steps to confirm
the original business case
– And updates „it‟ as necessary as we go along
– To arrive at an agreed position which we can codify in a contract.
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High Level schedule: Procurement
Drafting tender
notification and
placing in
publications
OJEU placing
Approach
document (plan)
complete
Business case
complete
Long list vendors
Prequalification
questionnaire
sent
Letter of
information & RFI
Letter of
information
(approach)
Prequal
questionaire
RFI drafted
Questionnaire
completed by
candidates
References
reviewed
Short list vendors
1st information
meeting suppliers
Draft T&C‟s
Draft process
Draft tender doc
RRP sent
Process sent
T&C‟s sent
Questions
received &
answered
2nd information
meeting suppliers
Draft selection
criterion &
process
RFP submission
Questions and
clarifications
Select winner
and reserve
Due dilligence
suppliers
Review contract
terms
Draft SLA
Draft Contract
Final award
Finalise contract
T&C‟s and
payment
schedules
Transition plan
SLA tuned
Housekeeping
Phase 5
Select
Phase 4
RFP
Phase 3
PreSelect
Phase 2
Prequalify
Phase 1
Invitation
Minimum 60 Days Minimum 40 Days ~20Days
Start January 2010 March April May June
Phase 5
Contract
For public sector allow (at least) a year
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Reflection
Why might it take so long to manage an
outsource in the public sector?
What could be the problems or issues?
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Where are we
We have a broad view of what the required retained organisation
might look like and …
… its key attributes.
What we might look for in a vendor and some key pointers in
negotiation.
Checking capability and why due diligence is important.
Defining who does what (configuration) and a rough plan.
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So… Let us think about the people being Outsourced
Highlight some „people management‟ aspects,
Understanding team dynamics: how might your workforce react to
outsourcing?
How can the transition period be managed in a sensitive and holistic
manner?
Trigger discussion!
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The Outsource Lifecycle
Management Preparation
NegotiationTransition
Scoping
Relationship
Formation
Relationship
Maturity
Relationship
Engagement
The
Outsource
Lifecycle
Definition
Interpretation
Renegotiation
Terminate
Selection
Reconnaissance
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During the outsource people cycle through a set of
reactions to the prospect of change
May start at early stage
Will vary by individual
Is event-driven so can be
influenced
Includes
shock, anxiety, anticipation, sense
of loss,
Written, social and psychological
contract changes
Adapt
Freeze
Panic
Protest
Despair
Denial
Rumours
Encounter
The People
Lifecycle
Stabilisation Anticipation
Acceptance
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Difficulties with relationships (ex) colleagues.
Outsourcing viewed as „failure‟.
Misunderstanding of roles
Psychological experience includes:
Anger, rejection, anxiety
Feelings of injustice
Uncertainty for future
Lack of control
Loss of belonging
Isolation
Plus: Issues around career development.
Financial losses due to contract
misunderstandings and relationship history.
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Findings on process
Many transfers „badly
managed‟ by original
organization - due to:
– Lack of communication,
– Avoidance of issues,
– Assumptions of resistance,
– Viewed as uncaring
– Perceptions of injustice
Low socialization with new
organization:
Individual (or non-existent)
socialization – liminality issues
Unclear roles
Perceived remoteness
Cultural differences
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Issues and Implications for team working
„Us and Them‟ (in-group and out-group processes)
Low compliance or even resistance „client‟ and „other‟.
Role identities ambiguous, conflicts arise.
Some feel alienated, disengaged, in-between, „vacuum‟ – therefore
communicate poorly with all parties.
Poor decision-making and low levels of creativity, and/or ideas not
transferred across „teams‟.
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Reflection
What do you think happens in an outsource if it is
badly managed?
To:
– Work performance
– Relationships
Discuss in your groups and report back
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Some of the risks for the organization
Reduced performance during and after transition.
Lack of organizational learning and „memory‟.
Reduction in innovation.
Reduced long term responsiveness from staff.
Poor negotiating, linked to above and cultural differences (both
organizational culture and national culture, especially in off-
shoring).
Anxiety and low performance for remaining staff (survivor
syndrome).
Intangibility of services can exacerbate conflicts between clients
and suppliers.
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Key to good transitions is fairness and justice
Distributive justice – perceptions of fairness of
outcomes, (equity, equality and needs) e.g. who is transferred and
who stays.
Procedural justice – perceptions of fairness of methods or
procedures used (decision criteria, voice) e.g. bias, favourites
stay, no opportunity to talk about the decision, changing decisions
about which company staff will join.
Interactional justice – perceived fairness of the interpersonal
treatment received (treatment and explanations) e.g. managers low
level respect, appear insincere, unthinking comments, no
justification given.
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Problems with justice
Important aspects of justice perceptions are; employee involvement;
voice; and perceived empathy, sensitivity and support from
management.
BUT most outsourcing is:
– imposed, based on one-way communication, by managers stressed or
distanced, and senior management assuming staff are no longer their
problem…
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Using justice during change
Plan to create perceived justice (distributive, procedural and
interactional) at every stage:
Distributive: will they perceive diagnosis, rationale, support, new
roles, policies and decision-making is fair?
Procedural: will they perceive they have some input into
diagnosis, perceive criteria for retention or transfer as fair, perceive
some voice in determining roles and responsibilities?
Interactional: will they perceive management listens to and respects
questions and concerns, act with empathy and sensitivity, and offer
sincere and adequate explanations about changes?
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Proactively Manage the Process
Over communicate - promote questions and answers - give/receive
feedback - be sincere and honest
Explain why - continually send the message about why these
changes are necessary
Promote participation - involve your people in the changes (informal
leaders)
Demonstrate stability
Set standards and targets
Avoid surprises
Identify the benefits .. measure the results
Monday, 16/July/2001
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Important points to consider
Develop the skills of your key people to manage the contract and
relationships – ensure managers are trained to handle the emotional
and rational concerns of staff.
Consider human resource aspects well before formal announcement
– develop business rationale and plan.
Consider how you can retain and develop knowledge and maintain
ongoing relationships with transferred staff.
Communicate clearly and openly with all staff and manage the
people processes fairly.
Ensure roles are clearly defined on all sides, including remaining
staff.
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Summary – handle transfers with care!
Outsourcing is a complex and uncertain change, many (but not all!)
staff will feel de-motivated, detached, and uncertain of their role.
A major factor during transfers is justice perceptions, poor justice
more likely to lead to continued low motivation.
Managers are often not equipped or prepared to handle
transfers, particularly the emotional aspects.
Development of managers and a focus on justice perceptions should
ease the transfer and (hopefully) reduce the risk of low performance.
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Focused
re-commitmentLetting go
The Individual Response during Change – Some Skip
First Stages…
Sense of Loss
Sense of Gain
Ending Middle Beginning
Fragmented and
chaotic re-
organisation
Denial
Anxiety
Anger
Resignation
Acknowledgement
Continuing anxiety
and anger
Reminiscing
Fear
Goal oriented
Acceptance
Comfortableness
Approach -
Avoidance conflict
Anticipation
New frame of
reference
Unconscious
competence
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Change Phases, Objectives & Affects
Ending Old –
Letting go
Changing and
re-organisation
Beginning new
(re)-commitment
Sense of Loss
Sense of Gain
Justice
Perceptions
Influence:
Analysis & Design Start-up Implementation
Institutionalise
mobilise
leadership & build
case
Mobilise
Team
Build org &
Individual capabilities
Standardise &
codify new
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Reflection
You are approached by someone being
outsourced came to you who said they wanted
to apply for a job in another department.
What would you do?
Monday, 16/July/2001
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Kubler-Ross Model – but not all go through!
Elisabeth Kübler-Ross (1969) On Death and Dying
Shock at receipt
bad news Acceptance
Depression
Anger at
unfairness
Denial
Bargaining
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Managing Denial
Individuals who stay in denial too long may vary :
– The problem has corrected itself .. it will be over soon
– Exhibits apathy and numbness
– Rationalise change away
You may coach this individual by :
– Reviewing the business analysis and business case findings
– Saying "you seem to be denying the need for change. We all want to
get through this change as quickly as we can and to minimise
disruption. This can't happen if we pretend change is not going to
happen"
– Emphasise change will happen
Allow time to let things sink in
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Managing Anger
Individuals angry about the change may :
Sabotage the change efforts
Play shoot the messenger
Withdraw from the team
You may coach the individual by :
Acknowledging legitimacy of anger
Distinguishing between feelings and inappropriate behaviour
Redirecting the blame from the change agent to the real reasons
necessitating change
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Managing bargaining
An individual may bargain with you by :
Cutting a deal to spare them
Being a "killer concern generator" to redirect problem solving
You may coach the individual by :
Focusing on how the individual or their area will benefit from the
change
Keep problem solving focused on the root cause
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Managing Depression
An individual depressed about change may :
Express a loss of control over the work environment
Increase absenteeism
You may coach the individual by :
Providing a series of specific
next steps and following up frequently
Reinforcing positive actions the individual takes
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Encouraging Acceptance
Signs of individuals accepting change include :
Expressing ownership for solutions
Being focused on achieving benefits
You may encourage acceptance by :
Providing recognition for their efforts
Utilising the individual as a coach or mentor for others
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Critical Success Factors in Outsourcing Change
Build a shared vision
Set clear goals
Involve participants
Encourage cultural awareness
Expect continuous communication
Integrate business
Develop realistic resource requirements
Recognise change in timely fashion
Tenacious and persistent leadership
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Research Indicates Change Fails By:
Not establishing a great enough sense of urgency
Not creating a powerful enough guiding coalition
Lacking a vision
Under communicating the vision by a factor of ten
Not removing obstacles to the new vision
Not systematically planning for creating short term wins
Declaring victory too soon
Not anchoring changes in the corporation's culture
Lack of a measurement system
Failure to involve people
Harvard Business Review, March/April 1995, “Leading Change - Why Transformation Efforts Fail”
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The process of change is driven by the sources of
resistance
Where it is possible:
– Participation in diagnosis/solution
– Develop consensus
– Recognise and look for valid criticism
– Resistance is often valuable information
– Door open for new evidence, revision and reviews
– Feedback and communication
Ground rules:
– No threats to autonomy
– Match values and ways of working as far as possible
– Decrease workload (if a system increases it fix it)
– Ownership of change unvarying
Change involves reshaping the task, roles and responsibilities at an
individual, groups and organisational level
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Reflection
Someone comes to you and asks whether
there are going to be redundancies as a result
of a proposed outsource.
What would you do?
Monday, 16/July/2001
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Dealing with resistance - what not to do
Fight the resistance
Take it personally
Go into more data collection and get hooked into the details
Avoid or collude with the individual
Work more with your “allies"
Give lots of reasons
Lose your confidence
Expect to have all the answers
Avoid giving "bad news"
Use aggressive language - "you dummy" rule
Source : Flawless Consulting by Peter Block
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What is TUPE and its importance in outsourcing?
The terms and conditions of employees of organisations are
protected in the UK under the Transfer of Undertakings (Protection
of Employment) Regulations 2006, known as 'TUPE'.
– This regulation means that the existing terms and conditions of an
employee contract of employment will transfer automatically to a new
employer in our case the outsource vender.
This means an employee will normally carry on working for the
outsource vender as before (same T&C‟s)…
… And if the new employer refuses to meet the terms of the existing
contract this will amount to a breach of contract.
Often you will hear this mentioned as an outsourced employee
having a „mirror‟ or image terms.
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TUPE legislation applies to all Outsource services in
UK (extends acquired rights directive EU)
TUPE was updated in April 2006
Existing law built upon in 4 key areas:
– When TUPE applies (to all relevant transfers question is identity)
– The pre-outsource transfer obligation to notify those affected.
– The post–transfer ability to change Ts and Cs
– TUPE and how insolvency is handled
Fairly clear on initial sourcing case law is now starting to clarify
situation.
– On renegotiation
– Contracts awarded to new supplier
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Generally all employment rights are moved across
Includes any holiday or outstanding claims you've made against the
original employer
– including discrimination for example (and current employer must
disclose this)
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TUPE Applicability
New definition of Service Provision Change
– Aim to reduce uncertainty in law
– Applies to „labour‟ intensive services like cleaning, catering, security and
refuse collection
No need to show transfer of assets or employees
– Exceeds acquired rights EC requirements
TUPE will apply where:
– Service activities cease by one person and taken up by a new person
– Where there is an organised group of employees whose principal
purpose is to carry service activities on behalf of a client
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TUPE Applicability
Service provision change
– Reassigning contract
– Insourcing
Exceptions:
– Limited to where on service provision change, the new provider carries
out activities with a single specific event or task of short term duration
– Or where activities consist mainly of supply of goods for client‟s use
However these exceptions may be caught by the general
definition of TUPE
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Practical implications for outsourcing
Practical Impact:
– TUPE will apply in most outsourcing/insourcing scenarios.
– Where contracting with service providers ensure that no one individual
(or group of individuals) at service provider is permanently assigned to
your work as TUPE may apply when you wish to move your business
elsewhere.
– Similarly if providing services to clients ensure employees are not
specifically assigned if you wish to avoid TUPE.
Interestingly it may apply to an organisation such as an advertising agency or a law
firm that takes over a client from another firm following a tender process
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Notification requirements have been tightened
New Requirement for Transferor to notify Transferee of Employee
Liability Information.
Existing law on information and consultation unchanged.
– Except liability for failure to consult will be the joint and several liability
of Transferor and Transferee.
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What employee liability information needs to be
handed over?
Following information on every employee assigned to the
undertaking:
– ID and age of employee (TUPE does not apply < 1 years service).
– Employment particulars (type of contract etc.).
– Information on any disciplinary or grievances to which dispute resolution
procedures apply within last two years.
– Court or Employment Tribunal claims within the last two years.
– Any claims that the Transferor may reasonably believe that the
employee may bring against Transferee
– Information of any relevant collective agreements.
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There is a legal requirement hand over liability
information
When and How do you Notify?
– Not less than 14 days before the relevant transfer
– In writing in one or more instalments
– Probably exempted under DPA
What is the remedy for failure to notify?
– Transferee can take Transferor to Employment Tribunal
– Just and equitable compensation having regard to any losses sustained
subject to a minimum of £500.00 per employee
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Can terms and conditions be changed following
transfer?
The ability to change Ts and Cs post transfer is still difficult even
consensually.
However post-transfer changes will be permissible if:
– The changes are unconnected to Transfer…
– …or connected to transfer there is an economic technical or
organisational (ETO) reason entailing changes in the workforce.
In London Metropolitan University -v- Sackur and others the
Employment Appeal Tribunal (EAT) confirmed that an ETO defence
is only available to employers who have reduced the numbers of
their workforce, or made changes to the functions of relevant
employees.
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Some specific issues second generation outsourcing
when a new supplier wins contract
Case law in Europe decided that ARD may not apply unless:
– Significant tangible or intangible assets are transferred
– The new supplier takes over a significant part or workforce
Issues determining whether ARD may apply
– the type of undertaking in question
– the transfer or otherwise of tangible assets
– the value of intangible assets at the date of transfer
– whether the majority of the employees are transferred
– the transfer or otherwise of customers and …
– … the degree of similarity between activities before and after the transfer
and the duration of any interruption in those activities.
A new supplier could argue that the service model has so changed that
the old workforce is no longer required
– This implies the incumbent supplier could remain liable for redundancy
payments unless it can persuade the client to include transfer in new
contract (unlikely!)
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TUPE Update 2006
Insolvency:
Tries to promote rescue culture by:
– Limiting the transferee‟s liability for employees dismissed.
by Transferor
– Allows variation of employment contract post transfer via appropriate
employee representatives to safeguard employment opportunities.
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TUPE Update 2006 Summary
Safer to assume TUPE applies to service
provision changeover
– ambiguity is whether the employees in question
have as a principal purpose the carrying out of work for
the client.
If Transferor
– Put together information on Employee Liabilities.
If Transferee
– Obtain information on Employee Liabilities.
– Slightly more scope for post-transfer changes to Ts and
Cs.
Best to get one of these
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Reflection
If you were a new supplier having just won the contract what could
be a legitimate argument for not taking on the staff from old
supplier?