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Alliances, Collaborations, Outsourcing

Note to self: HoudahSpot Scrivener search for “outsourcing.” Initial search found lots of hits.

From Post-Capitalist Society

Post-Capitalist Society
Amazon link: Post-Capitalist Society

The Case for Outsourcing

Even more drastic, indeed revolutionary, are the requirements for obtaining productivity from service workers.

Service work in many cases will be contracted out of the organization to whom the service is being rendered.

This applies particularly to support work, such as maintenance, and to a good deal of clerical work.

“Outsourcing,” moreover, will be applied increasingly to such work as drafting for architects and to the technical or professional library.

In fact, American law firms already contract out to an outside computerized “database” most of what their own law library used to do.

One driving force behind outsourcing is the need to make service workers productive.

The greatest need for increased productivity is in activities which do not lead to promotion into senior management within the organization.

But nobody in senior management is likely to be much interested in this kind of work, know enough about it, care greatly for it, or even consider it important—no matter how much money is at stake.

Such work does not fit the organization’s value system.

In the hospital, for instance, the value system is that of the doctors and nurses.

They are concerned with patient care.

No one therefore pays much attention to maintenance work, support work, clerical work even though that is where half the hospital’s costs are likely to be.

Nobody from these support activities can expect ever to get into a senior hospital position.

Most of the women who start cleaning hospital floors or making hospital beds, fifteen years later will still be cleaning hospital floors or making hospital beds.

By contrast, the woman who as a senior vice president heads the hospital division of America’s largest maintenance company started as an almost illiterate Mexican immigrant with a pail and a broom fourteen years ago.

But she started working in a hospital where maintenance work had been contracted out to a maintenance company.

As a result, she had opportunities for advancement.

Productivity in the hospitals maintained by this company has almost tripled in the last fifteen years.

The time needed to make a bed, for instance, has been cut by two thirds.

This maintenance company had a financial interest in improving the productivity of its menial jobs.

It had people in executive positions who knew first-hand the work needed to maintain a hospital.

The company was therefore willing to work for years on the redesign of all the tools needed, right down to the bed sheets.

It was willing to invest substantial capital in the new methods.

None of this a hospital would have done.

To make hospital maintenance productive required an outside contractor.

The greatest need for outsourcing—whether of manual work like maintenance, or clerical work like billing—is found in government (see Chapter 8 below).

There, productivity is lowest.

There, also, are the most people employed in such support activities.

But large businesses are not much different.

They, too, require systematic contracting out of service work to organizations whose business it is to do such work.

These contracting organizations offer career opportunities for the people doing such work.

Their executives take such work seriously; they are therefore willing to invest time and money in redesigning the work and its tools.

They are willing, even eager, to do the hard work needed to improve productivity.

Above all, they take the people who do such work seriously enough to challenge them to take the lead in improving their work and its productivity.

Outsourcing is necessary not just because of the economics involved.

It is necessary because it provides opportunities, income, and dignity for service workers.

We should therefore expect within a fairly short period of years to find such work contracted out to independent organizations, which compete and get paid for their own effectiveness in making this kind of work more productive.

This means a radical change in structure for the organizations of tomorrow.

It means that the big business, the government agency, the large hospital, the large university will not necessarily be the one that employs a great many people.

It will be the one that has substantial revenues and substantial results—achieved in large part because it itself does only work that is focused on its mission; work that is directly related to its results; work that it recognizes, values, and rewards appropriately.

The rest it contracts out.

From The Daily Drucker

Amazon link: The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done

The New Corporation’s Persona

Increasingly, in the Next Society’s corporation, top management will, in fact, be the company.

This top management’s responsibilities will cover the entire organization’s

bbx direction, planning, strategy, values, and principles;

bbx its structure and relationships between its various members;

bbx its alliances, partnerships, and joint ventures; and

bbx its research, design, and innovation.

Establishing a new corporate persona calls for a change in the corporation’s values.

And that may well be the most important task for top management.

In the half century after the Second World War, the business corporation has brilliantly proven itself as an economic organization, as a creator of wealth and jobs.

In the Next Society, the biggest challenge for the large company and especially for the multinational may be its social legitimacy—its values, its mission, its vision.

Everything else can be outsourced.

Splintered Nature of Knowledge Work

Knowledge work is specialized, and because it is so specialized, it is deeply splintered in most organizations.

Managing all of these specialties effectively is a big challenge for knowledge-based organizations.

For example, hospitals may use outsourcing, PEOs (Professional Employer Organizations), and temp agencies to manage, place, and satisfy the highly specialized knowledge worker.

This results in outsourcing part of the management task.

The modern hospital provides a great example of the management complexities created by the splintering of knowledge work and the resultant use of outsourcing, PEOs as well as temp agencies.

Even a fair-size community hospital with 275 to 300 beds will have approximately 3,000 people working for it.

Close to half will be knowledge workers of one kind or another.

Two of these groups, nurses and specialists in the business departments, are fairly large, numbering several hundred people each.

But there are around thirty “paramedic specialties”: the physical therapists and the people in the clinical lab; the psychiatric case workers; the oncological technicians; the two dozen people who prepare people for surgery; the people in sleep clinics; the ultrasound technicians; the cardiac-clinic technicians; and many, many more.

Managing all these specialties makes the modern hospital the most complex of modern organizations.

From Peter Drucker’s Managing for the Future

Managing for the Future

Amazon link: Managing for the Future

The Trend Toward Alliances for Progress

While mergers and takeovers, imports and exports grab headlines, business alliances rarely do.

Nor do they generally show up in statistics.

Yet for small and medium-sized businesses they are increasingly becoming the way to go international, and for big business, they are the way to become multitechnological.

Alliances of all kinds are becoming increasingly common, especially in international business: joint ventures; minority holdings (particularly cross-holdings, in which each partner owns the same percentage of the other); research and marketing compacts; cross-licensing and exchange-of-knowledge agreements; syndicates, and so on.

The trend is likely to accelerate.

Marketing, technology and people needs all push it.

In Japan in the ‘60s and ‘70s a foreign business could gain access to the domestic market only with a joint venture with a local company.

Increasingly, such joint ventures are needed in Europe and the U.S. as well.

A few years ago AT&T entered an alliance with the Italian telephone monopoly to reach a European market dominated by government monopolies.

Even more often an alliance is the only way to obtain new, distinct, and foreign technology.

Large computer makers buy into small software houses; large electronics manufacturers buy into small designers of specialty chips; large pharmaceutical companies buy into genetics start-ups; large commercial banks buy into bond traders or underwriters.

More and more, such alliances are also the way to get access to people with the know-how.

The many research pacts between American universities and large European, Japanese, (and American) businesses are good examples.

And then there are the international alliances within industries.

Two years ago, two medium-sized manufacturers of specialty machinery—one Japanese, one American—sealed their agreement to exchange research results and to sell and service each other’s products in their respective home markets by swapping 16 percent of each other’s stock.

All three big U.S. auto makers have substantial minority holdings in independent Japanese and Korean car makers and sell on the U.S. market, under their own name plates, cars made by these Asian “friends.”

These are all dangerous liaisons.

While their failure rate in the early years is no higher than that of new ventures or acquisitions, they tend to get into serious—sometimes fatal—trouble when they succeed. There is more in the book

See … A mature industry therefore needs to be managed for alliances, partnerships and joint ventures to adapt rapidly to such shifts

Find “Alliances” in the contents of Peter Drucker’s work or through a Google site search

List of topics in this Folder


“The greatest danger in times of turbulence is not turbulence; it is to act with yesterday’s logic”. — Peter Drucker

The shift from manual workers who do as they are being told — either by the task or by the boss — to knowledge workers who have to manage themselves ↓ profoundly challenges social structure

Managing Oneself is a REVOLUTION in human affairs.” … “It also requires an almost 180-degree change in the knowledge workers’ thoughts and actions from what most of us—even of the younger generation—still take for granted as the way to think and the way to act.” …

… “Managing Oneself is based on the very opposite realities: Workers are likely to outlive organizations (and therefore, employers can’t be depended on for designing your life), and the knowledge worker has mobility.” ← in a context




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