Return of the Guru

The Human Costs of Outsourcing

Ara Trembly
Insurance Experts' Forum, September 20, 2010

A few weeks ago I had the opportunity to attend a real-live rodeo in Wyoming, an experience I totally enjoyed. Part of the learning for me was seeing so many riders—especially bull riders—try and fail at the very difficult task of staying atop a wildly bucking animal for a minimum of eight seconds. When the rider couldn’t last the full eight ticks, the response from the genial rodeo announcer was always the same: “Tough luck.”

Fast forward to today, where I am preparing a speech on the advantages and disadvantages of outsourcing. My approach to the problem has been rather systematic—positives on one side of my decision tree and negatives on the other. I had a lot to say about the financial and time costs involved in outsourcing, especially as it relates to IT in insurance. But then I began to consider the human costs.

In my other life as a therapist, I get to hear the sad stories of men and women who have had their jobs—and sometimes their careers—outsourced. In some cases, these folks have worked for 20 years or more for a company, only to be told one day that someone in another state or another country can do the same job for less money, so thanks for your service and don’t let the door hit you on the way out. “Tough luck,” as the rodeo announcer would say.

Now before you start thinking that I am saying you or your company should never outsource jobs or projects, let me set the record straight. Sometimes outsourcing is an answer to a need for lower overhead, better performance, new capabilities, or more efficiency. But everything has its price. When we start playing with people’s livelihoods, we need to be aware of the human costs to them—and to us.

I have seen people’s lives spin out of control as they find themselves without a steady income and realize how vulnerable they have become. Anxiety, depression, despair, anger, family repercussions and physical symptoms of stress are all par for the course. If you have been there—and I have—you know that this is a scary scenario. Some of these folks adapt by finding new jobs or new careers (or becoming bloggers), but some don’t—even years later.

And what about the costs to those who do the outsourcing and remain employed? For one thing, as your employees watch their colleagues being unceremoniously whisked out of the office, they begin to wonder when the axe will fall on their necks. Worried employees tend to be less productive because they spend more and more time looking over their shoulders and waiting for the grim reaper to appear. This is especially true where multiple jobs are outsourced. In addition, once you begin outsourcing in earnest, the word spreads that yours is a company in which one may literally be “here today, gone tomorrow.” Not a good message for your future recruiting efforts.

Further, as the economy begins to brighten (it has to happen some day), your top talent will remember the loss of their friends and colleagues and they may find opportunities elsewhere more secure and appealing.

In summary, let me say again that there are times when outsourcing a particular job or function makes financial sense. Before we make decisions based on bottom-line numbers, however, we need to consider the human costs. No individual or company wants to be on the wrong end of the epitaph: “Tough luck.”

Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.

Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at ara@aratremblytechnology.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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