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02nd July 2015

The price of everything, the value of nothing

29th March 2015 | Posted in Economics, Management, Organisational Development

Writing in the FT this weekend, food writer Tim Hayward identifies the subtle feelings provoked when quality restaurateurs outsource parts of their production. It reminded me of a conversation I had in Madrid a couple of weeks ago and made me curious about how organisations engage in moving production and service around the world.

6f885b09-a86d-4fe7-9638-6be41fde16ac-1020x677The paradox the FT article catches is a common one in business process improvement. Off-shoring or outsourcing transactional processes at the front or back end of the service profit chain is an economically sensible decision for a business to consider. Efficiency and effectiveness can improve. Costs can reduce. Directors would be failing their shareholders if they didn’t at least think about it. More than that, there’s plenty of evidence that they may be failing their customers if they don’t put it on the agenda. Production and service delivery can improve. Political sensitivity about loss of jobs at home, whatever ‘home’ may mean to a global organisation in 2015, is not always supported by experience. But people don’t always see it that way. Off shoring and outsourcing are seen as threatening and the quality of production or service are almost always characterised as being weakened by the change. As Tim Hayward notes, any objection to the lamb shank on your plate being slow-cooked in a commercial kitchen on a business park rather than in the maestro’s kitchen by an artisan apprentice at dawn is an emotional response, not a qualitative or practical one. It may be the same for any organisation engaged in thinking about these things.

This brings me to the conversation in Madrid. I was there with my friends from TOWARD, who I’ve written about before and to whom I guess we’ve outsourced some of our Leadership development. Their cultural match with our team has made this an easy process to embrace. But the conversation was with someone on a similar development scheme with one of the big consulting firms. Explaining to him that we were working at an independent hotel because we liked personality in our venues and we were in a city centre for the cultural value drew a rather wistful response from him. His experience of his own development programme is of modern hotels with great transport links. He arrives, gets trained, leaves. It’s probably great training content, so the service design is effective and efficient. But it also sounds a bit, I dunno, soulless? A bit like the commercial kitchen’s lamb shank, I guess.

All our research tells us we aren’t spending significantly more money by our choice and all the feedback we have tells us that the people who come on our courses attribute value to the care of our team in finding great places to hold our events. I can’t put that in a spreadsheet but I bet it’s significant. Taking that same care in outsourcing or offshoring seems to me to be equally important. Ultimately, the way things are done can be as important as what it is you are doing to demonstrate understanding both the price of the service and its value.

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