David A. Boyle, CMC, is a human resources and business advisor with a practice focused on identifying the key people essential to achievement of demanding business plans.  His work has four aspects:

1.)understanding the cost of the attraction, motivation and retention of key employees; 

2.) selecting those key people needed to drive organizations and provide stability through systematic skill capturing, skill transfer and succession plans; 

3.) assessing an organization's core competencies; and;

4.) outsourcing non-core competencies to enhance the possibility of meeting targeted objectives..

After graduate training in psychology, David began his consulting career in 1968 with Hay Associates Canada.  He was appointed Vice-President Compensation Services for Tomenson-Alexander in 1975.  In 1977 he set up his own firm in human resources and compensation consulting and has evolved this practice into its current form as Eureka Applied Management Solutions, a division of Life Ventures Ltd.  David is also a partner in an outsourcing venture called HR-on-Demand.

Eureka Applied Management Solutions is a practice of Certified Management Consultants enabling North American clients to build profitable businesses and alliances in targeted markets.  HR-on-Demand is a partnership dedicated to managing and investing in significant outsourcing projects.

Accreditation and Affiliations
Certified Management Consultant with the Canadian Association of Certified Management Consultants.  Professional memberships include the Canadian Professional Sales Association, Sales Research Club of Toronto, and the Quebec Corporation of Psychologists.  Volunteer memberships include the Variety Club of Ontario, Ontario March of Dimes and the Heart & Stroke Foundation of Ontario.

"It used to take 20 years to become a $1 billion company.  Now it takes as little as 3 years.  How do you capture this compression of time in a way that enables your organization to evolve?  By becoming a Zero time company.  There's no other choice.  Things are moving too fast."

Mark Teflian, President of an organization called Time0 adds,

"The most important kind of time is the time that it takes to acquire and retain your customers.  That's what "time zero" is all about:  How fast are you retaining customers that you already have?  How fast are you grabbing new ones?"

It is an old saying that "time is of the essence". To be strong in a business market being competitive in price and in time seems to be the only way to create job security. Today outsourcing is a part of this work process revolution affecting our jobs, businesses and life styles.

Mentioning restructuring and outsourcing usually creates fear in employee hearts and excites their representatives, the bargaining agent  However, these fears can be overcome if we take the time to understand what outsourcing is, what it is trying to achieve and the very necessary contractual relationships negotiated based on the right objectives, with the right attitude and the right results.  Indeed, all parties whether management, union or worker can benefit from the increased revenue and savings, building stability and financial security for the future. 

The discussion which follows outlines how to bring in an outsourcing program into a unionized environment, successfully:

Out of the history of the union movement itself  comes the concept of outsourcing!  Yes, the early trade union called a "Guild" was itself an early example of the concept of outsourcing.  To find the best stonemason in London  you went to the center  for people most skilled in stonemasonry, the stonemason's guild.  Some of these guilds acted as hiring halls but in several regions they evolved to become companies in themselves, providing skills on an outsourced  basis to other local companies.      

Also from  the history of Europe the concept of business "Clusters" has been an important step in the economic success of this region.  The principle of a series of companies in a region each specializing in one skill and providing, perhaps, metal cabinets, brakes,  chains and shared accounting services one to the other sounds a lot like outsourcing.  Companies like Volvo have evolved from such a history.

Out of such historical patterns the future is clear�outsourcing is here to stay�bet on it! 

To read the business literature, our future job security has a chance only if built on outsourcing opportunities.

On the contrary, to read union press releases available on the net, the future with respect to outsourcing is very muddy, unions claim that no one  or no company can feel secure when outsourcing is proposed.  They suggest that both corporate and entrepreneurial interest in outsourcing is to be challenged at the negotiating table and defeated wherever possible.

To determine who is right and when outsourcing is right, listen here!

Outsourcing is a management strategy, by which an organization decides to out source major, non-core, functions to specialized, efficient service providers with an anticipated benefit through increased profit margin, more competitive cost, more sales, lower inventory and/or improved speed of delivery.  Outsourcing the information technology department is the classic example use.  Ross Perot, the

former Presidential candidate made his personal billions developing a company called EDS.  As the story goes, Ross sold Blue Cross Insurance on the concept of being able to produce claims cheques cheaper than the inside department.  He made them an offer to reduce cheque costs by half,  got the contract and made a pot because EDS costs were actually only 10% of the original Blue Cross cost.

Another glimpse of history  shows us that there is a long standing business practice of hiring special contractors,  contracting out to level off peaks and valleys and reduce overtime costs.  Similarly companies have a long history of

forming partnerships with other organizations having capacities and competencies complementing their own,  to access resources beyond their current reach.

In concept, sub-contracts are usually simple in purpose and often temporary in nature, e.g., contracting with a third party labour pool or renting warehouse and distribution services during peak times.

On the contrary, outsourcing involves the wholesale restructuring of the corporation to focus around core competencies and develop outside supplier relationships to satisfy the rest.

"Do what you do best and outsource the rest"  says the Outsourcing Institute.

The Institute web site also quotes James Quinn a professor of business at Dartmouth College;

" if you are not best-in-world in doing something, and are doing it in house, you are giving up a competitive edge.  You could outsource to the best in the world, up the value and lower the cost."

Professor Quinn goes on to say that

"You need higher quality of management to outsource successfully". 

In general, top managers and stakeholders love outsourcing.  In management eyes, outsourcing generates greater profit, business expansion opportunities all within reasonable expectation for adequate business financing.

Reality is, however, middle managers fear outsourcing, even hate it.

Saving time and money are the two main motives for outsourcing, creating a threat to middle-management  security by seeking new work process solutions.  Often the tactical reasons companies outsource include surviving in the presence of  merger and acquisition activity, the associated financial problems, the need to restructure business process and the need to recruit and retain more highly skilled management able to tackle the need to plan and execute more timely solutions.  Middle management is squeezed and pressured in the change environment.  It looks like the world is focused on them exclusively as the source of the solution to business issues.

It is further written in the business press that Unions, but not necessarily union members, hate outsourcing because of the fundamental threat to separate out parts of the work force into lower wage companies, thereby reducing job security for the membership. A distinct reduction in union ability to influence wage rates and availability of skills in a marketplace become anticipated possibilities.

Even when an outsourcing project has been announced the process behind outsourcing can be slow as watching glaciers melt.  To make outsourcing work companies often need to develop a number of concurrent processes to get competitive products to the market on time.  To take the time to develop product plans, to design an outsourcing strategy, to find and select a vendor will often discourage the participants, management and labour alike.

The potential for a human resources nightmare during a dragged out outsourcing project is very real.  Long periods of planning, with little open communication, is deadly to morale and productivity.  Rumors fill the void of poor communication.

There are also legal issues arising from employment standards laws, management rights, labour law and government relations. In most jurisdictions outsourcing used to break unions is against law.  Severance pay, notice periods, retraining requirements, pension benefit rights and successor rights become highlighted.

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People have been finding out early in the outsourcing process that the company actually learns more from its new suppliers than it would ever have learned from having a sole source internally, unless it already was best-in-the-world in that activity.

1.Accelerate reengineering benefits�see the benefits of more efficient management of non-core functions and increased focus on core functions

2.Access to world class capabilities�outsourcing providers gain expertise by working with many clients facing similar issues, streamlines technology and work processes�creates new career opportunities for personnel who successfully transition to the outsourcing provider

3.Cash infusion to the business�assets costly to maintain are transferred out�freeing up cash flow and possibly generating new revenue

4.Free resources for other purposes�focus all resources on what company does best

5.Control functions which have proved difficult to manage---once wayward functions are understood then specialists may be able to solve the problems

6.Improve focus of company efforts�allows more effort to focus on client needs

7.Make capital funds available�third party more likely to invest in a company with a clear core competency rather than one distracted by several non-core competencies

8.Reduce operating costs�by focusing on economies of scale, operating costs can be better managed

9.Reduce risk---dealing with a risk in a field you know is easier than dealing with multiple risks in several fields

10.Resources not available internally�Rather than building resources from the ground you contract them from third parties

Once outsourced, a worker often realizes that:

• smaller can be better
• in the outsourcing organization he or she has more influence 
• now is surrounded by more like-minded colleagues
• opportunity to receive more recognition when they perform
• pride increases with being the "best-in-world"
• the outsourced function can attract more business revenues, generating more security
• greater career opportunity can lead to higher wages

It appears that the average worker displaced by the restructuring trend goes through several stages of adjustment to the changed work environment and after about three to six months out begins to contemplate:

1.How serious am I about succeeding?

2.Am I going to spend all my time proving the old company management is wrong?

3.It hits me that what I focus on frequently happens!  Think negative � get tripped up and I screw myself more than the company.

4.Do I want a future or will my career die with the old ways?

A basic realization begins that the future will be defined by watching the old ways change or disappear,  ideas begin to win big and old ways eventually fall by the way side.

Then as Nike suggests:

Charles Fine (1999) in his interesting book, called Clockspeed, comments on how our world is accelerating in speed.  He believes that knowing what to outsource can help companies avoid supply headaches and keep control over their business destiny.  He gives as examples:

• Chrysler survived the 1980s by outsourcing automotive subsystems
• Notice the rise in the importance of the provider company's image,  "Intel Inside"
• Compaq bought parts from IBM to out maneuver IBM in the personal computer market
• Toyota's  "lean production system" is an outsourcing system based on supply by Denso, Japan's leading parts supplier
• Hewlett-Packard's strength is computer and printing software so they outsource building computers and printers 
• Teledisc is attempting to achieve profitability sooner rather than years away�outsourcing the production of microwave modules to companies ready to produce now rather than waiting for their own production facilities to open.

GM and the UAW had a set of tough negotiations over the past two years as GM tried to outsource its parts supply downstream to Delphi.  The results are interesting and obviously both sides took the time and effort to be creative.

Delphi is and example of sole sourcing, a GM owned subsidiary set up to have an exclusive contract to provide specific parts to GM factories.  Such a sole sourcing contract often is the solution to streamline supply negotiation�developing a long term solution�giving both GM and Delphi the time to find and capitalize on parts price reductions through efficiencies rather than relying on a low bid competition.  Predictability of supply and cost control generate opportunity for greater future job security.

Joann Miller (1999) reports in Business Week that GM granted UAW workers a wage increase to $25 per hour up 25% from today after 4 years and richer benefits.  To solve the Delphi Automotive Systems outsourcing issue, workers were provided with a nice plus, wage and benefit guarantees for parts workers in a corporate spin off like Delphi.  The UAW gained  a larger portion of profits and GM guaranted they will provide no  resistance to unionization at other facilities.

Why did GM do this? 

In this contract the UAW gave GM the freedom to restructure their workforce and boost efficiency based on a formula for replacing retirees and  restructuring room to reduce the workforce by 20% over the 4 years.

Similarly Ford can sell their share in Visteon Automotive Systems, based on a deal to lease Ford employees to Visteon until they are able to retire.  Daimler-Chrysler and the UAW agreed  no volunteer recognition of a union without 50%

of signed workers.  In all these contracts the car makers gained the right to negotiate competitiveness of a specific plant locally, motivating all parties to improve productivity without fear of job loss.  Early retirement packages are expected to become even more frequent.

Companies and unions both need to park defensiveness and  pointing blame before coming to the negotiating table.  A more thoughtful approach to tacking problems is needed based on the understanding that sometimes your best solution lies in a combination of solutions.

Mr. Stratton suggests a few sound principles:

1.Identify the problem before jumping to a conclusion

2.Take a measured approach

3.Find the facts

4.State the problem

5.List possible solutions to the problem

6.Consider each possible solution

7.Pick the best solutions

8.Write down the solution chosen to guide decisions of others

9.Communicate both the decision and the reasons behind the solution chosen

When faced with the prospect of outsourcing unions are primarily concerned about :

• Job Security
• Pressure to reduce wages or take benefit rollbacks
• Loss of the right to organize workers
• Loss of control under pressure of productivity improvement

In the automotive talks we know these issues were addressed by:

• Providing the right to work until retirement or take a package
• Wage and benefit guarantees
• Minimize resistance to attempts to organize new or restructured plants
• Find solutions to plant competitiveness at the local level
• Reducing the corporate power to impose solutions
• Reducing the number of supervisors

"In the right environment people at all levels of an organization can make contributions�Will granting people an extraordinary level of responsibility allow them to achieve an extraordinary level of performance?�(his answer is a resounding) Yes"

Mr. Sittenfeld describes what he considers to be the ideal � the socio-technical approach.  He discusses an outsourcing venture called Consolidated Diesel, a 1980 joint venture between Cummins Engine Co. and J.I. Case.

At Consolidated teamwork became the basis for building an engine where members of the team were extensively cross trained, a new culture adopted and a work code adopted, summarized as follows:

• Play fair, inform
• Listen to employees and involve them in the solution
• The responsibility assigned really matters, supports ownership not blame
• High expectations from each other, not only from above

Through this socio-technical approach  a bonus appeared � the company only needed 1 supervisor per 100 employees.  Considerable savings were also realized by a shorter production cycle and a substantial reduction in injury rate to about 1/5 of national rate.

It is important to note the key words implied in the Consolidated work code:

INFORM & LISTEN

CONSTRUCTIVE COMMUNICATION

EMPHASIZE PEER COMMUNICATION

SPEAK UP TO SOLVE AN ISSUE

AVOID BLAME

Which leads us to make the next point.

Dr. Nishimura emphasizes that globalization may be changing the face of manufacturing, but the actual source of a manufacturing company's success is decidedly local. � It take workers who have both the incentive and the authority to effect the necessary changes that will create the next small but important efficiency in manufacturing process and to accommodate the next small but inevitable change their OEM customers demand.  It takes speed in responding to ever shrinking product life cycles, and it also takes focus to meet those uncompromising, just-in-time delivery schedules.

Solectron's continuously improving processes have created a win-win strategy that lets both Solectron and its customer-partners concentrate on what each does best.

Solectron has two guidelines�superior customer service and respect for individual workers.  He pushes for fast-feedback from customers and giving employees the freedom to act in the best way they know how.

While the customer is always right, problems are resolved by people.  In this new century you keep the employee informed every step of the way.  To do otherwise is a waste of good human resources and a lost opportunity to serve the client before someone else does.

Polly LaBarre (1999) describes Australia's  Lend Lease Corporation, a company based on "How can we do what's never been done before?" with a challenge to double their business every five years.

This company has an internal "college" based on the principle:

 "..that happy, healthy, challenged employees are better employees.  We help people reach their potential."  

At Land Lease communication with employees is continuous in every aspect of the work process through:

• Mandated learning opportunities
• Regular employee meetings
• Internal networking
• Internal new business incubators, meeting together spontaneously to unlock complex problems and realize enormous in house potential

All of this communication is in recognition of their unique business principle

 "speed to market is the key to our future and the key to speed is flexibility�in our products, our people and our union agreements."

But hello!  Where is the union?

Unions are not populated by Neanderthals?  They have the resources to analyze and understand the business case too!  Maybe-just-maybe a good idea will come from the union side.

In a recent set of negotiations with a client our firm Eureka pointed out several value added opportunities which would benefit their bottom line.  In preparation for the presentation we had a dilemma.  If we the genius consultants said it, the ideas would be believed.  If we told them the truth, that the union economist developed the ideas,  the opportunity would be shot down in flames.

We told the truth.  The President stormed out of the negotiation room.  Only to return in 10 minutes with 5 sheepish Vice-presidents in tow.  He then announced to his Vice-Presidents that they should sit and listen to new value added ideas they themselves should have identified.

The value-added idea generated by the union after review of the business case was -- Labour input costs could be reduced by 2.2 million US$ by spending $10,000 to train 200 employees on a specialized fluid handling skill key to plant operations.

The moral of the story was and is bring the union into the business case analysis early. Grab hold of the "discretionary effect"---people cost is 60-80% of job productivity if performance is just what is needed to keep their job.  People

stretch to 100-110% of their capacity at no increase to input cost when fully motivated.  An informed union employee is good business.

Charles Fishman (1999) makes the point:

"Who is in charge of a place than runs its self? Everybody!"

At a General Electric facility in Durham North Carolina  it is realized that

multi-skilling is how the place is kept together.  People don't hoard their skills.  The bargaining unit has been a key party to this discovery.  One employee suggested that

"Trust is a funny thing.  It's a mystery � and the genius � of what goes on at GE/Durham."

To transform the union-company and company-client set of relationships into a trusting culture it is necessary to reach agreement on a few issues:

• Define shared responsibility for production or service delivery
• Set performance standards acceptable to customers
• Set  competitive work pace and wage rates being realistic and consistent with best practices
• Anticipate trends for customers and propose adjustments
• Continuous improvement towards leading edge services
• Develop a knowledge advantage�customer can't get elsewhere
• Target to be supplier of choice in the marketplace

To reach such agreements flexibility is the key and the win-win strategy must work.

Bazerman and Gillespie (1999) note that differences of opinion about future events don't have to be bridged;  they become the core of something they describe as a contingent contract.  In effect, contingent contracts allow negotiators to be flexible without feeling that they have been compromised.  Betting isn't always risky.  In some cases, it actually reduces risk by sharing it among two or more parties.

Business Week described Science Applications International Corporation the

largest employee owned info-tech firm in the US.  A leading privately held technology conglomerate in which 36,000 employees own a piece.  This company sells automation control systems to healthcare, nuclear, oil, and

utilities.  The article makes the point that by increasing the involvement of employees and their bargaining agents in the business:

"People are taking a more proprietary interest in the performance of the company"

Burrows, Peter 1999 Job shops take center stage.  Business Week June 21

Business Week, 1999 Where owners and workers see eye to eye  June 21

Fine, Charles H., 1999  Clockspeed, New York, Perseus Books

Fishman, Charles, 1999  Engines of Democracy, Fast Company, October

Imperato, Gina, 1999  Net Company Supplement to Fast Company, Fall Issue

LaBarre, Polly, 1999, The Company Without Limits.  Fast Company, September

Markels, Alex, 1999, "The wisdom of chairman Ko",  Fast Company, November

Miller, Joann, 1999  Commentary:  THE AUTO TALKS - WHO REALLY WON,  Business Week, October 25

Sittenfeld, Curtis, 1999, "Power by the people",  Fast Company, July-August

Spencer, Lyle M. 1995.  Reengineering Human Resources, New York, John Wiley & Sons, Inc.

Stratton, Jeff, Editor  1999 Board & Administrator, December Volume 16, No.4