which a performance standard has been established, measurable or not. Some of the reports will be by-products of other data processing functions, most will come from the vendor, but some may originate from the client, such as reports from users about their help desk performance. The liaison representative is a logical person to be responsible for coordinating, compiling, and disseminating the performance results.
Some aspects of contract requirements cannot readily be checked by reports. For example, keeping proprietary information confidential is a matter that can be verified only by keeping full communication with the right people, discreetly looking for possible breaches and diplomatically looking into anything noticed that raises suspicions.
Motivating Vendor to Conform
If the vendor’
s payments are tied to the performance results, that provision can be a principal motivating factor for the contractor to accomplish the outcome the client wants. Of course, having the vendor sharing the rewards and risks is a worthy plan where the circumstances make such an arrangement practical. It can make the vendor feel more like a partner than a contractor, and that spirit is desirable. Or, the contract may specify financial penalties when the vendor does not meet specified performance standards, generally a desirable type of provision.
The time to make terms for sharing the rewards and risks is when the contract is being negotiated; however, such an arrangement can be negotiated as an amendment to the original contract if both sides can see that it is to their benefit.
Whether or not the contract provides for the vendor’
s payments to be tied in to its
performance criteria, it is essential for the performance report results to be communicated regularly and systematically to the client’
s management. The
contractor should be thanked for meeting or exceeding set standards, and must be reminded of situations where the results criteria have not been met. If the performance is less than satisfactory a few times and the vendor is not brought to account, the contractor will not be motivated to hit the target. Thus, it is important to let the vendor know that the client is aware of the deficiencies and expects them to take corrective measures. Careful records of the deficiency and copies of the reminder notices are important to keep, so that if the situation becomes a larger issue, the historical facts are documented for reference in discussions and negotiations about corrective action.
The client has one advantage in its pressures to the contractor to meet performance requirements. Outside service firms, for business reasons, are anxious to please their clients so that contract renewal can be achieved. Therefore, a request for improved performance should normally be met with respectful responses or negotiations to resolve the matter. If a contractor is seriously and repeatedly deficient in its compliance, the ultimate threat is to terminate the contract, which is the last resort and an undesirable conclusion for both parties; terminations under hostile circumstances can hurt the client as well as the vendor, since they inevitably cause disruption and the difficulties of moving the work back in-house or to another vendor under unpleasant circumstances.
HOW TO HANDLE EMPLOYEES WHEN DOWNSIZING
One of the most difficult parts of outsourcing and other types of downsizing is to manage the human relations aspects so that morale and loyalty are preserved and that the best employees are retained. Unfortunately, transferring employees out or letting them go inevitably strains the feelings of the other employees, and this section shows some of the tactics that can minimize the negative results of downsizing and even, sometimes, leave the new organization stronger than it was before.
Downsizing Methods
Downsizing is a major part of, indeed one purpose of, nearly all outsourcing programs. Cost reduction is an objective of most outsourcing, and that reduction is primarily in terms of fewer employees.
But there are a variety of ways that downsizing can be accomplished without outsourcing. One currently popular approach is reengineering, which consists of methodically examining the operating processes of an organization by analyzing the types and numbers of employees needed for each function as well as developing better approaches for performing these processes. Another downsizing method is to make “across the board” cuts, say 10 percent of each department; this approach, which is used to hastily meet a budget crisis, is generally not recommended as it usually makes cuts in the wrong places.
In the data processing arena, many companies have been able to reduce staff by converting mainframe systems to client/servers, by adopting CASE methods for programming, and other methods for accomplishing the work goals with fewer employees.
Inevitable Anxiety and Resentment
Anxiety is an inevitable result of uncertainty. When a situation arises that will involve letting employees go, or requested to be considered for employment by an outsourcing services firm, it results in anxiety for those affected. These employees’
source of livelihood is put in limbo until the situation is resolved, even though the sources of their income may be improved under the new arrangement. Unfortunately, the uncertainty and resentment caused by downsizing usually also results in the lowering of morale of the employees who remain.
There are several general principles reviewed below for taking steps to minimize the disruption from downsizing, to maximize the morale and loyalty of the remaining employees, and to help to retain the employees the client wants.
Explain Process at Earliest Opportunity
The timing of the announcement of a downsizing plan to the employees concerned is a difficult decision, and usually not a perfect one. The plan should be explained before the rumors become prevalent. It can obviously be disconcerting for an employee to learn first of a downsizing plan from the newspapers.
While the plan must be discussed in advance with key employees who need to be consulted in preparing the structure of the downsizing effort, the planning phase should be as short as possible because, once the plan is known by top people confidentially, leaks and rumors almost inevitably follow.
Boeing’
s announcement in 1993 that it would reduce its workforce by nearly 20
percent over 1 ½ years was received without any special alarm by its employees.
The reason for the calm acceptance was that Boeing had made a point of revealing over the previous period that sales in the aerospace industry had been at a low level and that drastic corrective action was in order.
Explain Openly the Business Reasons for the Change
When the downsizing plan is announced, the important matters to emphasize and clarify are the business reasons for making the change and the fairness features of the plan for the employees.
There has been enough downsizing in recent years that it has become an accepted fact of life to most people. It has become recognized that in the evolving intensity of global competition, companies must often make major cost reduction efforts to beat or stay even with competitors. The real reasons for the decision to lessen staff can be to reduce a downward profit trend, to meet known cost levels of competitors, to generate cash for an important new venture, or some other of the many possible business considerations. These business reasons should be explained so that all concerned are made aware of the valid and logical necessity of the downsizing plan.
It should be made clear how the downsizing program will make the organization stronger so that departing employees will understand the logic and reasonableness of the effort and remaining employees will feel more secure.
The fairness of the plan structure as explained should include the general terms of a financial package and career assistance for those that will leave, and the benefits of working for a computer service firm for those employees who may be made available for employment with the outsourcing vendor. The plan may give choices to some employees, making it somewhat voluntary, such as having them decide whether to accept a severance package or transfer to some alternative positions.
All of this open discussion of the business reasons and fairness will not eliminate some bitterness and lowering of morale. But done well, it should keep those disadvantages to a minimum.
Get Help from Human Resources and Legal Staff
When Philadelphia Newspapers, Inc. planned a downsizing effort in 1993, based on moving from its mainframe to client/servers, the unions threatened to walk out. The downsizing program had to be deferred until the labor dispute was resolved. That delay indicates the value of securing counsel and advice from legal and human relations specialists.
The human resources staff should participate closely in the planning of the downsizing steps. It is their job to be skilled in the handling of employee relations matters, especially those involving intense emotional feelings. Therefore, human resources’
advice and guidance should be sought in laying out the plan. However,
the execution is a line responsibility; that is, it is the line manager’
s proper role to
make the announcements to the groups affected and, ultimately, to explain to each individual how the plan affects him or her.