KMD Poland’s Jens Brinksten: Firms Ask Much of Sourcing Partners, Not Enough of Themselves

March 30, 2016

JensBrinkstenOne of the true outsourcing veterans in Nordic business, Jens Brinksten, brings first-hand knowledge of alternative sourcing to Denmark’s KMD, as head of KMD Poland — a level of experience unusual among parent company executives. He has set up offshore operations across Eastern Europe and Central Asia. Jens shared his perspective with the audience at the March TON meetings; we caught up with him shortly after the event and asked him to enlarge on some issues he raised during his provocative presentation.

 

Jens, you seem to suggest that when companies run into problems in outsourcing projects, the first place they should look for answers is inside their own organizations, not their partners’ operations.

 

My angle on outsourcing is very practical. A lot of companies spend a lot of money on consultants, lawyers and auditors to do things that KMD did entirely internally. People tend to believe that if they hire McKinsey, everything will go well. But if your company is fully committed to outsourcing as a discipline, have people with first-hand experience in it and plan things very thoroughly from the beginning, you really don’t need the outside help.

 

They tend to want to outsource outsourcing?

 

That’s a funny way of putting it, but yes. Danes in particular tend to assign these projects to their youngest managers to outsourcing projects, because nobody else in the company thinks this is fun. They put a new guy in charge, instead of a more experienced executive who really knows the business processes being outsourced and is in the best position to adapt those processes to the outsourced environment.

 

The outsourcing vendors that companies contract with in the offshore markets are very experienced nowadays. They rarely are the sources of the problems in outsourcing. They’ve run many, many projects in the last 15-20 years, and they really know what to do. Most of the bottlenecks and problems I see when I advise companies originate with the companies who want to outsource but are not prepared well enough.

 

When you outsource, you should do it in good times, when you have the budget and the resources to do the work internally, but you choose to outsource it because it makes sense to do that. Outsourcing is most costly during the first 18 months. That is an investment period. That is when you should be planning the entire process, from Day One to Exit. And this is something I’ve observed – outsourcing plans rarely include an exit strategy – a plan for what happens if the program doesn’t live up to expectations. That’s a mistake.

 

There’s a fear of being connected with an initiative that became a failure.

 

Yes. Too many managers and boards are too reluctant to close down an outsourcing engagement, because that’s never a popular decision. They would rather label it a success, even when everyone knows it’s a disaster. Maybe the cost per production hour has gone down, but that is because we just added more production hours to an existing cost base. We didn’t really save anything.

 

Projects also run into problems if they start out without top-level management buy-in. And it is important to involve the people who were most critical of the initiative directly in the outsourcing project. Those people usually have legitimate points, and you have to address their criticisms directly in your planning – if you can’t address those points, your critics probably were right. If you involve them, and they are wrong, at least they have had their say. In my experience, those people tend to be the ones who say what everyone else thinks. They are influencers. So having them on your side can make a big difference in getting and keeping management support.

 

Outsourcing projects need to be undertaken as openly as possible. It’s a sensitive subject. Outsourcing projects tend to generate rumors and to make people nervous about what it going to happen to their jobs. It is very difficult to get the communications right when it comes to outsourcing – why are we doing it, what’s in it for you, what’s in it for the company. Often, when I advise companies on outsourcing, I find that nobody has prepared a communication strategy – internal, for the employees, or external, for the financial community. There is no HR strategy.

 

Do you find people are receptive to this criticism?

 

I shared some of these kinds of stories at the TON meeting, and I could see a lot of people nodding. People came over to me during the breaks and shared similar stories. I heard from a lot of people that new sourcing approaches began when their companies were financially in the red and management viewed outsourcing as a way to save money, as a way to get back to profitability. They didn’t see that the benefits don’t really start to come until the project is 18-24 months along. So these people know that their management boards are losing sight of this initial period of investment – but they don’t dare to say it.

 

Scandinavian companies always want to offshore work to the top-notch people, but we don’t want to outsource the top-notch jobs. We hire these outstanding people and then we give them the worst jobs, which they are substantially overqualified to do – especially in Central and Eastern Europe – and then they get sick of it and leave. Then we wonder why we can’t keep good people in our offshore business centers. We forget that people in Eastern Europe are very ambitious, and they want challenges in their daily work. And if you can’t make them feel challenged, they can find another company that can.

 

There are thousands of books out there about sourcing. But what do most of these books focus their attention on? How to select an outsource vendor. The authors have forgotten to focus on the mother companies – how they should prepare themselves before they go out and source. What processes, procedures and best practices have to be in place, in the parent company, so we can be assured that people who come from another culture background and speak another language can understand our company and the work we need them to do?

 

That includes all of the specifications and documentation – are they delivered in a form and in language that the outsourcer’s people can understand and use them? We tend to view these things as the vendor’s responsibility, but it isn’t. It’s ours.

 

So management is basically saying, “This is a peripheral function, the kind of thing we would choose to outsource…why should we change anything about the way we run our business for the sake of doing some non-core business function better?”

 

Exactly. In my experience, we are not doing enough to involve our sourcing partners. Think of a man who is sitting there cutting stones. If you hire that man to cut stones, he will think about the work in one way; if you hire that man to build a cathedral, he will think about that work very differently. We are hiring too many stone-cutters.


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