Time changes most things, but one thing that doesn’t change is people’s actions based on their fear of the unknown. That fear arises among employees when companies announce they are planning to implement an outsourcing arrangement. Jobs are often in jeopardy. And even in cases where people have been told their jobs are not going away, they often think: “This is just the first step; more outsourcing will occur later. Will my job be outsourced the next time?” At the very least, there is anxiety, if not fear.

Outsourcing Center has studied hundreds of such situations through interviews with buyers participating in its annual Outsourcing Excellence Awards program. Reactions to actual or feared job loss range from passive resistance to outright sabotage. Absenteeism due to “illness” increases at such times. Some employees with valuable knowledge quit unexpectedly. Others make the process of knowledge transfer difficult or hinder the setting up of the support structures necessary for outsourcing. Production slows.

Companies must deploy strategies to deal with the resistance and “noise” of unhappy employees in order to prevent hindrances to successfully achieving their goals. In 2004 we published a white paper (“The Fearsome ‘O’ Word”) with the findings of our study on the strategies companies were using at that time.

Since the adoption of outsourcing has increased exponentially in nearly all industries and business processes since that time, and offshoring has also become prevalent since 2004, we recently undertook another study to determine the trends in dealing with employee resistance today.

We studied 249 outsourcing relationships participating in the Outsourcing Excellence Awards program from 2005-2009 that were willing to answer survey questions about employee resistance. The study looked at deals where the number of employees whose jobs were impacted ranged from 15 to more than 400 people per company. We found some significant changes in the way companies handle employee resistance today from the way they handled it up to 2004.

Finding #1: Experience makes a difference

Our recent study found that, in companies that had outsourced before, there is less obvious and vocal resistance, and the resistance lasts for a shorter period of time. This is because the company has experience from its prior outsourcing initiatives in dealing with the fears/apprehensions surrounding job security. Moreover, many companies have established an outsourcing center of excellence or project management office that uses lessons learned from prior outsourcing deals to help forge success in future deals.

In companies lacking any prior experience in outsourcing, the study found that the executives were well aware that employee resistance can greatly impact outsourcing success. These companies began researching and/or retaining outsourcing consultants for best practices in dealing with resistance.

Buyers in the study revealed that even if they experienced success in outsourcing IT before, there was still employee (and executive) apprehension when the company undertook its first BPO initiative. Similarly, companies that experienced ITO and BPO successes faced renewed resistance the first time they announced service delivery would be sourced offshore. Then, again, even if they had experienced success with a large offshore provider located in a country such as India, the company faced renewed apprehension from employees and managers or business unit leaders if it planned a subsequent outsourcing arrangement offshore with a small company or one located in a region just emerging as an outsourcing service-delivery locale.

In each of these instances, the buyers stated that an essential component in dealing with the resistance was presenting a clear and robust explanation as to why it chose the particular service provider and presenting evidence that the provider had a proven track record of success.

A significant change since 2004 is a trend for buyers to include among their provider selection criteria the provider’s transition methodology and proof of the provider’s experience in successfully helping other clients manage resistance and similar transitions to outsourcing.

Finding #2: Education facilitates change

Among the strategies that companies use in dealing with employee resistance, there is now a trend toward educating more internal leaders at the buyer organization. This is a step beyond the strategies around communicating the announcement of an impending outsourcing arrangement and is focused on risk mitigation.

Some companies, for example, set up a project management team dedicated to change management associated with their outsourcing initiative. Business process owners and key management personnel comprise the team. The company — sometimes with the assistance of the provider’s team — educates the project management team in employee “handholding” through the transition process. The team learns how to resolve issues that arise during the process.

Other companies organize workshops for their managers and team leaders, educating them with “talking points” to use when discussing the outsourcing initiative with employees. The workshops focus on helping the managers and team leaders to be more comfortable with the facts, changes, and impacts to their business units or teams so they can more effectively help alleviate employees’ concerns.

Finally, we note a new trend among buyers’ risk mitigation efforts, aimed at smoothing out the challenges that arise between the time of announcing an outsourcing initiative to the staff and the transition. Several companies’ top executives, business unit managers, and team leaders make a concerted effort to publicly compliment employees whose actions facilitate collaboration with the provider’s team when onsite at the buyer’s facilities or when an employee’s proactive behavior helps to enable success in the outsourcing initiative.

Finding #3: Changes in communication

The study found that, in the area of communicating with employees about the outsourcing plans, nothing has changed as far as what to communicate. Buyers’ still need to be up front and honest and communicate these key points:

• The business drivers for the outsourcing as well as the long-term objectives and how outsourcing will help the company become more competitive, world class in services, etc.
• The outsourcing is due to strategic initiatives to support innovation, company growth, etc. and not due to employees’ poor performance

What has changed since 2004 is the time for starting the communications about outsourcing and the frequency of the communications. Buyers in our recent study stated that communicating with employees early enough to give them time to get behind the change and support the move to outsourcing is key to success in mitigating resistance.

They also report that communicating often — not just in the initial stages — is extremely important. As one company’s executive stated, “It’s not like you get to address employee concerns and issues once. You have to do it over and over and over again.”

There is an emerging trend among companies that have employees with long tenure (more than 10 years) who will either move to new jobs within the buyer organization, move to the provider’s organization, or leave the company after knowledge transfer is completed. Some of these companies set up on-site “counseling centers” within divisions or business units where employees can go and just talk with each other and help each other deal with the upcoming change. One buyer’s executive described this as going through a grieving process with the loss of friends, routines, familiar environment and supervisor, etc.

An additional new trend in the communication process is an uptick in the effort to develop communications plans that address community concerns about job loss. One probable reason for the uptick is the increasing adoption of outsourcing among hospitals as well as small and midsized businesses.

Finding #4: There’s a potential no-win situation

When outsourcing service delivery models switched to offshore several years ago, there was a lot of employee resistance in the United States that arose from media and marketplace attention to the fact that companies were eliminating jobs at home and sending them to other countries. As adoption of offshore delivery models became more prevalent and a fact of life since at least 2004, the resistance diminished somewhat over time.

However, Outsourcing Center’s 2009 survey of buyers indicates a trend in resistance again this year, due to the negative media attention to offshoring at a time of recession and economic crisis.

Buyers surveyed stated that the challenge of breaking this kind of resistance is difficult because it easily turns into an emotional debate that no one can win. Buyers having survived these situations report that executives need to ensure that they are educated enough on the benefits of using an offshore delivery model and educated on how to have a fact-based discussion with apprehensive or angry employees, removing the no-win emotional factor from the discussion.

Our study also indicates an increased use of strategies that help employees grow more familiar with their new offshore teammates. Buyers are using cultural training for both the onshore and offshore groups as early as possible (even before transition), as well as social events with onshore-offshore teams, and video conferencing that helps put faces with names to increase familiarity and teamwork. All of these strategies help to alleviate concerns about offshoring.

Human nature

The study found a significant number of the surveyed 249 outsourcing relationships where the buyer organization did not experience any employee resistance toward announced outsourcing. In most of these cases, however, the driver for outsourcing was to support growth, and employees were already overwhelmed with work and grateful for outsourced help.

Where there has been resistance in deals studied since 2004, the fact remains that change management is crucial to success. And change management issues are considerable when transitioning to outsourcing. As one buyer pointed out, even if 95 percent of 400 impacted employees are enthusiastic about the outsourcing initiative, the five percent who are unhappy can wreak a lot of havoc in an organization. “It’s just human nature,” stated one executive. Thus, even though outsourcing for some reasons and in some business processes no longer faces resistance, companies must anticipate pushback or resistance. They also must plan in advance to use best-practice, proven methods for mitigating it and resolving the issues that arise.