Outsourcing Management

Today's Motley Fool Post of the Day comes from the brilliant charter member who goes under the monicker Watching The Herd. Let me quote my favorite part:

Anyone working in most of the Fortune 500 companies in America knows how corporate decisions really get made. Someone has an idea, someone makes an assumption about the revenue or "units" that idea will produce and a bogus attempt to formulate a business case to "quantify" the numbers previously assumed is made. The process is much like the process used in a freshman chemistry lab to produce data that proves PV = nRT when your real lab data didn't add up. The only difference is that in modern business, no one really "knows" the end formula being proven, they just think they do. After pencil whipping the business case, word comes down from the mountain to the minions and the project is approved. The minions then spend an inordinate amount of time using poorly defined strategies to meet what are often unachievable goals.

The process normally ends with maybe one of ten attempts producing something of value. Of course, the executives and bean counters are watching all the dollars spent on the projects and many of the hard, quantifiable dollars involve the actual technical work. When the project is late because of poor business requirements or it fails because of poor market research, the executives home in on the poor returns and begin trying to find cheaper ways to do the technical work.

Given the success rate of most product development efforts, exactly what is preventing the management, marketing and finance work supporting it from being outsourced as well? The typical 5 to 10 percent success rate in product development typically isn't due to absolute technical failures. Products typically don't fail because they didn't "work" as designed, they fail because no one wanted the product the firm's executives decided to make. Given that track record, how could off-shore, outsourced executives in these fields do any worse? With fewer lavishly compensated executives, maybe the firm could focus on customers more effectively using in-house talent rather than saving enough money through off-shoring to cover the costs of back-dated options and earnings restatements and defense attorneys.

Brilliant. Read the rest, which can be found here.

Posted by John Jainschigg at 11:52 PM  Permalink

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