I have been in charge of commercial activities in big multinational companies over the past two decades. So, I’ve been able to witness how, even the “biggies”, are gradually reducing their staff. And that below levels they need to remain fully operational. How to solve this? With external resources?

When this occurs, there are two possibilities:

Either (i) Work understaffed. Do a sub-optimal job. Jeopardize your Customer’s results. And, in the long run, harm your company’s reputation. 

Or (ii) Complement that lean organization with first-class external resources. Continue delivering successful projects. Maintain Customer satisfaction. And keep your company on the virtuous cycle of growth, development and profitability.

Big companies want to act like start-ups now, instead of the other way around.

When it comes to Project Management, Commercial Management and Risk Management, there are a few important questions (and preconceptions) that need to be tested to see if outsourcing is possible. Here we go with 4 of them:

Objection #1: In view of preserving confidentiality, certain vital functions can only be done by internal employees, loyal to the company.

Companies cannot guarantee 100% loyalty of their staff. This, because of attrition, the impact of restructuring, employee dissatisfaction, salary freezes etc.

While preservation of confidentiality seems granted from in-house staff, the reality may be quite different.

When signing NDA’s (non-disclosure agreements / confidentiality agreements) on a project-by-project basis, external resources are well reminded of their duties. And also of the possible consequences of a breach of confidentiality. They would risk their medium-term collaboration opportunities and their reputation if they would not handle the confidential information with due care.

Objection #2: Using external resources will lead to dependency. These resources may disappear as quickly as they arrived and will leave your company without the ability to perform.

Avoidance of dependency is a managerial responsibility that applies as much to internal resources than to outsourcing.

Often, internal resources want to preserve their job by controlling the information at hand  thus creating dependency.

When working with external parties, you probably concentrate more on the question of what will happen on the next project in case you would work without them. External resources that seem to have their own agenda of information-preservation and dependency-creation should absolutely be avoided. You can set-up an information storage platform where all the relevant information of your project is gathered and where you can provide (and remove) the access for external resources on a need-to-know basis. With current technology this is perfectly achievable.

Objection #3: External resources will not care about the value creation for your company.

Internal resources often take their job for granted. However, the starting point for their value creation is to overcome the “negative value” of monthly salaries.

External resources will understand that they need to create more value to you than they cost, every month. Otherwise, they are out. They will pro-actively look for, and propose to create, value for your company in the short to medium run. Otherwise, they are at risk of becoming irrelevant.

Objection #4: The risks related to your projects can only really be analysed and judged by the insiders.

This is partly true; deep knowledge of your business is required. But don’t underestimate outsiders. They also bring their perspective.

My recommendation would be to set-up mixed “Risk Review Boards” including various functions of your own organization and, at least one, external resource. This external adviser can even be the facilitator of the discussions (the Risk Manager). He or she will bring an outside point of view, not affected by an emotional attachment to certain projects. And will be able to structure the risk analysis around objective criteria. Therefore preserving the real goal of finding successful projects for your company.

Conclusion

We have been looking at vital points for a company: confidentiality, dependence, value creation and risk analysis. And tested their treatment by either internal or external resources.

In my opinion, the successful companies of the future will only have a core of employees, as required to establish and maintain the company’s culture, strategy, brand, focus etc. This applies obviously to SME’s (small and medium companies) but, more and more, also to big multi-national companies.

The companies’ internal resources will just be able to fulfill the minimum scope. In order to grow, or even simply perform, companies will have to rely on well-selected external resources with whom they can build strong, medium-term relations not necessarily based on exclusivity but rather on value creation.

This externalization/outsourcing will also include vital functions such as project management, commercial management and risk management. An important success factor for companies will be their ability to select excellent external resources while, at the same time, avoiding dependency and preserving the long-term viability of the company.

About AfiTaC

AfiTaC.com is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “newsletter@afitac.com”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “info@afitac.com”. 


Jan Bouckaert

Jan Bouckaert is a FIDIC Certified Adjudicator (President's list) with 25 years of worldwide experience in negotiation of complex construction, renewable energy, power and infrastructure projects. He is also specialized in contract management, project controls and alternative dispute resolution. During Jan’s career path, he lived in France, Belgium, Egypt, India and Portugal and worked for GE Renewable Energy, Alstom Hydro, Besix/Six Construct. He is a Civil Engineer from the University of Leuven (Belgium) and has an MBA from ISEG (Portugal). He speaks fluently English, French, Portuguese and Dutch. Jan is the founder of AfiTaC, a company giving advice on international tenders and contracts., and Managing Director of Proove SAS. Be welcome to connect on LinkedIn: https://www.linkedin.com/in/afitac/

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