What can you derive, in the context of agile leadership, from the spate of mass layoffs in Tech?
I came across circumstances this week where leadership teams were under severe pressure to dramatically cut costs.
One of the leaders I spoke to was working through the dichotomy of saving costs whilst building (at best) or maintaining (at worst) capability within the organization.
- Should she go with managed services?
- Should she invest in remote outsourced solutions?
And so forth.
It’s very tempting because you do lower costs and outsource the hassle of acquiring and developing the right skills. You also outsource some of the difficulties of managing teams and the costs associated with developing talent and capabilities.
The problem, however, is that you receive – for example – 7 key individuals to work on your project or product. For the first 3 months, the team are on fire. Everything works great and validates your initial decision to outsource the work.
After the honeymoon is over, you realise that you don’t know any of the individuals who work on your team because you have a single point of contact rather than a team relationship. You start to realise that output drops, and work items are taking longer and longer to be completed.
So, the initial hype fades as you realise that your organization is now less effective than before the cost cutting exercise, and you don’t have the ability to inspire or influence the team at all.
You can’t identify where things are going wrong, you can’t use your creativity and influence to remove those obstacles, and there is nothing you can do to improve effectiveness or flow efficiency.
In theory, when you cut costs you are inevitably going to be cutting effectiveness, productivity, and creativity. We know this, yet when the pressure comes down the pipeline, we imagine that we can cut costs and get MORE effectiveness, productivity, and creativity through outsourcing.
The leader I spoke to came to realise that if she had two of her own team members, who were skilled and competent, she would achieve more than she was with her 7 outsourced team members and customer relationship service contact.
Nothing was getting done. No innovation was present. The organization’s capabilities were severely diminished. That was the true cost of outsourcing and cutting internal costs.
John Seddon has proven in his work that when you are looking to cut costs in the short-term, your long-term costs inevitably increase, so please avoid knee-jerk reactions to market conditions and think carefully through your options.
We can’t build great products without great people.
- Please avoid cutting costs at all costs.
- Please avoid outsourcing your crown jewels.
- Please avoid outsourcing innovation.
- Please avoid outsourcing competitive advantage.
- Please avoid outsourcing all the great things that make your company great.
You shouldn’t outsource the very thing that creates value for your customers and competitive advantage for your organization.
- Technology experts in your organization aren’t a liability, they are an asset.
- Technology experts in your organization create competitive advantage.
- Technology experts in your organization save costs over the long-term.
- Technology experts in your organization drive innovation.
So, it can be tempting to witness the turmoil and ‘decisive action’ being taken by tech giants and assume that you need to be doing the same. Avoid doing that. Many of their actions may be perfectly justified, many of their actions may not be.
Remember, when you outsource your competitive advantage and lay off your most skilled, creative, and talented staff you are opening the door to competitors taking advantage of those skills and outsourced companies.
Focus on effectiveness.
In tough economic times, my advice would be to focus on how you can be more effective within your organization.
- How do you focus on doing the most valuable work?
- How can you significantly improve your products and create competitive advantage?
- How can you reduce costs by being more effective?
- How can you reduce costs by decreasing waste?
- How can you increase customer satisfaction?
- How can you increase customer retention?
- How can you identify and build the next big cash cow for the organization?
And so forth.
Why not do the opposite of what your competitors are doing?
- Why not insource talent?
- Why not build things in your own organization?
- Why not hire the abundant talent to drive innovation and exploit competitor weaknesses?
- Why not increase your organization’s capabilities?
- Why not invest in the long-term when everyone else is focused on the short-term?
You get the idea.
Do the opposite of what the herd is doing. Focus on value creation, value delivery, and innovation.
These are the things that come to mind when I witness massive tech layoffs and dramatic cost cutting initiatives in the industry. Don’t let a good crisis go to waste.
About John Coleman
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