Outsourcing Problems? Your Middle Management May Be to Blame

CIO — Middle management just isn't what it used to be.

The old definition of a middle manager—those senior staff in charge of overseeing the details of day-to-day management and reporting to top management—is too narrow, says Leslie Willcocks, Professor of Technology Work and Globalization at the London School of Economics (LSE) and head of its Outsourcing Unit. In today's complex and global business environment, middle management is the "glue that holds organizations together," Willcocks says.

At outsourcing companies, middle managers are even more important, responsible as they are for working externally with customers and suppliers and internally with senior management. At offshore outsourcing firms, they require an ever greater mix of skills, including the ability to build virtual teams across organizational boundaries, countries and cultures. Indeed, effective middle managers at IT service providers must be simultaneously coordinators, knowledge repositories, social capitalists, and change agents, say Willcocks and Catherine Griffiths, co-founder and business development manager of the LSE's Outsourcing Unit.

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In reality, those in middle management positions at many organizations—particularly in offshore IT service providers, but also at client companies—lack some or all of those key skills, says Willcocks. And according to his and Griffiths' research, that lack of experience can create huge headaches for outsourcing customers. Costs can spiral out of control, service levels sink, and the outsourcer's ability to meet contractual obligations suffers when middle managers fail to execute as needed. (Willcocks' and Griffiths' research on outsourcing and middle management is based on a case database of more than 1,200 global sourcing IT, BPO and offshoring arrangements studied over the last 16 years.)

The more work becomes adaptive—where solutions are unclear and problems are complex—the more important middle management is, say Willcocks and Griffiths, particularly in offshore application development projects or situations where new or innovative solutions are being attempted.

The Root of the Outsourcing Middle Management Problem

Offshore outsourcers' middle management deficiencies stem from the fact that they have grown faster than their talent base.

"The speed with which many countries are developing their outsourcing and offshoring industries means revenues have come without the corporate structures to sustain sufficiently the speed or scalability of long term growth," Griffiths says. "Without the necessary middle management to hold the company together and provide the smooth running and corporate knowledge repository, many companies reach a growth plateau."

High turnover in outsourcing hot spots like India and the Philippines further limits the pool of potential middle managers.

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