Hindsight is 20/20

This is such a great tool. You are always right, there is no risk. And you can always say I told you so. Unfortunately, for decision-makers who have to look forward, this is not a tool we can use, except to learn from our mistakes. (Then again, some columnists can use it to toot their horn, ahem!!)

Hindsight 1. A year ago, HP fired Carly Fiorina and hired Mark Hurd. I thought it was a great move where they got a no-fluff, roll-up-your-sleeve CEO to replace a celebrity CEO. That stock is up 60 percent from last year.

Hindsight 2. Three months ago, I recommended selling Google when it was at $419 and buying Oxy. (Please note: this is not the pimple cream but the oil company). As of last night’s trading, Oxy was up slightly under 10 percent while Google was down about 15 percent. The stock market realized that Google could not sustain its growth trajectory and had to adjust its expectations.

Hindsight 3. Three months ago, I asked for a minute to reflect on the 20th anniversary of People Power One. Unfortunately, the struggle for good governance continues. In hindsight, we have not learned from our past and are now living with the same, if not higher, level of graft and corruption. (Oops! I mean alleged graft); only the players and their cronies have changed.

My Two Cents. Two out of three aren’t bad!

The negative side of outsourcing

In the spirit of balanced reporting, I thought I should bring out the other side of the coin.

Loss of source country jobs. Although economists will argue that overall world trade is better off, someone along the value chain still loses his or her job. Let us say, for example, that we outsource 100 medical transcription (MT) jobs to the Philippines, there are 100 American MT personnel who will not be doing MT work. The outsourcer (myself included) will argue that outsourcing the jobs to the Philippines will reduce health care costs and that, in turn, will benefit more than the 100 people. We just need to make sure that the 100 MT workers are given the respect and proper compensation that they deserve.

Loss of morale. An employee can give his company 100 percent if and only if he feels that he is an integral part of the organization and not some equipment to be sacked when the company feels like it. Seeing 100 of your colleagues go could sow these seeds of insecurity. A company needs to be open and frank with the career path of those left behind and show them their true career path.

I once bought a company of 100 people. A company is a collection of assets, a team of people who can make use of these assets to produce profits. Making sure these people keep on doing their jobs during an acquisition is a definite challenge. I was straight with them and did not give them false expectations. I told them I did not know who would stay and who would go but as soon as I knew this, they would know. The employees appreciated the candor; transition problems were held to a minimum.

Loss of competitive advantage. Outsourcing is a strategic tool to focus the company on its core competence. If you are a financial mortgage company, then outsourcing your payroll to an HR and payroll outsourcer makes sense. The company can focus on writing new mortgages and collecting on the mortgages. However, should the same mortgage company outsource its call center to a supplier who may use the database and start its own mortgage company? It could happen.

Microsoft’s core competence is producing software that everyone needs. With all the litigation that Microsoft is subject to, it makes sense to outsource its litigation support. Microsoft employees can focus on making software and not attending to lawsuits.

Higher cost of coordination. It is hard enough to coordinate different tasks between divisions. Could bringing in a third party increase or reduce productivity? I believe that if the outsourced task is not your core competence, then the benefit of reduced cost outweighs the increased cost of coordination.

My Two Cents. Be careful with what you outsource; it should not be your core. If properly executed, outsourcing may help reduce costs but bear in mind this is not the magic silver bullet. Make sure your outsource supplier can deliver on its promises. In any business, reputation is job #1.

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Dickson Co is the CFO (C is for cheap) for Dfnn, Intelligent Wave Philippines and HatchAsia.com. For comments or suggestions, e-mail [email protected]