Why Pride and Outsourcing Don’t Mix Print E-mail
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Written by Jennifer Read   
Sunday, 30 November 2008 19:00

Root problems tend to be everyday business issues. So why do some parties give up?

Global SourcingMany of the less successful electronics manufacturing outsourcing relationships at their core have problem behaviors very similar to the age-old character flaws known as the Seven Deadly Sins. In the old days, when good character was considered an essential part of civilized behavior (and was that such a bad thing? Listen up, bankers!), a helpful mnemonic device was designed to help us remember what to avoid: SALIGIA.

As explained in our October column, SALIGIA is derived from the first letters (in Latin) of the Seven Deadly Sins:

Superbia (pride).
Avaritia (greed).
Luxuria (lust).
Invidia (envy).
Gula (gluttony).
Ira (wrath).
Acedia (sloth).

It is our contention that each of these sins has an analogous bad behavior in outsourcing that leads to failed cases, as outlined in Table 1.

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This month we are focusing on the first, and arguably most destructive, of the problem behaviors: pride/self-righteousness. Known in Greek drama as hubris, it has led to many an heroic downfall. Our company tracks a wide spectrum of actual electronics manufacturing programs of all sizes in a variety of end-markets. The failures are most instructive. And we have found the root cause of most failures is Superbia, or pride/self-righteousness.

Failed outsourcing programs are expensive. It can cost millions to change EMS suppliers. When we interview management teams on both sides to determine what went wrong, we often find that at some point in the relationship, the parties just stopped communicating. Typically, nothing else changed: the capabilities and expertise of the EMS provider, the projected market, the IP that drove the potential success of the product – none of these basic elements changed. But communications simply broke down about the everyday issues or practice of doing business because of pride/self-righteousness on the part of one or both parties.

Since the two parties in an outsourcing relationship are business entities, presumably their primary reason for existence is to make money. If true openness and humility were practiced, solutions could be worked out that would enable reasonable margins and profitability on both sides. Yet that’s not what we hear from our clients. Usually the OEM will say things like, “They have just nickled and dimed me to death.” Or the EMS will complain the OEM is requesting continuous cost reductions when direct costs are increasing. More often than not, the root problems tend to be everyday business issues that are the same for everyone, and presumably are solvable. Yet in the failed cases, the parties simply just give up.

Sometimes the parties give up long before the relationship formally ends, because material liability or other contractual issues prevent them from walking away when things start to get rough. The failure (lack of communication) gets more catastrophic – even though in most cases it was entirely avoidable if less ego (pride and self-righteousness) were the order of the day.

Case in point: In discussions with an OEM – a litany of complaints was unleashed about the EMS supplier’s incompetence regarding a particular issue or problem. One specific detail was in dispute, but the OEM thought the EMS should have known a key fact that would have made it clear what the OEM expected. When we asked the OEM if they had communicated the expectations to the “clueless” EMS, the OEM said, “Yes.” They distinctly remembered a time when the EMS firm had proposed a solution, the OEM had “raised an eyebrow.” When asked why they hadn’t simply explained what they expected or wanted to solve the problem, the OEM blustered something like the EMS “should have known,” and changed the topic.

It’s that kind of gamesmanship that arises from pride and self-righteousness. Behavior like that has a tendency to eat away at perfectly good business relationships, and the result tends to be damaging and expensive. Transparency, openness and truthfulness, arising out of humility, lead to much more profitable and successful outsourcing programs and relationships. Just think what a wonderful place the economy would be in if we had seen a little of that in the financial industry.

Jennifer Read is cofounder of Charlie Barnhart and Associates (charliebarnhart.com); This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Last Updated on Sunday, 30 November 2008 17:19
 

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