I’ve noticed a disturbing trend towards “turnover per head” in organisations, this means that an organisation will do anything it can to increase it’s turnover relative to the number of book employees. Even sacrificing employees to outsourcing because, while costs increase, the amount of money handled per-head has dramatically increased.
The BBC is a prime example of this, they sold their crown jewels of BBC Broadcast and BBC Technology because they were large headcounts to do mundane tasks such as transmission operations and IT. By cutting the number of staff they have reduced their staff and asset overhead, but maintained their productivity. The BBC’s stated aim in outsourcing was to increase efficiency and drive down costs by around 10%, however Siemens’ aim was to increase BBC’s purchasing by 20%. With these two objectives being in complete opposition how could everyone win?
I think that if you need a resource within an organisation, it is usually cheaper to do it in house. This is because the effective costs are usually the same (once you reach a sustainable volume) but in internal purchasing you don’t have the same profit drive. Even if you do charge a profit overhead to each internal billing the profit remains within the group.
I once knew a girl who worked for the NHS (National Health Service) she was an Australian librarian on a temporary contract. Some time later while having a discussion with a Civil Servant from the ODPM (Office of the Deputy Prime Minster) in a Pimlico wine bar, it was revealed to me that apparently every few years the opposition picks on a government department and claims that there is too much staff overhead, the reaction of the incumbent leadership is to order a cull of staff. However, very quickly it is realised that the organisation can’t run without staff and temps have to be employed to fill the gaps. After sometime the opposition complains about waste because of employing temps, so agencies are bought out of their contracts and permanent staff are employed (or temps converted). Then the cycle continues.
This is much the same “headcount” issue as is found in commercial organisations but without the political mud-slinging. Ultimately the right number of people are needed to do the right job. Economies of scale only apply for SMEs and don’t apply for large organisations. An IT department of 20 staff is almost certainly as cost effective as an IT operation of 500 staff. In outsourcing an operation all you are effectively doing is shifting a number on the balance sheet from one page to the other, but once the dust has settled, you will likely find yourself paying for someone’s luxury car and holidays as a result. How does that make you feel?