At a Glance
When companies set out to outsource capabilities, many fail to consider the impact on intellectual capital. By following a few rules, they can mitigate potential problems down the road.
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An Opportunity to Take Responsibility
Build Context into Your Learning Programs
Intellectual Capital Management in Governance Models
Technology to Enable Intellectual Capital Management Companies throughout the Communications & High Tech sector are struggling to adapt to lost knowledge. For some, it's due to an organic phenomenon that occurs when large numbers of workers retire, with few
replacements on deck. For others, knowledge loss is the result of a strategic
decision to trim the workforce. Similarly, it can be a byproduct of strategic outsourcing decisions aimed at reducing costs and improving productivity. In many of these outsourcing cases, companies are slow or even fail to consider the intellectual capital ramifications that accompany these arrangements.
The latter scenario, in which knowledge loss is a byproduct of a strategic outsourcing decision, begs further examination. While it has its roots in manufacturing, outsourcing has rapidly expanded to include call
centers, finance, HR or customer service functions and is increasingly the strategic response for any company wanting to improve workforce productivity and/or reduce costs. In the vast majority of cases, however, companies fail to consider the knowledge loss implications of these decisions.
An Opportunity to Take Responsibility Companies that achieve the greatest benefit from their outsourcing arrangements are those that take it upon themselves, early on, to determine how to best manage the knowledge that will no longer reside within
their four walls. Most companies that try to assume this responsibility (and there aren't many) do so once it's too late—when lagging outsourcing performance or knowledge ownership disputes reveal that something is amiss. At that point, it's usually impossible to retrofit a mutually agreeable knowledge
transfer and management process into the outsourcing contract.
To reduce outsourcing risks and misunderstandings down the
road, and to help ensure a smooth transition of operations, companies should
address issues related to the management and transfer of intellectual capital
during the initial discussions that shape an outsourcing agreement. As a first
step, companies and their outsourcing partners need to agree that the
management of intellectual capital is a critical enabler of the outsourcing
strategy. Once that is established, the two parties can define their respective
knowledge management roles and responsibilities.
While many factors come into play when hammering out
intellectual capital management decisions, companies can start by focusing on a
few key areas.
Build Context into Your Learning Programs Because employees of outsourcing providers often serve as
representatives of a client company in service roles, it is imperative that
these individuals receive proper training. The challenge lies in providing them
a learning context that shares historical corporate wisdom and insights so they
can succeed in the future. Performance simulation is the most effective type of
learning to bring outsourcing personnel up to speed. In this type of learning,
employees complete tasks and receive feedback and coaching in an environment
that looks like "the real thing." The learn-by-doing approach allows them to
explore, take risks and face real-world outcomes while they learn and master
job-related skills.
When entering an outsourcing arrangement, examine your outsourcing provider's ability to provide high-quality learning solutions for
the employees who will represent your business. Once your potential outsourcers
acknowledge the importance of knowledge sharing, they will likely want to work
with you to establish the most effective learning environment for their
personnel.
Intellectual Capital Management in Governance Models Every successful outsourcing arrangement is based on a commitment to sound governing principles. This means that both parties share an
understanding of strategic priorities, as well as a plan to manage the related intellectual capital with those strategic components in mind. In the area of
learning (noted above), companies are well served by a collaborative process that aligns an organization's learning strategy with business objectives. In
this way, intellectual capital management processes can help drive a more
effective governance model.
When entering into an outsourcing arrangement, determine how open your outsourcing service provider is to including intellectual capital management in an overarching governance plan. If they balk at the suggestion,
it may be time to look for another provider.
Technology to Enable Intellectual Capital Management In outsourcing arrangements, it is imperative for companies to have the technical ability to capture, maintain and protect content, and also distribute it to multiple sources. Closely related to this is rights
management. Currently, many companies "over protect" their information either
because they don't trust the outsourcer's ability to secure the information or they are hesitant to share information they consider proprietary. Regardless of
the reason, over-protecting information puts the outsourcing partner at a
tremendous disadvantage and impacts their ability to deliver strategic
services.
When entering into an outsourcing arrangement, assess the appropriateness of your outsourcing service provider's technical infrastructure, its security protocols and its use of sensitive information.
This requirement becomes even more pronounced when considering an arrangement
with a provider that uses global, widely distributed resources. In addition,
work with your vendors to understand the rights issues involving intellectual
capital, and be prepared to let them know what information you will—and will
not—share.
By proactively managing intellectual capital before they
sign an outsourcing contract, companies can dramatically improve humanperformance output (by some estimates, up to 100 percent), regardless of where
employees reside in the arrangement. As you consider the feasibility of using an outsourcing arrangement, take advantage of the opportunity to explore the intellectual capital issues. You are, after all, doing your best to drive a business strategy. There's no need to make it more difficult by failing to
anticipate the challenges that might arise as a consequence of your decisions.
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