Outside intervention is often the cause of change in an organization. That intervention is not market pressure, like competition, but can come from partners like suppliers, vendors, and service providers.
The intervenor can hurt the situation as much as it can help. Consider the classic intervention case in which family, friends, or the courts intervene and convince drug-addicted people to get help through a detox center. When done right, the intervention helps the patient develop the necessary behavior skills to break the cycle of addiction. However, the media is full of stories about people who go through the program only to fall off the wagon some time after treatment.
The Outsourced Traffic Department
It made sense on paper. The freight brokerage offered to absorb the inbound load coordination as a “value add” to the brokerage business. The company used truckload brokers for about a third of the total inbound truckload volume. To the broker there were enough potential gross margin dollars in 6,000 annual loads to cover the cost of the additional coordination effort.
The Operations VP at the shipper liked the idea, since it was a fast way to address a labor issue in the traffic department. Of the two coordinators who worked in the department, one gave notice, and the other saw this as an opportunity to demand an increase in pay. The department management team said they could pick up the slack and replace the two coordinators within weeks. But the VP was looking for a way to trim payroll dollars. Outsourcing the business to the brokerage as a “value add,” in the mind of the executive, meant that he could trim $100,000 off the payroll, with the cost of the coordination included in what the company already paid for brokered freight.
The broker and the shipper made a fast deal, and the company outsourced the coordination effort to the broker. The elapsed time between the beginning of the discussion about the coordinator labor and the handshake agreement was less than three hours.
That is when the problems started. The broker sent a team to the shipper’s offices to learn about the shipper’s processes and systems. The shipper’s management team walked the broker’s process team through the daily activity, working coordination plans and monitoring loads. The team dedicated about twelve hours to watching the process, and then, feeling confident they knew the score, flew home. That first week the shipper’s management team managed the coordination process, planning the next day’s loads, tracking deliveries, and remotely training the broker’s team in the process. The shipper’s two managers dedicated about four hours each to the actual tasks and spent the rest of the time training the broker’s team on the systems.
Over the next few weeks the broker’s team took over, with mixed results. The broker’s plans missed shipments, dispatched loads and tenders late, and carriers rejected load tenders. All the KPIs moved in the wrong direction as the broker’s team fought to learn the system and apply their own practices and processes. All of the KPIs suffered, but the worst was the Carrier Rejected Tenders, the number of loads contracted carriers rejected. When the carriers rejected the tenders, the broker put a brokerage carrier under the load to move it.
As months passed, the broker’s team gained control of the effort and got into a groove. All the KPIs improved except for one, Carrier Rejected Tenders. After about six weeks, the shipper’s management team started to talk to carriers about the increase in rejected loads, and learned that the carriers rejected many loads because there was insufficient time between the tender and the scheduled load pickup. The team looked at the freight costs reports and learned that truckload costs increased while total truckloads decreased. Broker loads increased sharply after the broker took over the coordination process, often at rates slightly higher than contracted rates with the shipper’s carriers.
The shipper started to talk to the broker about the increase in brokered loads and the late tender releases to contracted carriers. The broker started to push back, asking for overhead funding for the coordination services. In negotiations, the broker asked for fees greater than what the shipper’s payroll costs had been.
As outsourced, the shipper now looked at a higher cost for operations than what the internal payroll had been, with lower performance and higher transport costs. The shipper decided to take the coordination back into the house, but first had to train a team of new coordinators. Even the management team at the shipper changed, as front line and department leaders left for better opportunities. The company had to hire and train new coordinators, and then facilitate the conversion of control back to the internal team.
Similar to Shifting the Burden, this archetype shifts the burden of an activity or task off onto another team or outside resource. With this shift, the person’s or organization’s ability to do the task atrophies to the point that they can’t do the task without the outside assistance. They are like an injured person who uses a cane to assist in walking while recovering and becomes dependent on the cane long after they should be able to walk without it.
As the example above illustrates, companies outsource internal operations to a third party with the expectation that the 3PL will provide faster, cleaner, and less expensive service, helping the company reduce payroll. After the transition, the company reassigns the internal staff that did the job, or promotes them to customer (i.e., layoff). After the 3PL’s promise of faster, better, and cheaper fails to materialize, the internal managers face the uphill climb of acquiring and training the needed staff to replace the “replacements.” Often in the process operating costs increase as past institutional knowledge is lost.
What the People Say
At first, management sounds positive about the change: “We will remove our staffing headache, lower our payroll, and get better service.” As the transition progresses, the managers grumble about poor performance as costs and problem-solving efforts increase. They say, “The transition did not work as planned,” and “We have yet to see the cost savings over what we projected.”
What to Do?
Outsourcing is just one of the examples of Shifting the Burden to the Intervenor.