In 1984, George Orwell offers the view of a nightmarish future of totalitarian governments. Part of their mind control is a new language to replace English called “double think” that retards critical thought by destroying the ability to express abstract concepts such as freedom. One of the precepts of the practice of double think is that you can know something, but convince yourself of the opposite if necessary.
In the business of human resources products and services, whether you call it double think or rationalization, it has become a deeply enshrined tradition. Both practitioners and providers are capable of convincing themselves of many facts not in evidence. Religious people call this “faith,” but chief financial officers offer a more grim appraisal. They call it delusion.
Pricing models for enterprise HRO and RPO and many other services are in the process of being, or have already been, commoditized. Companies that do not know their numbers—or, worse, do not care—have decided what it “should” cost to hire an external service provider to perform a function. They ask these providers to perform that function for a fraction of their internal costs. And, bizarrely, in an attempt to win business, some misguided providers agree to do this.
I am not sure where the genesis of the problem is, and I am not sure that is pertinent. To be clear, yes, providers should offer cost savings through economies of scale and better technology. They should
be able to accomplish the task. In recruiting, for example, depending on how you look at it, the least expensive job to fill is the one that is never filled. It is often true, to argue the converse, that the most expensive opening is the one you do not fill, as it impacts productivity, morale, and profitability. We have seen some providers who have taken on programs with insufficient number of resources, insufficient competence in the technology, and a pricing model that was simply, ridiculously, fatally, cheap.
When these deals fail, as they inevitably will, the post-mortem often focuses on how the practitioner got the wrong provider. The company then, if they still have the stomach for outsourcing, will go
into the market to find a new provider who will agree to perform the services for a pricing model to reflect the untenable one that blew up in everyone’s faces. This is the essence of commoditization and the downward slide of an industry.
It is quintessential “double think” not to examine all the reasons that a program might fail. And, yes, part of it is that there is such a thing as a deal that is too good to be true. A deal can also be just downright false. The metaphor that comes to mind is trying to win the Daytona 500 in a 15-year-old Yugo. It cannot be done.
So what is the cure for double think? The truth. And, yes, the practitioners have to be able to “handle the truth.” The truth is that you can save money, get more streamlined operations, and better analytics. But, if you are expecting to save 50 percent or more, then you are probably kidding yourself. If you are currently using a lot of overlapping providers simultaneously or if you have a high reliance on fee-for-placement agencies, then you might be able to save at this level, but that is the subject of rigorous analysis in concert with your provider. And practitioners should use reputable, experienced, highly-rated providers. The company that “will” do your deal or give you the “best” deal is often the one you do not want.
For the providers, the solution is do not respond to blind RFPs. The whole RFP process is often flawed, as some companies go seeking these low level cost models; when they cannot find them, they do not consummate a deal, which is a colossal waste of everyone’s time. Providers also need to be realistic. The road to hell is paved with deluded optimism.
If both sides keep it real, there will be good outcomes and not bad double think.
Elliot H. Clark is CEO of SharedXpertise, the publishers of HRO Today.