CONDUIT

Build vs. Buy?

With the percentage of non-cash reward elements trending up in almost every corporate total reward portfolio, some firms are examining the feasibility of building administrative platforms (for communications, reporting and award fulfillment) internally, in lieu of using an outside firm’s resources or acquiring some type of ready-made solution.

Over the last few months I have worked closely with several firms in examining their build vs. buy business case.  And while it goes without saying that internal cost parameters and resource alignment and supporting structures vary widely across business models, invariability each finding came down to five critical points in favor of outsourcing.      

A distraction for internal resources.

In examining the ramifications of buying vs. building each organization would rely upon internal resources (usually some type of shared services group) to build. All would be doing so while taking these assets away from supporting mission critical applications. The issue of keeping dedicated internal resources focused on the core business was ultimately deemed as a priority. 

Several firms identified opportunity costs to the business and used this in their financial analysis as a potential outcome of core applications being delayed or postponed in any way as well as the time delays associated with launching the recognition platform.    

The experience and relevant acumen of internal resources.

All firms recognized that an internally lead led design would reflect a limited level of expertise and spoke to the benefits of using an outside firm with successful experience in building platforms.

All firms placed value on immediately gaining cutting edge functional enhancements generated by a wide range of users over time. Concern that internally designed solutions would not reflect the most progressive strategies prevailed in the findings.   

Ongoing support and future development.

All cited concern over ongoing support and future development. Collectively the business cases went beyond the launch phase and addresses ongoing support (and potential internal resources required) as a concern. The prevailing opinion was that ongoing support of a self built recognition system would not be a priority for internal resources.   

The issue of support transcended the program administrator level and was applied to all stakeholders. Companies looked at the resources that would be required to assure seamless operation for participants and other program sponsors within the enterprise. Ultimately firms rationalized (financially) that having technical staff at the ready for technical issues, questions, fixes, and any other unforeseen problems that may arise was A) more critical with an unproven platform and B) Not a cost component they were willing to carry.    

Financial advantages.

Ultimately the business case pointed to outsourcing the project, citing both an accounting and economic benefit. In addition to positioning the direct internal cost of resources and the opportunity cost of potential delays to the recognition project as well as mission critical applications as barriers to building, in each case most companies made the case that using an outside firm allowed them to amortize the costs of development over time. 

The Evolving role of HR

The Evolving role of HR: Partnering with Leadership by Michael Echols in the May 2006 edition of Workforce Performance Solutions makes the case that the new HR executive is a proactive, strategic member of the executive team responsible for developing the most precious of all corporate resources—leadership. We could not agree more.    

We are in a ‘knowledge economy’. Leadership talent is needed at all levels within the organization  to process information and leverage critical thinking skills.  As Echols points out, senior executives tend to look at recruitment and not retention as the preferred solution for maintaining adequate supply of leadership. But as workforce demographics shift there will be a shallower pool to draw from stifling growth and expansion opportunities for companies not properly prepared. 

We are witnessing progressive companies redefine the recruitment paradigm. By using targeted peer-peer and manager-employee recognition strategies, firms are re-recruiting employees everyday. By recognizing individual efforts that are in line with the larger corporate mission, these companies are consciously reminding employees why they came on board in the first place—‘to make a difference’. They are also strengthening the employee’s emotional commitment to the corporate cause. That investment in cultivating an energized leader will pay off handsomely as work practices and obstacles become increasingly complex. Firms that cultivate the mindshare and commitment of their employees will in the process be re-recruiting them.

Intrapreneurs: Who are they?

Who are these new breed of leaders called the corporate intrapreneurs? They are the forward- thinking employees within every organization that are constantly seeking ways to optimize resources and innovate existing processes for maximum impact and return.

According to Neal Thornberry in his recent book, Lead Like an Entrepreneur , internal entrepreneurs or corporate intrapreneurs can help businesses identify and create new growth-oriented business opportunities or leverage existing processes for maximum return. 

As we all know sustained competitive advantage comes from using internal strengths to exploit opportunities and neutralize threats. An often untapped strength is the perspective that comes from an employee’s experience and insight. In many organizations this creative energy often goes unrealized. Organizations that encourage employees to explore innovation by recognizing risk taking are realizing new potential while developing new leaders within their ranks.

If you want to encourage intrapreneurship, Thornberry says you should create supporting sub-structures for intrapreneural activities including a recognition platform that celebrates both success and attempts (including failed efforts) to innovate.

Doing so builds momentum and encourages engagement. Companies that recognize innovative initiative have found that efforts to promote and recognize intrapreneurs have inspired and motivated others to pioneer as well.