Resources Connection
January, 2000
The New Millennium Employee: The CRO
By Michael Ford - Technology @ Work

For many years, companies have effectively utilized outsourced employees as an extension of their workforce. The technology staffing shortage of the '90's made outsourcing a necessity for technology businesses and IT departments throughout the world and caused a significant increase in the utilization of consultants and outsourcing companies. By the later part of the '90's, companies were utilizing outsourcing in every facet of their business as a strategic tool to succeed in a rapidly changing business environment.

What once was considered a project-based tactical management tool is now seen as a premier way to achieve innovation. It provides an effective avenue for developing new products and technologies. In the coming years, we will likely see an increase of outsourcing across the spectrum: from a single outsourced professional assisting companies on an interim basis; to complete corporate departments being outsourced to offsite service providers; to strategic mega deals in which corporate giants outsource R&D and other innovative areas to other corporate giants.

With the advent of strategic outsourcing comes the need to manage the outsourcing function. Corporate America has responded by creating a new line on the organization chart, the Chief Resource Officer, whose job is to manage outsourcing.

The Chief Resource Officer (CRO) holds a powerful position in this emerging area. In addition to the vital strategic role outsourcing now plays within a growing company, big money is being spent on outsourcing. The Outsourcing Institute estimates that by the year 2001, $319 billion will be spent on services, contracts, and relationships. With this much money being invested in outsourcing, active and skilled management is needed to ensure companies are getting the maximum return on investment for their outsourcing dollars.

In the early days of outsourcing, locating consultants was typically a function of the department head that needed the specific service. The CFO hired the financial consultants, the CTO (Chief Technology Officer) hired the IT consultants, and so on. Sometimes the HR department was called upon to locate outsourcing services.

As outsourcing evolved into a strategic tool, the need to integrate strategy, implementation, and relationship management became vital to the success of outsourcing. Outsourcing contracts can account for $5 million, $10 million, or more a year. The potential of outsourcing to move a company forward in competitiveness, globalization, and ultimately profitability is too great to go unmanaged.

Who is the CRO? According to the Outsourcing Institute, it is "someone with the ability to pull together all the varied elements of the internal organization, the external organization, and the suppliers, in order to work in a cohesive manner . . ."

Key to the position of CRO is the ability of "pulling together" the needed resources. Large outsourcing projects are often multi-faceted, requiring multiple consultants. Internally, technology, finance, operations, marketing, and other departments may need to work together in large outsourcing ventures. These internal groups must also work with the consultants who may come from one or many external companies. A large amount of the CRO's time is spent managing relationships amongst all the parties involved. Bringing together multiple contingencies with varying goals, interests, and needs can be difficult and requires a skilled individual with varied expertise.

The Outsourcing Institute has formulated the following characteristics and skills needed by the CRO:

  1. Experience managing different businesses
  2. Experience managing costs
  3. Project management
  4. Contract negotiations
  5. Political and cultural consciousness
  6. Ability to think out of the box
  7. Comfortable with change

At big companies that utilize multiple strategic outsourcing partners on an ongoing basis, the creation of a CRO position is vital. Too much is at stake not to ensure optimal organization and management. However, companies just beginning to venture into outsourcing and/or those companies whose use of outsourcing is limited probably cannot justify another employee to manage the process.

Companies that are not yet ready to hire a CRO can still effectively manage outsourcing in a variety of other ways. The department head in need of outsourcing is well positioned to work directly with the outsourcing company to determine the specific services needed, as well as provide direction and supervision. If a CFO or CTO is too busy to work directly with the outsourcing professionals, a manager is often appointed to work with the consultants and service providers.

For companies that utilize multiple outsourcing services either from one service provider or from many different consultants and companies, it is not uncommon for the Chief Executive Officer or the Chief Operations Officer to oversee the use of outsourcing. The purchasing or HR department may assist her or him in negotiating the contracts while department heads will provide in the day-to-day administration of the outsourced services.

No matter who is managing the outsourcing process, it is important that a company formulate an outsourcing plan before they begin to utilize these services on an ongoing, strategic basis. The plan should specifically state the company's outsourcing goals, including how outsourcing will strategically improve the company's business functions, who will manage the process, the budget, benchmarks for evaluating the process, and a complete timeline for use of the services.

This plan should be shared with all those involved in the outsourcing projects, both internally and externally. When outsourcing ventures fail, it is often due to the lack of clear communication between the parties involved.

When a CRO is hired, undoubtedly the development of such a plan would be their first priority. Other priorities for the CRO, or anyone managing the outsourcing process, are to develop tactics that will ensure good working relationships amongst all involved in the process; stay organized and informed; and provide direction and feedback while allowing your consultants to work independently and stay focused on innovation.

While still new to the business model, the CRO will become a familiar part of Corporate America's management structure in time. Outsourcing will continue to grow as will the need to strategically plan and implement it. The most valued employee of the new millennium, if not the busiest, may likely be your Chief Resource Officer.

Michael Ford is director of operations for the San Diego office of Resources Connection.



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