2005 – When outsourcing goes wrong
One advantage of travelling with
Ryanair on a recent trip to Norway was the opportunity
to read a book without interruptions for in-flight
meals. The airline does not provide catering on
its short haul flights apart from selling snacks
and drinks. This saves money on the ticket price.
I am quite capable of making
a sandwich so have never understood the need for
in-flight catering, even on relatively long flights.
The ritual of removing plastic knives and forks
from their little bags for the sake of consuming
some rubbery scrambled egg and a chipolata sausage,
rarely seems worth the effort.
It is certainly not worth the
kind of delays that ruined journeys for thousands
of passengers last month when British Airways
baggage handlers walked out in sympathy with striking
workers at the London subsidiary of the in-flight
catering company, Gate Gourmet.
To lose your flight because of
technical problems is one thing, but to do so
because of a lack food is ridiculous. I heard
of one executive complaining that, as a result
of the dispute, he was given a single sandwich
to tide him over a 22-hour journey to Australia.
Set against the plight of people in New Orleans
last week I do not call this suffering.
But the airlines have encouraged
their passengers, for various reasons, to subject
themselves to nursery-style nannying dressed-up
as in-flight service. We press a button and someone
brings us a glass of water or even champagne if
our companies are prepared to stump up the exorbitant
premiums for travelling business class.
We have become accustomed to
the ritual of the packaged in-flight meal which
creates so much plastic junk that there is a real
skill to keeping it all on your tray and a real
problem doing anything else before cabin staff
clear it away. I have always regarded this ritual
as more a form of control than a service.
But rather than overhaul the
system, BA has followed the business re-engineering
fashion for sorting the things it does in to two
baskets: one for its important stuff, such as
flying people places, and one for less important
stuff. In business jargon that’s “core”
and “none core”.
Thus, Rod Eddington, chief executive
of BA, explained in an open letter to staff that
“we are an airline and not a catering company”
and, therefore, would not be taking catering back
in to a business that was intent on driving out
“cost and complexity”.
But how do you gauge the cost
and complexity of dealing with 70,000 irate passengers
who are unable to use one of the world’s
busiest airports because of a wildcat strike over
planned redundancies at one of your suppliers?
BA did not have an alternative
supplier. Gate Gourmet took over the whole catering
operation that had been performed in-house up
to 1997 and that is still based physically within
the Heathrow community, providing 80,000 airline
meals a day.
The employers that are based
at Heathrow may be tempted to forget sometimes,
when they do their core/none-core assessments,
that they are all members of an inter-dependent
community. Funnily enough, Heathrow employees
seem to have a better understanding of this. A
large proportion of the Heathrow employment community
is of Asian origin, often bound together in strong
family networks. It was this sense of solidarity
that led baggage handlers initially to support
In spite of all the industrial
relations legislation that was framed in order
to curb the powers of trade unions, there remains
little that can prevent spontaneous action of
people with a grievance and all the injunctions
in the world can do little to repair the damage
that can result.
This is not the first industrial
dispute at Heathrow during a peak holiday period.
We can only guess how people may factor this in
for the future. I do so already. I would far rather
use a low-cost airline flying out of one of the
The fashion for contracting out
various services, now better know as outsourcing
- another piece of business jargon - has become
so entrenched that it has become a significant
influence in the development of emerging economies.
But some companies are growing wary of transferring
services outside where their only influence on
employee relations and working conditions is the
stipulations in their service contracts.
Indeed most of these stipulations
tend to be related to maintaining levels of service
rather than good rates of pay and sensible people
management. Service providers tend to be left
to sort those issues out for themselves. This
is mooted as one of the attractions of taking
the contract outside in the first place. Meanwhile
the contracting companies play what they consider
to be the smart game of forcing competing suppliers
to undercut each other. The big supermarkets have
been doing this for years to the stage that many
small farmers are scarcely able to carry on their
But companies that divorce themselves
from the employment concerns of their suppliers
are taking a large risk.
Nick Starritt, a non-executive
director of Northgate Information Solutions, created
a revolution in employment services at BP a few
years back when as the then director of Human
Resources he was responsible for handing over
many of the company’s HR support functions
to an outside supplier, Exult.
“It’s important to
do a risk assessment when you go down the outsourcing
route so that you know what might happen if things
go wrong. While there are clear attractions of
having a single supplier it leaves you with no
alternatives to mitigate the damage that can be
caused by a strike,” he says.
“We outsourced a whole
bunch of activities to Exult but it did not all
go smoothly and we did suffer some initial hiccups
with the payroll. For the outsourcer it was like
being given a computer programme without the code.
The problem was consolidating a lot of separate
Mike Emmott, employee relations
advisor at the Chartered Institute of Personnel
and Development believes that many of Gate Gourmet
London’s problems stemmed from a clash of
cultures as managers of the US-owned company struggled
to rid its UK business of 1970’s style working
practices. These are issues for the company. But
they are also issues that cannot be ignored by
its airline customer.
“There are only so many
things you can do, however, when you are not managing
the employees yourself. How do you build up a
relationship of loyalty and trust with staff you
do not manage directly?” he says.
Recent research published by
the UK’s National Outsourcing Association
highlighted fears among its membership that decisions
by some companies to take back some services in-house
were a growing trend. Cost saving will continue
to balance such considerations.
In the meantime there needs to be some
radical re-thinking around the notion of core and none-core.