In previous blogs, we discussed the fact that ERP projects bring large scale returns to corporations (in the range of 100-400%).  Although it would be expected that employees will share in this success, that may not always be the case.  Some companies may see additional benefits from off-shoring their projects after implementation.  Several studies have shown, however, that if the “contract” between employers and employees is studied as a Prisoner’s Dilemma, which you can play interactively, then it is in the best long-term interest of all parties to cooperate:  with whole-hearted cooperation, the company gets higher productivity and employees are assured that their jobs will not be lost soon after implementation. 

(A real-life Prisoner’s Dilemma is, of course, far more complex than the game and we can have several sub-games that adds to the complexity.)

This is not to say that jobs will not be outsourced after an implementation or that off-shoring will not take place.  Rather, it is a covenant that outsourcing will pay the same compensation at the same location, off-shoring will be for additional hiring (not replacement).  Layoffs, if unavoidable, would be with at least six months notice and should offer extended vesting stock options (this is the case for some companies in Israel, for instance). 

It is also up to each employee to determine the fundamental reason for the change, based on corporate statements and their own research.  Is the project one that the company is doing for its survival?  If so, chances are that the company will cut costs for the short term wherever it can, including layoffs.  If it is for increased profitability and further growth, then there is better chance of long-term viability within the company.  Employees also need to determine how they (and their departments) will be affected personally by the changes.  This is where the Prisoner’s Dilemma sub-games come in.  Some employees will come out ahead while others may not.  Once they know where they stand, they can decide how best to respond to these changes.  Will more education or advanced degree make a difference?  Will special skills or relationships help?

The flip side of a change is also to see the project as an opportunity.  With innovation, more self-training and better communication, each employee can ensure that they can contribute more and let their managers know how much more they can do.  Ultimately, this will be the best form of capitalism where everyone gets a chance to perform better.

Thus, the best response to change:  embrace it, and try to get on top of it!  This will ensure that you can have the best qualifications to make the optimal contribution and get the maximum reward!

This is very true.  The employees need to be empowered to make sure they are part of the big picture and the give and take scenario of the Prisoners Dilema makes sure both sides benefit and avoids the lopsided result where one party makes out entirely and the other party is left holding an empty bucket.

By Mark on November 21, 2007

Agree, that this change is coming and it is better to embrace than to avoid.  We however have to proceed with caution; Ensure that when we say cost cutting by sending work offshore we are really not adding development time or decreasing scope or degrading quality; definte the type of work for offshore, Production Support is more viable than Development.
Overall it is the Business that makes the company succeed and IT spending is just to ensure maximum Business success.

By Rajeev on November 25, 2007

I find that several companies who have undergone this type of change end up going back to previous models, as off-shoring ends up costing as much, if not more in resource handling, than the resources cost in the first place.

It seems that we are stuck in a delicate balancing act of short term employment v. long term contracting.  Companies and personnell have to make the best of the current environment, and be able to adjust acordingly.  If not, they risk being swept under by the fad du jour.

These changes, although we seem to believe that they are new, have been ocurring in business for countless ages, although never as fluidly as they happen now…

Like Kenny Rogers said: “You gotta know when to hold ‘em, know when to fold ‘em, know when to walk away, and know when to run...”

That’s what business and people need to understand in order to be successful.  Those that read the cards right the most, are the ones that win the tournament.

By jason on November 29, 2007