Boards need to consider whether automating or outsourcing business functions in the interests of short-term cost saving may actually be a long-term handicap.
Too often, Australian boards make decisions based on cost benefits without considering the second-order and third-order consequences of the decision. Boards need to look beyond the bottom line in the next quarter and consider the long-term consequences of their decisions.
Every board has a responsibility to ensure that the organisation will have the people, skills, investments and capabilities it needs to build profitable businesses in 10 years’ time. For this reason, boards must explore the unexpected or unintended consequences of their decisions, particularly when considering automation or outsourcing.
Outsourcing is already affecting skill development
Many businesses have decided to outsource certain functions because it’s cost-effective. But some are now discovering that these decisions have unintended consequences.
Ten years ago, at Acumentum, we made the decision to outsource aspects of our programming and software architect roles to India. We were one of many businesses going down this path at the time. But what we didn’t think about enough at the time was how critical those early stage roles were to the career path of higher-value roles, like enterprise architects.
Traditionally, enterprise architects understand all aspects of technology that a large enterprise utilises because they follow a specific career path – most start as programmers and then become software architects. By outsourcing these roles, suddenly the pathway to become an enterprise architect disappeared. Now, it’s difficult to recruit an enterprise architect in Australia.
There’s a valuable lesson to be learned here. When outsourcing or automating boards and management teams have to look at the jobs affected and think about whether those roles are important stepping stones. We need to provide people with a path to build their experience and capabilities for future senior roles. If the skills we’re thinking of outsourcing will prepare our workforce or are critical to business strategy then they should remain in Australia, even if they can be done cheaper elsewhere.
The broader implication is that boards can’t just think about the first order consequences of a decision, they need to think deeply about the second and third order issues.
Just because we can doesn’t mean we should
In the same context, just because something can be automated doesn’t mean it necessarily should be. While a machine may be able to complete a man-made task perfectly there are some jobs that perhaps should never be automated.
Is it right to replace a nurse with a humanoid? Do we want to create an automated solution to mind our children? Should we trust a judge who is a robot?
As a society we need to think deeply about what qualities or roles we want to reserve solely for human beings, and what are we happy to automate. The pornography industry has often led the way with technology – interactive video is an example – yet people seem to be drawing a line when it comes to sex robots. Every industry will have a line and boards need to work out where it is.
While the short-term cost benefits may be attractive, boards must take a long-term perspective when reviewing and approving automation and outsourcing proposals. This requires them to consider not only the essential elements of their business strategy but also the broader implications of their decisions for society as a whole. Cost savings are usually only part of the picture, and the potential strategic and economic issues may far outweigh the benefits.
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Russell Yardley / About Author
Russell is a professional company director. His board experience includes Chairman ASX listed Tesserent, board member ASX listed Powerhouse Ventures, Wunderman Bienalto, the Victorian Government Purchasing Board and the Alannah and Madeline Foundation. He is an experienced director, entrepreneur and innovator, with expertise in technology, strategic & business planning and an extensive knowledge of government.
Russell was appointed a Fellow of the Australian Institute of Company Directors in 2012. His expertise has been recognised by SmartCompany as one of Australia's 12 Most Influential People in Tech and as an Honorary Member of the Australian Computer Society.