The Changing Role of Leadership in an Outsourced World

Jeffrey Pfeffer, a Professor at the Stanford School of Business, distributed an interesting article by Gerald F. Davis of the University of Michigan about the changes facing corporations and corporate structures titled, “What Might Replace the Modern Corporation?  Uberization and the Web Page Enterprise.” Although this is a very academic article and assumes substantive understanding of various theories of organization, its core thesis is quite interesting. Davis argues that two factors, “Nikefication” and “U berization,” are fundamentally changing organizations. What Davis is calling “Nikefication” is the out-sourcing of production and distribution. In Nikefication, traditional control of production and distribution is contracted out to other organizations – think Apple producing computers in China through a Chinese company. On the other hand, “Uberization” is the outsourcing of labor. In Uberization, the relationship between the worker who is doing a job for the corporation is changed to a contract worker doing a specific task for the organization. This is a very interesting thesis to consider. It seems that virtually everything can be contracted out. In our own business, we contract out accounting, many elements of marketing, most software development, some customer service and several other operational needs. It seems as though virtually anything can be converted to a contract. There is certainly much discussion in the media about these changes and their impact on things like productivity, healthcare and social security.  My particular interest is the impact these changes will have on leadership. What is leadership if almost everything is converted to outsourced contracts? I suspect that what remains for leaders in an organization is to focus on defining strategy, generating innovation, managing financials and knowing how to manage contractual relations. So what does a leader need to be able to do? I believe that one of the most important capabilities for leaders in this new outsourced world that Davis describes is being able to sense the direction of markets and create innovations that quickly turn market opportunities into real business. As such, it is very much like the first phase in most of Cerebyte’s Transformational Leadership programs which is always about sensing and defining opportunities. But beyond that, it would seem that leadership would be very different in this new business world. The second step of our program is typically about building a consensus around an opportunity. However, the number of people required for the consensus shrinks significantly when everything is outsourced. The leader no longer has to convince a production arm or a labor force that an initiative is worth doing, but only those colleagues who have to align with the strategy.  Similarly, planning for implementation changes from how to do the detailed work needed to produce a new product or service, to which contractor to select to do the planning and ultimately the work. In an outsourced world of business, traditional notions of control also change from a focus on creating motivation and monitoring performance to an assumption that motivation and, to a lesser degree monitoring, are less relevant because behaviors are governed by the contracts.  The monitoring would be more focused on checking on contractually defined performance, presumably with various contingencies. As a result, establishing an excellent contractual relationship and writing a solid contract become more important than traditional notions of “leadership” such as influencing, motivating and engaging. Organizations are likely to be smaller, and “led” by a small cadre of closely knit colleagues with very different attitudes and skills than traditional notions of a CEO as being at the top of the corporate org chart. It seems likely that traditional organizational charts will become less prevalent as more nimble team-based organizational structures take the forefront in the years ahead. What are your thoughts about the changing face of leadership in the outsourced world?]]>