Friday, June 3, 2011

Sourcing Your Soul (or, Why 7-Eleven Should’ve Kept Its Cows)

Although I understand sourcing might make economic sense in the short-term, I just don’t like the idea of it. An example of “specialization” commonly used in economics to justify and encourage this type of activity is a story contrasting a jack-of-all-trades living in a small town or village in the developing world with a super-specialized professional. Specialized professionals – along with specialized companies and nations – are better off, they say (using lots of graphs, charts, and numbers). Maybe.

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But who’s going to be the last man standing when things get really bad? Not the specialists. In fact, they’ll be the first to fall. I saw this first-hand following the collapse of a government far, far away. When major systems failed, it was the university professors, scientists, and other super-specialists who were the most ill-prepared to deal with it, while the handymen thrived. If you continue the economists parallel between individuals, companies, and nations, it would seem that super-specialized companies and nations will have the toughest time getting through the toughest times.

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A more down-to-earth argument: The best company to work for pretty much every year according to Fortune is SAS Institutes, a company that “basically outsources almost nothing and uses very, very few contract workers.” (see HBS HR6, 10) How could they be so silly? What about quarterly profits? What about Wall Street?

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SAS has never gone public and, therefore, doesn’t have to bow to the pressures of Wall Street, which I think is the main driver of the sourcing craze. SAS is able to focus on the long term and doesn’t have to worry about saving money (and sacrificing quality) in the short run. “If you want something done right, own it and control it,” they say. (HBS HR6, 11) SAS is a company with a soul, held together not by an organization chart (which they don’t have) or a complex series of partnerships with other companies, but rather by its people.

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Two of the companies featured in “Strategic Sourcing” were Chrysler, which went bankrupt after the article was written, and Wal-Mart, which… which… well, which is Wal-Mart. Not exactly the pot of gold at the end of the sourcing-rainbow if you ask me.

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I’ll predict that SAS will be the last company standing after all of the companies praised in the article for their sourcing policies – 7-Eleven, Wal-Mart, American Express, and Chrysler – either file for bankruptcy (in Chrysler’s case – again) or go out of business.

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The article praises 7-Eleven for selling its cows, insinuating that it was ridiculous for them to ever have their own cows in the first place. I disagree. A 7-Eleven-type-of-company is just a little more picturesque – has just a little more soul – if it keeps its own cows. And I don’t care what they think on Wall Street, there’s definitely something to be said for that.

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