Outsource & Centralise

• Jan 29, 2025
• Higher Education, Leadership, Planning, & Work
• 3 minutes reading time

I wrote the bulk of this post almost a decade ago as the university I was working at was undergoing a formal review by a consulting firm to propose a restructure aimed at improving “efficiency”. Given that I am in that situation again (the university I am currently working at is merging with another university) and the same consulting firm is managing the process - I thought I’d publish an update. Firstly, to argue about their two pillars, which I predict will form part of their key recommendations for the organisational structure. The other is to make a point that we still don't understand or appreciate knowledge work as being

The playbook for most consulting firms is pretty limited, and most advice they essentially boils down to two things - outsource and centralise. Why? Because it's worked in the past. There are great exemplars of business transformation being achieved through these types of measures. I'm not going to debate that, but what I would suggest is that those examples only occurred when dealing with issues of labour - not knowledge. A business based on manual labour can reduce costs through outsourcing to a cheaper labour market, and centralisation can produce savings at scale. However, labour is a simplified concept that has little to do with many businesses today, especially in my case - a university.

Yes, we require "labour" to function, but that term doesn't reflect what most people within the organisation do. What they do is deal with is people and information. To do this requires understanding, and understanding requires the development of knowledge. So the work our people do looks less like traditional manual labour and more like knowledge work^[1].

With that distinction in mind, let’s look at the concepts of outsourcing and centralisation.

If we Outsourcing knowledge, we lose on many fronts. We lose access to the people who possess it, and we lose it as an organisational asset. We also add a cost to the business. To access outsourced knowledge, we now have to pay for it; the "vendor" of that knowledge knows that and will ensure we pay for it – forever. We also lose the ability for that knowledge to grow, adapt and change. This is a key difference between knowledge and labour - labour has a static value^[2], but knowledge can grow and decline. Knowledge can develop and change organically, but labour can't. So outsourcing treats knowledge as static, robbing it of its very essence so that it can fit nicely on someone's spreadsheet.

Centralisation also suffers the same fate because it treats knowledge as a static value. The thinking that centralising knowledge into specific units fails to comprehend that knowledge is how we deal with complexity. To deal with complexity, we have to experience it, and through that experience, we learn. Learning is the basis of growing knowledge, not sticking it in a vacuum. Centralisation stifles knowledge creation as it starves it of the nutrients that diversity brings. The differences we encounter is key for learning because it is fundamentally about challenging, changing and reforming models and patterns of thinking. Centralisation, as Taleb might put it, ensures an organisation becomes fragile. It robs it of the ability to grow knowledge, which eventually makes the organisation dumber and less able to adapt to a changing environment.

So, despite what the spreadsheets might say, outsourcing and centralisation significantly harm the organisation as a whole. It adds a cost rather than removes one, ensuring the organisation is less agile and adaptable.

• Tim Klapdor
• Adelaide, Australia
• posts, & work