Re: Internal Free Markets LO1596

Dr. Ivan Blanco (BLANCO@BU4090.BARRY.EDU)
Sat, 10 Jun 1995 11:23:11 -0400 (EDT)

Replying to LO1584 --

> Date: Fri, 9 Jun 1995 09:49:03 -0500 (CDT)
> From: Tobin Quereau <quereau@austin.cc.tx.us>
>
> One other issue that I keep running into with this "intrapreneuring"
> approach is that internal services or departments are internal for a
> purpose (at least originally, we hope). When they are shifted into the
> competitive role with external services, they are being asked to compete
> with all of those who have a much larger "marketplace" in which to play.

The "purpose" for the creation of internal services may lose
validity in some cases. In this sense, what was appropriate at one point
of time may no longer be good enough.

> If we are really saying that we want our "internal" groups to compete
> equally with external options, they often _must_ begin to look outwardly
> for sufficient customers to supply so that they can create competitive
> services. In such cases, the more appropriate response I would think is to
> simply "outsource" (I marvel at the creativity of the corporate
> wordsmiths!) whatever is possible.
>
I don't think that outsourcing is done by asking your internal,
say Payroll Unit, go out there, become an independent company on your own,
and supply us with this service. Most of the time, it is done by
identifying companies already in the market, with the expertise, customer
base, the economies of scale, etc., that can serve us.

> Are we ready for our internal departments and other institutional services
> to be dividing their attention and "their" resources between internal and
> external customers?

Don't we already do this in some universities units? For
instance, mot schools of business have develop Executive Development
Centers, to serve a population other than students and compete with a huge
number of consulting firms and other companies that already provide those
services. In fact, more and more academic units will have to look for
external customers for survival!

> Will they not be tempted to serve the customers with
> the willingness to "pay" at the highest rate of return? Are we providing
> our internal "customers" with sufficient capital to "pay" at market rates
> and keep the attention of the newly directed service "provider?"
>
If we are talking about univeristies, I don't think that these
markets forces will have a lot of effect. On the contrary, the units
operating out of a university has lower operating costs than the external
organizations offering similar services.

> I am not opposed to a movement in the direction being considered, but I
> think we must keep the smaller _and_ the larger systems in mind as we do.
>
> In addition to these concerns, such a model is not as readily applied to
> educational institutions (where I work), for example, and others which are
> regulated by outside agencies and bodies requiring specific accrediting or
> procedural standards and capabilities. We cannot just opt for the
> competitive marketplace entirely--do away with personnel, for example.
>
We do to some extend outsource different things. For instance
most uiversities accept the credits a student takes at another university
over the summer. Or we have agreements for study abroad programs.
Internships are also outsourced too, because we don't have the capability
to do them outserlves. Then we do some internal outsourcing deals too.
My school just outsource the Social and Ethics in Business course to the
Philosophy Department. They will teach the fundamentals, and we will try
to some practical applications of the subject in other business courses.

> There is no doubt in my mind that we have _plenty_ of room to improve our
> institutional practices in higher education as well as the K-12 systems.
> In what ways can we create some of the "freedom" we are seeking without
> abdicating from our "responsibilities" to our community and
> customers/partners/students???

A story to close this comments. When I was at Central Connecticut
State University, I taught a course in Organization Theory during a Summer
term. In this course the students where asked to go on a scavenger hunt
of different departments of the uninveristy. What they did, under my
guidance, was to observe the chosen unit, interview people, etc., and
learn how that particular unit operated... Then, the different teams
presented their obeservations, conclusions and recommendations, and we
discussed them. Later, during the following semester I received many
visits from these same students who were surprised to find out that,
during the same Summer, the university had hired an outside consultant
(for $450,000.00) to the same job we did. I understand the differences
between the two groups, but when you think of it, the students were
somewhat right to say that for a lot less money we could have done the
job. They also said that it could have been a greater learning experience
for them to know that the information would have been used at that
decision making level. I asked the students if they were willing to
repeat their presentations, and they did, but you guess who would not want
to listen to them (or found kind words and nice excuses to not listen to
them). The recommendations of the external consultant are getting dust in
some drawer, somewhere in an office...

Ivan,

--
  ***************************************************************
  R. IVAN BLANCO, Ph.D.                        Voice 305 899-3515
  Assoc. Prof. & Director                      Fax   305 892-6412
  International Business Programs
  Andreas School of Business    _________E-Mail Addresses________
  Barry University              Bitnet: Blanco%bu4090@Barryu
  Miami Shores, FL 33161-6695   Internet: Blanco@bu4090.barry.edu
               <<<<< ---------------- >>>>>
     "Las naciones marchan hacia el termino de su grandeza, con
  el mismo paso que camina su educacion." "The nations march      
  toward their greatness at the same pace as their educational    
  systems evolve." Simon Bolivar
  ===============================================================