OBS, DISCRETION AND SKILL IRENA GRUGULIS, STEVEN VINCENT AND GAIL HEBSON This case study explores two networks, an outsourced group of housing benefit caseworkers and production workers in a specialist chemicals company, and considers the effect that each network had on employee skills. Total Customer Services (TCS) specialise in business operations outsourcing. With a turnover of over 200 million per year and more than 3,000 employees, TCS has one of the largest players in this emerging market and had a strategy of rapid expansion. It took over the management of the housing benefits office of a London borough as a loss-leader in order to break into an expanding area of outsourcing business. This housingbenefits office had previously been under-performing and was identified as one of the worst boroughs in London. Here, claim processing was outsourced to improve the quality of service provided. Scotchem is a pigment manufacturing plant. It is one of several UK-based chemical production facilities owned by Multichem, a large European multinational that specialises in developing and producing industrial chemicals. Pigments have been produced on the site for over 75 years and Scotchem is Multichems centre of excellence in pigment manufacture. The company employs over 650 people on its unionised site and produces around 24,000 tonnes of pigment.

A regularfeature of this production process was that Scotchem collaborates with customers and suppliers in order to develop both processes and products for specific orders. Both of these networks were organised, and gained their flexibility, in slightly different ways. In TCS claims processing was contracted out for seven years and initially contact between the council and TCS (with the exception of contract negotiation at senior level) took the form of council staff monitoring claims processed by TCS caseworkers. However, the original contract also set performance levels for TCS and these were not met. As a result, the council set a new series of targets and weekly meetings were held with senior TCS staff to discuss performance. Scotchems network is far more flexible, at least in terms of its relations with customers and suppliers. Since it produces chemicals in bulk and can both place and fill orders on a very large scale, many of its suppliers and customers are long term, with 20- or 30-year relationships not uncommon. Formal contracts tended to be short term, with quarterly negotiations used to set prices and agree approximate levels of consumption in order to manage work in progress. However, these agreements are part of very long-term relationships. As a result, a series of alliances and friendships have built up between various staff members, with informal contacts and tacit knowledge supplementing official agreements about cooperation. Contracts, control and the decline of discretion In theory, outsourcing only changes the responsibility for completing a task, not the task itself.

In theory too, such a change may improve efficiency and effectiveness. The organisation that outsources may gain numerical flexibility, hiring staff only when needed, or secure access to expertise that it lacks internally. Yet these theories focus on organisational experience or expectations and assume that the way work is managed does not affect the way it is carried out. In practice, in TCS, outsourcing required a change in management structure which fundamentally altered the work processes. Such adjustments might have been predicted. There are, broadly, two distinct ways of controlling staff: status, in which employees are trusted to perform often ill-specified or extra-functional activities (and through which they may gain certain rights), and contract, where tasks tend to be clearly specified and tightly controlled, completed at the order of employers (Streeck, 1987). Most employment relationships tend to be a fluid mixture of both, influenced by organisational structures, individuals and contexts. According to the prescriptive literature, liberation from bureaucratic control should increase an individuals autonomy; in practice, in TCS, the reverse was the case. Here the process of contracting meant that tasks were more strictly defined and monitored and employees were able to exercise less discretion. Housing benefit staff had previously been responsible for seeing an entire claim through from start to finish, ensuring that the documentation was complete and correct and often exercising their professional judgement to condone minor omissions.

Since forms were complicated and demanded repeated pieces of evidence, these omissions were reasonably common. Under TCS, once the work was contracted out, processing was reorganised so that caseworkers specialised in one part of the claims process or worked in the newly-set-up call centre for extended periods of time (instead of part of a shift, as had been the case under the local authority). Housing benefit is a complex area and regulations are subject to change, so this specialisation not only made processing claims less pleasurable by taking away caseworkers feelings of ownership and making their work less interesting, it also meant that skills declined. Staff members were no longer aware of changes that occurred outside their own narrow remit. Their power to make decisions was also lost. Caseworkers were required only to ensure that the paperwork was complete before passing the form back to the local authority, rather than approving it as it stood. Under [the council] I had my own caseload, a set number of cases, surnames for a particular area; I go through all those cases from start to finish.

If, during the benefit period, there was a change of circumstances it was my sole ability to do that case. I knew those cases. You could call the name and address and I could tell you what that entailed. We dont have that under [TCS]. What we have, its even worse now . . . we come in and they give us this sheet and they say this is your work for the day. You dont really know the cases. Ten people could have touched that case since it came in before it gets to the person who finally pays the claim. So from the customer point of view its not very helpful as they tend to receive letters from five or six different case workers they say, who wrote to me? (TCS caseworker, female) To a certain extent, this decline in discretion was an inevitable part of the contracting process.

After all, tasks may be contracted out, but responsibility remains with the original organisation. This institutional separation of execution and authority has implications for work processes. While in-house staff might be controlled through trust, work undertaken by external bodies was regulated by contract. Because local authorities must validate claims, council staff checked every detail of every form before authorising it. The in-house experts retained by the council found that the monitoring was as time-consuming and tedious for them as it was for the ex-colleagues they monitored. Changing skills, changing workers This decline in employees discretion was also matched by changes in personnel. In TCS the initial work group was of skilled staff that had transferred over from the local authority, but these were supplemented by agency staff (25 from a workforce of 110) whose levels of skill and experience varied. Further, TCS itself hired and trained new recruits, but these were less qualified than the existing caseworkers and the training that they were given was greatly shortened. Such increasingly active management was more a product of the subcontracting process than a reflection of changes in the skills base. The audit systems were imposed on all workers and even the most experienced and skilled staff, who had been accustomed to exercise discretion when working in-house, were subjected to higher levels of control as subcontractors.

There was a reduction in the skills base that had existed prior to contracting out, but this reduction was a consequence rather than a cause of the increasing emphasis on audit. This reduction in skills was partly because the temporary nature of the agreements provided fewer incentives for organisations to develop and maintain employees skills. TCS, which had a seven-year contract with the council, introduced a caseworker training programme, but they recruited less qualified people than the council had and their training programme then equipped workers with fewer technical skills since the redesigned work processes demanded fewer skills. Scotchem and learning networks Scotchems network was qualitatively different from TCSs outsourced work. Since it was one of the largest multinationals engaged in producing chemicals and pigments, several of its relationships with suppliers and customers were long term. Specific contracts for services could be short, but they were repeated and inter-firm relationships could and did last 20 or 30 years. Many of these companies were competitors, but the size of their orders and the duration of the contacts meant that, here at least, market dependency resulted in the growth of trust. Officially, contact took the form of contracts for particulaservices; unofficially, it came close to a contract for service, allowing trust and status to develop. In Scotchem, individual employees held permanent contracts and staff at all levels were expected to exercise responsibility and engage in extra-functional activities. When a new plant was set up, one of the operatives commented that:

Weve been left with quite a free role to prioritise ourselves and sort our own team out, what we do and who does it, left to our own responsibility for that. . . We know our responsibilities, we organise ourselves. I think the ownership has come from because we understand the business and the needs of the business. These expectations were extended to work with other firms. Orders for pigment would often involve developing products or improving delivery and, to achieve this, Scotchem employees at all levels were required to collaborate with customers and suppliers, a working arrangement which included shop-floor employees who would test new processes and equipment before developments were finalised. Two of the most recent results of such inter-organisational collaborations are a complex automated loading facility for part of the Scotchem site, and larger and tougher bags for the powdered chemicals.

Extensive collaboration with one preferred supplier in producing bag specifications has maximised benefits for both parties by significantly reducing leakage which might foul the loading equipment. Each of these collaborations was formally governed through contract, and the information that could be revealed to competitors was restricted. However, the long-term relations between the firms and the friendships that often existed between employees meant that contracts were honoured more in breach than in observation. Exchanges generally went beyond permitted limits and several people commented that projects would not have succeeded were it not for both sides generosity with information. Significantly too, contracts set out the aims of each collaboration and little attempt was made to specify or monitor detailed tasks.

Questions 1 What were the main differences between the way work was organised at TCS and at Scotchem? 2 What implications did this have for skill? 3 What impact would improving or increasing training have had in these companies? 4 How important is discretion (a) in these two case studies and (b) as part of skill? 5 Given the evidence here, what are the implications of a general increase in outsourcing work?