OUTSOURCING AND MANAGEMENT This page intentionally left blank OUTSOURCING AND MANAGEMENT WHY THE MARKET BENCHMARK WILL TOPPLE OLD SCHOOL MANAGEMENT STYLES Thomas Nelson Tunstall OUTSOURCINGANDMANAGEMENT © Thomas Nelson Tunstall, 2007. Softcover reprint of the hardcover 1st edition 2007 978-1-4039-7967-4 All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles or reviews. First published in 2007 by PALGRAVE MACMILLAN™ 175 Fifth Avenue, New York, N.Y. 10010 and Houndmills, Basingstoke, Hampshire, England RG21 6XS Companies and representatives throughout the world. PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-349-53823-2 ISBN 978-0-230-60360-8 (eBook) DOI 10.1057/9780230603608 Library of Congress Cataloging-in-Publication Data Tunstall, Thomas Nelson. Outsourcing and management : why the market benchmark will topple old school management styles / by Thomas Nelson Tunstall. p. cm. Includes index. 1. Management. 2. Industrial organization. I. Title. HD31.T83 2007 658.4(cid:2)058—dc22 2006051389 A catalogue record for this book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: March 2007 10 9 8 7 6 5 4 3 2 1 For Renee This page intentionally left blank CONTENTS List of Figures ix Acknowledgments xi Foreword by Peter Bendor-Samuel xiv Introduction xvii Chapter 1 The High Level Framework 1 Chapter 2 Governance Options 25 Chapter 3 Organizations Over Time 45 Chapter 4 The Black Box Exposed 59 Chapter 5 External Governance 89 Chapter 6 The Global Perspective 117 Chapter 7 Management Style 133 Chapter 8 New Rules for Governance 151 Appendix—NAICS New Services Sectors (2002) 183 Notes 199 Index 211 This page intentionally left blank LIST OF FIGURES 1.1 Rigid Hierarchy 5 2.1 Market-Hierarchy Continuum 28 2.2 Outsourcing Evolution 41 2.3 Divisional Organization 42 4.1 Inseparability of People, Information, Services, and Transaction Costs 60 6.1 Matrixed Organization 130 7.1 Organizational Transition 135 7.2 Organizational Modularity 136 7.3 Advantages to Organization and Market 137 8.1 The Real Path to the Future 177