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This is an MIT Sloan Management Review article. Some observers see outsourcing as a key trend (perhaps even the key trend) shaping the future of human resources. They envision HR departments focused entirely on strategic activities, leaving all the transactional and administrative activities to vendors. But, the author cautions that outsourcing any business activity creates potential risks as well as benefits: Companies can find themselves overly dependent on suppliers, and they can lose strength in strategically core competencies. The author synthesizes the strongest of the available research on the outsourcing decision and identifies the six key factors that companies should consider when making important outsourcing decisions. The framework, which helps assess the pros and cons of outsourcing, can be applied specifically to HR functions. In particular, it can help explicate the managerial issues of outsourcing agreements such as the recent landmark deal between BP and Exult Inc. That $600 million, seven-year arrangement provides a window into the many opportunities--and complexities--of HR outsourcing.

Organizations differ considerably in their rate of performance improvement. Because any improvement trajectory is the fruit of a series of improvement projects, the proximate cause of this variation among organizations lies in the varied ways these projects are managed. The success of these projects depends, however, not only on the goals and the efforts of the project team, but also on the context within which the projects are undertaken--and, more specifically, on the competencies on which the projects can draw. It is variation in these competencies--the organization's underlying "performance improvement capability" (PIC)--that explains the substantial and sustained differences in rates of improvement across organizations. This article describes the efforts of several hospitals to strengthen their PIC through five key components: skills, systems, structure, strategy, and culture.

To many managers, the idea of introducing process management to their development organizations sounds like a sure way to destroy creativity. Product development, they contend, is not the same as manufacturing: Each project has unique challenges that require unique solutions. In fact, the authors argue, managers who need to know how many projects their development organizations can handle and how quickly those projects can deliver new products to market must think of product development as a production process in which projects move through the knowledge-work equivalent of a job shop.

Western manufacturers have long believed that standardized work in a hierarchical environment alienates employees, poisons labor relations, stifles initiative, and lowers quality. This belief sets up Frederick W. Taylor's time-and-motion studies as the enemy of manufacturing innovation and excellence. NUMMI, the joint-venture auto assembly plant set up by General Motors and Toyota in 1984, shows that hierarchy and standardization motivate workers and increase job satisfaction. NUMMI has a no-layoff policy and its production system is strongly committed to the social context in which work is performed. Workers rather than engineers analyze jobs, design more efficient procedures, and create a consensus for new standards. Reduced variability in task performance increases safety, quality, productivity, and flexibility, and gives continuous improvement a base. Workers interact with the system by refining it.