People are rational creatures. They will make the best decisions they can based on the information available to them and their ability to process it. If shadow staffs exist, they exist for a reason. They address meaningful gaps in the overall business model in one of five areas 1) Availability, 2) Access, 3) Quality, 4) Cost, or 5) Governance.
“We don’t have a choice.”
When multiple managers independently hire staff to fill the same service gap, then clearly the corporate functions have failed in making needed services available to the enterprise. Sometimes, however, a business unit’s needs are unique. In such cases, it might make sense to keep that particular service housed in the business unit, where it can be close to customers.
“Sorry, we’re all out.”
Even when a needed service is available within an organization, not all managers may have ready and equal access to that service. Access is a particular issue in IT application development. Smaller business units are often frustrated at their inability to compete for limited, budget-driven, centralized IT resources. Are competing investments being evaluated in the appropriate context and with the right yardsticks? Again, shadow staffs can be a flag for further study.
“Mercedes? How ’bout a Chevy?”
Just like any other consumer, line managers will “shop” elsewhere if they are not satisfied with the products and services they receive. Dissatisfaction can result from poor quality (e.g., inadequate speed, accuracy) or simply a mismatch between what customers receive versus what they desire. For example, a manager may require and be willing to pay for a customized financial
“It’s cheaper if we just do it ourselves.”
“We can do it for less” is the most common rationale used by managers to justify their shadow organizations. However, in most cases managers are reacting to what they perceive to be excessive cost allocations or outside vendor invoices without full information. To really evaluate the cost of providing a service, you need to assess the full economic impact of that decision, including associated overhead charges. If, after this analysis, the manager can still do it for less, he or she should be encouraged to do so.
“Who’s gonna stop me?”
The lack of effective governance mechanisms acts as the final green light in the development of shadow staffs. If there are no clear corporate policies defining roles and responsibilities or measures and incentives to monitor and encourage desired behaviors, then shadow staffs become an unofficially sanctioned fixture in many organizational structures.
Source: Booz & Company, “Shining a Light on Shadow Staff”, 3/2003