by Ian Brumwell, Atlantic Insight
Based on over twenty years of working with both clients and vendors, Ian Brumwell outlines seven suggestions that will significantly contribute to the likelihood of win-win-win outcomes being delivered for the client, the client’s customer and the outsourcer.
We have supported many businesses outsourcing a process / service through the cycle of bid to live service. We have also helped outsourcers transitioning and optimizing new processes. This is the first of two articles on business process outsourcing. This article offers seven recommendations for a business to increase the likelihood of achieving exceptional outcomes from its partnership with an outsourcer. The second article’s recommendations will be written from the outsourcer perspective, seeking to optimize its partnerships with its clients. These are not meant to be exhaustive in nature… more a reflection of some key learnings.
1. Take steps to avoid outsourcing marginBefore commencing the outsourcing process, the performance of the process(es) / function(s) / department(s) to be outsourced should be baselined and the potential for improvement quantified. This means establishing current operational performance levels, identifying barriers to performance and quantifying opportunities for improvement and building a business case and roadmap for improvement if the process was not to be outsourced. This represents a baseline of what can be achieved if the business does not outsource. More importantly it enables the value of an outsourcing strategy to be compared against an ‘in-house’ sourcing strategy in terms of its ability to support corporate purpose and deliver strategic imperatives. It also informs thinking around how the outsourcer’s payment is linked to key deliverables and performance. If, for example, the client is outsourcing to leverage technology to improve multi-channel customer journeys and the customer experience while reducing cost then the contract should be structured to promote and drive these outcomes.
2. Manage internal stakeholder expectations and behaviours. Leverage vendor capability to support.We have encountered situations where internal support functions pre-outsourcing provided a ‘Rolls Royce’ quality service to their internal customer base but then contracted for a ‘Ford’ equivalent service from their outsource partners. Conscious decisions were made by the business to reduce the service offering and service levels on internal user IT services and support. These decisions made economic sense yet impacted every internal customer within the organization. To ensure a smooth and effective outsourcing of services authentic and honest communication is required to the end-user base to manage expectations and change their behaviours. Both the outsourcer and its client need to build and own a joint stakeholder management plan.
3. Invest in Partner Management capability whose objective is to deliver win-win-win outcomesTo prepare for outsourcing, select a partner, manage the transition, optimize the service provision and manage the ongoing relationship requires specialist skills particularly where large/complex contracts are concerned. An investment in this capability will yield significant returns. In our experience, the repurposing of resource that does not have the knowledge, skills an experience is a false economy. ‘Win-win-win’ scenarios can only be achieved through true collaboration and partnership.
4. Fail to plan is to plan to failA critical driver to cost effective delivery of targeted service outcomes is accurate demand forecasting. Depending on the contract it might be the client or the outsourcer that creates the demand forecast and determines the resource requirement. Let us assume that it is the client who creates the demand forecast and determines the resource requirement. This must be regularly communicated by the client so that the outsourcer is able to provide a Build Plan every week that demonstrates how they are going to meet the client requirement. If there is an adverse variance between required and available resource, then a plan should be jointly developed and agreed to address the gap and manage the risk. In our experience this is a risk that is rarely managed well; the impact of failing to plan is massive – lost sales, reduced CSAT and CX, eroded margins, reduced colleague engagement, customer churn, loss of confidence, and increased risk to reputation.
5. Follow the money. How the outsourcer is paid will drive their behaviourUltimately selecting a balanced set of measures to inform outsourcer remuneration is critical. How an outsourcer is paid will introduce subconscious ‘bias’. The client must be clear about why it is outsourcing. Is it consciously outsourcing a problem? Is it seeking access to capability and technology to transform sales performance, tech support, service level delivery, quality and CX? Is cost reduction the main driver? Are the processes considered to be transactional, and not core to the business? Or perhaps a combination of the aforementioned factors? The strategic imperative(s) and targeted outcomes should inform how the outsourcing partner is paid based on their performance against a balanced set of KPIs.
6. Outsourcer colleague retention is a key performance driver. A demonstrable track record of innovation to continuously improve colleague engagement and experience is of paramount importanceThe outsourcer’s teams in many cases have day-to-day interactions with your businesses’ most precious asset – the customer. How effectively the outsourcer leads, trains, coaches, supports their teams and colleagues / people across the colleague journey is therefore critical. An ineffective approach results in low colleague engagement which then adversely impacts retention levels and the motivation to deliver exceptional customer outcomes. Many outsourcers suffer high colleague turnover particularly in offshore environments. Colleague churn is a significant issue if not managed rigorously. Continuously assess and support the outsourcer’s approach to improving the colleague engagement and experience across the colleague journey. Clients should demand visibility of employee churn trends and improvement programs as part of the tender process and during the contract.
7. Treat the outsourcer seamlessly as part of the team.What I see frequently is unrealistic client demands and expectations of vendor flexibility. For example, after the decision to recruit the client had 12 weeks’ notice to recruit, while under a ‘flexible’ contract the outsourcer gets only two weeks’ notice. Historically there were four weeks training in-house for new recruits but demands on flexibility permitted only two weeks training at the outsourcer. There may be performance-boosting reporting tools at the client, but only difficult-to-use spreadsheets at the outsourcer. There may be advanced coaching techniques at the client, yet minimal coaching at the outsourcer. Embracing the outsource partner into the fold, making it part of the team and sharing best practices is essential for the highest possible performance. Expecting unrealistic levels of flexibility will dilute performance, quality and CX and the relationship will descend until mutual acrimony.
Successful outsourcing partnerships deliver win-win-win outcomes for the client’s customer, the client, and the outsourcer. If the client wishes to achieve win-win outcomes for itself and its customers of the outsourced services, it needs to make sure that it walks the talk when it comes to partnership with the outsourcer. Our next set of recommendations will be written for the outsourcer.
Ian Brumwell is a Partner at Atlantic Insight.
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