We have seen the global financial markets in unprecedented turmoil recently, with markets plunging and several financial institutions going under. The crisis is making many people uneasy, but for others it is also an opportunity.
Many commentators believe that this trend will result in a near-term boom in outsourcing. Indeed, one could argue that properly structured outsourcing arrangements, especially around specific functions such as customer service or back office, could provide an effective antidote to the credit crunch, offering a low-risk route for firms to kick-start business operations.
In order to succeed, businesses need to employ increased vigilance in the way that outsourcing is engendered within their processes. While historically seen primarily as a cost-saving exercise, and inevitably treated as such in the initial negotiation stage, outsourcing is now considered a key source of strategic
guidance and innovation and, more importantly, a source of vital input into decision-making.
Inevitably, the process for implementing an outsourcing process has become increasingly time-crunched – the time to market for implementing is becoming shorter, with pressure to get contracts signed more quickly. These pressures to deliver to market faster means that some outsourcing contracts can go wrong as mistakes are made, but by investing time and effort at the early stages of the contract, such mistakes can be avoided.
It is critical that the relationship between client and outsourcer is one of trust from the outset. Rather than being viewed as merely extra bodies to provide support to already over stretched internal departments, outsourcers need to be seen as sources of guidance, innovation and better service value that drives both -financial and organisational impact. An outsourcer unable to offer these capabilities, as a specialist expert within its own field, is unlikely to survive and prosper in today’s economic climate. Equally, contracts should be long-term partnerships with goals that benefit both the outsourcer and the client. The traditional model, in which outsourcer and client are reduced to an almost adversarial stance, will benefit neither and is likely to destroy rather than add value.
Service level agreements should be negotiated before the contract starts and continually monitored by both the outsourcer and the client. They should detail specific objectives, and set clear and mutually agreed targets, which align with the client’s strategy and long-term objectives. This continued checkpoint method of -assessing the partnership will continue to develop and grow, ensuring a fruitful business partnership.
Many companies view the outsourcer as a standalone entity that, once briefed, should be able to run with the particular project with minimal intervention, but outsourcing a process does not mean outsourcing accountability or competency. In order to succeed, the outsourcing provider will need regular, ongoing input and feedback from the client. Good governance processes are critical to outsourcing success.
The best method to successfully move forward with an outsourcing project, no matter what your company’s core business, is to develop a taskforce drawn from across the organisation, with a vested interest in making the project work. This team should bring together business functions adjoined to the outsourced project that can provide direction and ensure that the outputs are in line with their departments’ needs.
Communication, in its many forms, is another critical component of a successful outsourcing project. It’s no use putting together a taskforce designed to manage the implementation of a project if it meets irregularly or fails to communicate any problems or issues there may be. Encourage the team to meet and feed back as often as possible to ensure completely open lines of communication.
Employees and the knowledge they hold are the most valuable assets in most companies, so it is vital to look after them. This holds particularly true when undertaking an outsourcing engagement, as creating and maintaining employee engagement is one of the most important, yet most often overlooked, requirements for success.
During and immediately after the implementation of an outsourcing arrangement, employees remaining in the client company can often feel demotivated and unappreciated. To maintain staff morale it is important to ensure employees feel valued, so firms should not underestimate the importance of ‘over-communicating’ before, during and after the outsourcing effort. It should not be assumed that employees will immediately embrace the change. Companies should look to attain strong executive and staff buy-in early on in the project life-cycle – engaging fully with the internal communications function to ensure that all staff are fully aware of what is happening at the earliest possible stage.
The outsourcing projects that succeed are those where the potential outcome has been worked through with solutions developed for every possible scenario. It is inevitable that something will occur that will throw a spanner in the works, whether it’s a financial problem with the company, a takeover bid, budget cuts or, as we’re seeing now, the impact of wider macroeconomic forces on the business as a whole.
Incorporating contingency into the project is not an optional extra – it’s absolutely critical to the success of any outsourced project. It is amazing in how many instances projects will fail merely because a few simple projected outcomes haven’t been prepared for; yet it takes relatively little time to work through a series of contingency plans which encompass the vast majority of eventualities.
One way of understanding how a project is performing and whether any flexibility is required is by setting key performance indicators, which allow both parties to monitor progress. Regularly monitoring these indicators throughout the project helps ensure that the project remains on track. This will enable project teams to remain flexible and ensure quick responsiveness to any obstacles.
Outsourcing arrangements, approached with the right mindset, can be among the most successful and rewarding business partnerships. Adhering to the four points above – and quizzing prospective providers in the light of them – can help organisations implement projects in a pain-free way that minimises the risk to the business.
About the author
Alastair Hanlon is director of industry solutions for Convergys, responsible for working with clients to develop innovative customer care solutions. His background is in management consulting and he developed worldwide telecoms industry experience with Geneva Technology before joining Convergys