Outlook Point of View, January 2007
Outsourcing functions such as HR, learning, finance, procurement and IT is gaining significant momentum in the marketplace. This comes as no surprise to Accenture; our ongoing High Performance Business research shows that outsourcing plays a vital role in achieving high performance. Specifically, outsourcing enables senior management to focus their energies on activities central to the business, rather than on repeatable, transactional processes. What too few organizations realize, however, is that successful outsourcing requires a dual transformation: not just of the outsourced entity, but also of the roles and performance of those people retained within the organization.
Outsourcing demands that a great deal of attention be paid to the details of the new outsourced function: operating plans, contractual obligations, service level agreements and so forth. Frequently forgotten in the details of the change journey is that part of the organization left behind: the retained workforce and the portion of a business process remaining in-house after the outsourcing begins. The result is a dangerous disconnect between the outsourced function and the retained portion of the enterprise.
If only the outsourced portion of the business function undergoes real change, a potentially significant source of value creation is lost from the outsourcing arrangement: the synergies of efficient transaction processing and the creativity of people better able to think beyond transactional service delivery. However, change that embraces both the outsourced and retained portions of a business process results in an arrangement much better positioned to deliver high performance for the organization as a whole.
The Challenges Facing the Retained Workforce
Coordinating outsourcing's dual transformation challenges most companies beyond their current capabilities. In many cases, the retained workforce is given insufficient guidance about their new roles and new work. Often, they do not have the tools, rewards, authority or training to perform in the ways dictated by the process changes that accompany outsourcing. Performance management and governance processes are rarely altered in ways that help shape new behaviors. Resistance is common—even efforts to actively undermine the new work arrangements. One US financial institution, for example, launched a new HR call center and received only 40 calls the following day. What happened? Turns out, the retained HR employees, resistant to the idea of the outsourced call center, told their co-workers not to bother calling; instead, the retained workers would make the calls themselves and report back to the rest of the organization.
A key success factor is establishing trust between the new outsourced unit and the retained workforce. Getting people to respect one another, given the new "pecking order" that will be established, can be difficult: business partners may feel superior to executives working at the company's centers of excellence; those executives, in turn, may feel superior to the employees whose transactional jobs have just been outsourced. But what happens within the business process anywhere affects the business process everywhere. In an outsourcing relationship, the various players are like different colors on a beach ball: puncture any point, no matter which color, and the entire ball deflates.
Changing at Three Speeds
An additional challenge is the complexity of the change going on in a typical outsourcing relationship. When a company outsources HR, for example, three different kinds of changes may be occurring: (1) the metrics used to assess the contribution of the HR workforce are now based on business value creation, not just on transactional customer service; (2) people accustomed to working within a siloed departmental function must now collaborate with the wider business and integrate their work into a larger whole; and (3) HR must go beyond its traditional responsibilities and become more consultative in developing solutions for the business.
Transformational HR outsourcing typically happens when an organization is going through a major upheaval of some type. The business expectation of the HR workforce is changing at the same time as the HR function itself, and that can create a degree of friction. What leadership is saying to the HR organization is: "You have to take out cost, you have to do business differently, and you have to do it with fewer people. And, by the way, you now have a new major role with the leadership team because you're charged with cost take-out that has a major business impact. Make it so."
Making the Change Happen
What steps must organizations take to ensure their retained workforce is able to perform at the levels needed to maximize the ROI of the outsourcing arrangement? Executives should think in terms of at least the following three primary areas of work.
1. Establishing a Phased Development Process. An essential insight about major change programs is that they are successful only when executed in stages or phases, like an assault on a mountaintop: one successfully gets to one camp; acclimates there for awhile; then tackles the next stage. In business transformation, not taking a phased approach puts the organization at risk of having critical processes stretch beyond the breaking point. Set intermediate goals and enjoy short-term successes. Such an approach raises the confidence level of the entire organization. Implementing a process for tracking the impact of change and management issues, as well as executing a communications strategy, are also critical aspects of an overall program management function that oversees phased releases.
2. Creating More Effective Leadership Accountability and Development. A second insight: Program staging starts with the leadership group itself. Good leaders are action-oriented, but the first and most important action isn’t necessarily to get the outsourcing arrangement in place or the call center up and operating. It is, rather, creating an environment at the leadership table where executives look each other in the eye (and in the mirror) and hold one another accountable for making the change happen and for owning the results.
Accordingly, major organization and change management tasks here include:
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Mobilizing executive sponsors and change teams around transition in the outsourced and retained organizations.
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Developing a vision statement, a communications strategy and key messages.
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Defining a new leadership architecture, positions, capabilities and the performance and HR process metrics for the outsourced and the retained organizations.
3. Retooling the Jobs, Roles and Behaviors of the Retained Workforce. Companies often spend millions of dollars retooling their technology but next to nothing retooling their people, even in an HR outsourcing arrangement. Little wonder they may have trouble making change stick. Major tasks for ensuring the retained workforce both can perform and wants to perform in new ways include:
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Cultural assessments, to determine what is strong and what is not within the supportive environment of the workforce.
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Identifying learning needs and implementing new training programs. New rapid e-learning techniques can help here, as can simulation techniques that can actually shape new behaviors, not merely test whether workers have been listening to lectures.
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Reengineering work processes. Process redesign is part of the transformation of the retained workforce, but helping the employees actually perform those new processes is just as essential. New desktop tools can help here by embedding new ways of working into the applications used by the workforce.
Reaping the Benefits
Organizations that do a more effective job at transforming not only their outsourced function but also the retained workforce should expect benefits to show up in several ways. One is lower costs and risks. A second is that attention to the transformation of the retained workforce as part of an outsourcing strategy creates jobs that are more satisfying and establishes an environment where people are able to do their best work.
Perhaps more important, however, are the topline benefits that can be delivered by a more effective functional organization—whether that is HR, finance, IT or others. The transformed organization contributes to high performance through measurable improvements in business value, whether that is measured according to cost, productivity, retention or other significant metrics.
Marc Sotkiewicz is Accenture's global lead in transformation of the retained HR workforce. He is based in Chicago.
Yaarit Silverstone is Accenture's global lead for Organization and Change Management. She is based in Atlanta.
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