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Creating value through outsourcing

December 2015, Consumer Directions

In a global business environment, many organisations are considering outsourcing or offshoring certain functions or services. So if outsourcing aspects of customer service is on the cards, how can you ensure that your customers are well looked after?

The horror stories about outsourcing or offshoring customer service are well-known, but in an environment where organisations are under pressure to deliver higher levels of service and responsiveness while keeping costs under control, it is sometimes the reality of business today. Some organisations are also utilising outsourcing as a means to offer 24x7 service, augment existing onshore service offerings and capabilities, and meet the need for fast response created by always-on social media.

The key to ensuring any outsourcing move is beneficial is thoughtful and well-managed planning and execution.

Choosing what to outsource

Outsourcing experts are united that a ‘lift and shift’ approach, such as offshoring an entire customer service function in one big bang, is a fast-track to failure.

“What I have noticed in many interactions with outsource operations is just pushing something offshore for labour arbitrage is not the right approach,” says Peter Morrison, consulting director, LimeBridge Australia.

Russell Ives, ANZ operations lead, Accenture, says organisations should ask themselves a series of questions when considering any outsourcing move:

  • Does my organisation have the in-house capabilities to do the customer service function at the level of quality and effectiveness it desires? If not, can I build those capabilities cost effectively and in a timeframe that meets the organisation’s objectives?

  • Is there an opportunity to gain rapid capability and increase customer service outcomes by using a specialised provider?

  • Is there an opportunity to gain cost and efficiency advantage by using a specialised provider?

  • Is the function highly administrative or clerical and there is no material competitive advantage from keeping in house?

If the answer to any of these questions is yes, an organisation could potentially outsource this service or function. Once the motivation for outsourcing is clearly defined, Sandip Sen, global CEO of Aegis Limited, a global business process outsourcing (BPO) firm, recommends identifying what may be core to the business and non-core functions, so that a stepped approach can be taken with “low-hanging fruit” outsourced first. “For example, you might want to outsource some back office operations, or you might want to consider outsourcing customer service for mass customers, but not for premium customers,” Sen says.

When looking at outsourcing customer service functions in particular, organisations should undertake a demand management exercise to understand the root cause of why people are contacting the organisation, and work out the best way to resolve each inquiry. “If you take a process, no matter how broken it is and merely send it offshore, it will remain broken, and that provides a very poor customer experience,” Morrison says.

Establishing the right relationship

To achieve the best possible outcomes from outsourcing, according to Ives, organisations should take a holistic view of the entire customer service process and outsource relationship, and clearly align the customer and business outcomes, rather than focusing only on cost reduction. Getting the relationship on the right footing from the beginning, according to Sen, starts with a strong and realistic transition plan.

“Sometimes outsourcing plans fail because the client has taken six months to decide on the process and campaign, but once they have decided, they want to execute in the next 30 to 45 days, and it’s not possible to do well,” he says. Hiring and training the right people is also very important. “It is important for the client to be immersed in the transition process in the short run, sending key personnel to the vendor’s premises, which could be in another country or city.

Some things can be taught, but some things have to be learned, in terms of the cultural nuances, hiring patterns, skillset requirements, and quality standards, and the client’s participation is very important there,” Sen says. Depending on the complexity of the process, this period could be anywhere from 60 to 150 days, but this “handholding” is essential to a good transition.

“The challenge and art of customer service outsourcing is how to establish the organisation’s customer service culture and customer relationship ‘feel’ within the outsource provider’s operations such that it feels the same, and preferably better, than the in-house service,” says Ives.

What about escalation?

One of the arguments against outsourcing is that providers may not have the knowledge, skills or nuanced cultural understanding to deal sensitively with more complex issues such as complaints or disputes, particularly if an offshore provider is used.

Morrison believes the answer to this is establishing a very clear escalation pathway, with well-defined criteria. In some cases, an outsource provider may have both offshore and onshore operations it will use in an escalation process. “The basic issues can be handled offshore, with escalation onshore. Then the company itself may only need to be involved at the higher levels, such as complaints, or Ombudsman or Ministerial matters. You can optimise that by having a very clear understanding of the root cause of why people are making contact, and the escalation process,” says Morrison.

He adds that it is worth considering how the outsource provider can be given certain levels of authority to resolve complaints—as may be provided to frontline staff within an internal customer service operation. “I think it’s an oversimplification to say complaints should be onshore. I believe it is best to give authority and power to the outsourcer to solve certain types of matters, and there may be some very technical or specific matters that you may not want them to solve. I have seen situations where the outsourcer can write off up to specific amounts under a matrix of criteria, so they can resolve complaints within that framework.”

Moving to business as usual

Once the transition period is over and the relationship enters a business as usual phase, a strong governance mechanism is critical.

“This means at the operating level you will have weekly calls, at the business level, monthly meetings, and at the executive level, quarterly business reviews, and wrapped around this is transparent communication at all levels,” Sen says. Using these governance mechanisms, the client and the vendor can maintain a productive relationship by employing what Accenture has defined as three key behaviours – that companies adapt to changing business and market conditions by collaboratively seeking solutions, that senior leadership from both parties work to understand each other’s objectives, and that they resolve conflicts fairly.

“This is where our research found one of the largest disparities in BPO performance. Fully 90 per cent of high performers said that client and provider were able to productively resolve conflicts. This was true of only 44 per cent of typical performers,” says Ives. Just as establishing the right cultural context is crucial during the transition phase to an outsourced arrangement, treating the outsourcer as a partner or extension of the client’s own team makes for a closer, more effective relationship.

According to Ives, in the best BPO relationships, the clients includes the provider and the business end users in the whole picture of the end-to-end business process, even when the provider is only directly accountable for discrete sub-processes. Morrison says that he is definitely seeing a strengthening of this partnership approach with outsourcers.

“I think you have to have a broader relationship than just ‘do my calls between 5pm and 7am’. Managers can even fly over and hold events. One client has offshored some operations to Manila, and if executives hold staff forums, they will also fly over and deliver those same messages to the offshored outsource provider. In other words, they feel it’s important to bring them into the same company culture.”

Continuous improvement

During the course of an outsource relationship, revisiting the demand management exercise periodically, either by sampling several times a year or using ‘reason for call coding’ to continually assess the root cause of contacts can help to keep costs under control. Ensuring customer experience is maintained is also key, whether this is assessed through quality measures or systems such as the Net Promoter Score (NPS). Organisations can also work with their outsource provider as a means of leveraging additional resources and expertise to provide better quality service to customers.

This could be via continuous improvement of processes or systems, or opening up new or extended channels for service – for example, by adding live chat, or faster responses to social media enquiries. Taking all these aspects into consideration, it is clear that outsourcing is anything but ‘set and forget’, but requires an ongoing investment of time, resources and commitment to ensure customers and the organisation receive the best possible outcome.

Outsourcing social media monitoring

As more consumers lodge enquiries and voice complaints through social media—at all times of the day and night—organisations are under more pressure than ever to respond quickly. While there are many social media monitoring solutions available, many still rely on human intervention to respond, and that’s where outsourcing comes in.

While there are obvious benefits in leveraging additional resources to manage the onslaught, organisations are still reticent about outsourcing social media, Sen says.

This is partly because they are still working out how they should handle their social media; partly because social media cuts across functions including marketing, PR, customer service, technology and business operations; and partly because it involves very directly the brand’s reputation and communication, so they feel they need to be the “defenders and guardians of their brand”.

“But vendors have reached a state of maturity in social media outsourcing. Through our social engagement solution, AegisLISA, we have both the technology and business process management expertise to manage digital and social media. We are working with customers to say we understand your brand reputation and we will protect it, but obviously there is some separation anxiety,” Sen says.