How is that process knowledge acquired? It sounds obvious, but it involves the careful and exhaustive documentation of the processes with the participation of both client and provider.
The procurement manager quoted above highlighted the importance of creating in-depth descriptions of each process before kicking off the transition period, which, in the case of his company, enabled both parties to “understand clearly how operations really worked, from the requisitions to the purchase to the purchase order.” A final key to successfully managing the transition period: an “all hands on deck” approach.
At a finance and accounting outsourcing engagement we studied at a global manufacturer, the pressure was on both client and provider because it was the client’s first outsourcing engagement; progress and performance were being watched very closely by top management. According to the company’s European corporate finance director, the credibility of the entire transition process depended on delivering to the pre-announced timelines; that, in turn, required the day-to-day involvement of senior managers who could make rapid decisions and bulldoze obstacles out of the way when required.
As the finance director summarized it, key success factors included “effective expectations management and communication across all levels, sustained management focus, and having leaders from both our company and our provider willing to hold themselves and their teams accountable and responsible for the engagement.”
Many outsourcing arrangements involve coordinating work across large geographic areas, which underscores the need for continuous, on-the-ground information about the diverse regional business needs.
During the transition period at one learning BPO program we studied, an executive from the provider and one from the client traveled together around the region every six months and visited key leaders in different areas. That enabled different parts of the organization to understand the dynamic requirements of the business and then use that knowledge to help the BPO team perform better.
Outsourcing demands that a great deal of attention be paid to the details of the newly outsourced function. Frequently forgotten during the transition period is part of the client organization that remains working for the company: the retained workforce and the portion of a business process remaining in-house after the outsourcing begins.
Without effectively managing the changes experienced by the retained workforce, a dangerous disconnect can arise. 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.
Our research confirmed the importance of focusing on change in both the structure and performance of the retained organization. For example, half of high performers have modified their retained organization to optimize the operating model of their BPO arrangement, compared with only 29 percent of typical performers.
Three transformations of the retained organization are especially important.
Transforming clients from “users” to “customers”
One of the critical organizational changes that must occur in outsourcing—critical because it is necessary to achieve better cost control—is for the “users” of business services to become educated “customers” who know how to look after the organization’s larger needs. While a user tends to consume resources with little thought to costs, an educated customer makes informed choices about service levels, functionality and costs.
This shift empowers client executives to more meaningfully contribute to business objectives. Rather than responding to a “user’s” request with, “Sorry, that’s not in my budget,” the client executive works with the “customer” of the outsourcing services to weigh the business value of the request versus its cost.
Transforming provider relationships from “them” to “us”
Another striking finding from our research into high-performance BPO was the importance of having outsourcing clients take a partnering, collaborative attitude toward the arrangement. Nearly 85 percent of high performers consider their BPO provider to be a strategic partner; by contrast, only 41 percent of typical performers operate according to that mindset. Clearly, in a BPO arrangement, there is no “them”—everyone is “us.”
One high-performance BPO relationship we studied serves as an exemplar for integrating the provider into the client organization. The client executive instructed his own leadership to include the provider’s remotely located staff in everyday operations in a meaningful way, reminding his team that the provider’s offshore staff was an integral part of the end-to-end delivery group, just as the retained staff was. The client established monthly meetings with the remotely located provider employees to encourage and reward their contributions to operational innovations and improvements.
Changing the mindsets of employees from “back-office” doers to “front-office” service coordinators
In a business services organization that has been restructured to run on an outsourced basis, far fewer employees perform transactional activities and many more coordinate service delivery with BPO providers and internal clients. This means that most middle managers—many of whom rose in their positions because of their functional skills—must now learn better relationship skills.
As one provider executive put it, “The reality is that relationship managers in the client’s retained organization need a vastly different skill set. Just taking your best accountants and putting them in the role of relationship manager doesn’t work well.”
An executive with a medical devices company offered advice about how to more effectively prepare middle managers for their new roles: “Get your people to the provider’s delivery centers early on. Meeting the delivery center people and understanding what they do opens the eyes of the managers to their new roles.”
But changes in roles and mindsets ripple through all levels of the workforce, not just middle management. Efforts must be made to overcome the natural resistance to change, and at the same time to give people the knowledge and skills they need to work in new ways. In other words, managing change for the retained workforce—and for the provider workforce, as well—involves ensuring that the workforce can perform in the new ways required, and ensuring that they want to perform in those ways.
Here are some keys to success along both those dimensions.
Innovative programs for training, collaboration and knowledge sharing. Today’s innovative learning solutions can be especially powerful when it comes to enabling change. Performance simulations—learning environments that replicate the actual tasks to be performed by workers—help move people from knowledge to action.
Web-based environments can provide training experiences that are both richer and more timely. Social learning and collaboration platforms offer access to real-time expertise and learning, and also provide a supportive environment that encourages understanding and change.
Cultural assessments. These can help determine where misaligned attitudes and mindsets interfere with the workforce’s ability to succeed in the new work environment. Social media applications can help by enabling both clients and providers to take the pulse of a change program much more directly than by administering and analyzing an online survey.
Redesigned work processes. Process reengineering is part of the transformation of the retained workforce, but helping the employees actually perform those new processes is just as essential. It is often important to use technologies that embed new ways of working into the applications used by the workforce. This goes beyond telling people about change and helps them perform in new ways.
Ultimately, it is important to collaborate with leaders and members of the retained workforce as new structures and ways of working are designed and implemented. People are naturally more accepting of and engaged in changes to which they have had some input. The outsourcing operating model is a new world. But the transformation can be extremely positive when people are engaged from the start in the design of that new world, coexisting and prospering with an outsourcing partner.