The Secrets To Setting Up Effective Outsourcing

One of the things that is most often misunderstood about outsourcing today, is the transformational potential it has on your business.

Sure, outsourcing just a few transactions may not appear to be much, however one needs to realise that to succeed in outsourcing today, in this age of disruption, you need to take a strategic approach. So, this by its very nature, means outsourcing becomes an enabler of business transformation because it forces you to think differently than you may have done in the past.

Completely new teams of people, potentially located in different geographies, where you need to define processes, and then start measuring performance, are all aspects of this transformation potential.

Furthermore, this journey that you have started will also mean that new skills and capabilities like governance, risk and commercial management will be required, developed and mastered.

As your business grows, other considerations will be apparent …These include business acumen, ethics and social responsibility, and the like

So that is why we refer to the fourth practice of The Seven Practices Of Highly Effective OutsourcingTM as Embark On The Journey.

In this practice, we will discuss the four major elements that you need to consider when you embark on your journey and transition your business, well at least parts of it, to your newly selected strategic outsourcing partner.

At The Startup Business we call these elements The Four P’s – being “process”, “platforms”, “people”, and “performance”. View The Four P’s as the “swim lanes” of your project transition plan (amongst other ones, of course).

For example, in large business outsourcing transitions, there will be specific individuals assigned to each of The Four P’s. In smaller businesses, even a single-individual business, The Four P’s are still relevant, even if you as the “business” are doing everything! You just need to be sure nothing gets missed.

Let’s now go through each of The Four P’s in more detail so that you can implement them in your business outsourcing transitions…

PROCESSES & FUNCTIONS

When you made your decision to outsource, you based it on a set of criteria and then identified an area of your business that, in your analysis, deemed suitable to outsource. This may have been a specific process or activity; maybe, account reconciliation, for example. Or perhaps it was to outsource a whole function of your business – a team or department, which is made up of multiple processes or activities.

Regardless of which approach you took, the need to map out the detail from the lowest “task” level through to the highest “mega process” is essential because, in outsourcing, you need to be clear on the hand-offs as well as the roles and responsibilities between your business and your outsourcing partner’s business, and down to the individual or role level of each one.

In traditional outsourcing, typically we are just looking at low level tasks and activities. However, in strategic outsourcing we need to have a more holistic view to understand all the moving parts and inter-connected relationships – even when the initial outsourcing engagement may be relatively small. This is also especially important in terms of the potential of future automation and robotic investments in your business, which have the potential to eliminate the low-level tasks and activities altogether.

This mapping exercise is also where you need to be working very closely with your outsourcing partner. This is because it is in your best interest that they are engaged and working side by side with you, as you map out this detail in what we call your “business process architecture”.

PLATFORMS & TOOLS

The next element you need to review for your outsourcing transition are the technology platforms your outsourcing partner may require access to, and the technology tools that will facilitate collaboration and drive efficiencies between you and your outsourcing partner’s business.

In terms of your current platforms, you need to consider whether it is possible to give outside parties access.

Does your outsourcing partner’s team require remote access to your systems via connections such as VPN?

How secure is your outsourcing partner’s facilities? … Physical and virtual security controls must be mandatory with no exceptions

If they do get access, then does this mean they have access to everything, or can you partition what they have access to? If your current platforms are cloud-based, then it may be that it is easy for you to give them their own unique log in – but still you need to be sure as to what level of access you are going to grant them.

Emails and telephones do not cut it as collaboration tools. You need to have high-definition video that allows seamless connectivity between you and your outsourcing partner (at The Startup Business, we use Zoom which, in our opinion, is a high quality, scalable and cost-effective solution).

You also need to have facilities for file sharing, whether this be on your own secure network, or cloud-based, using applications like Google Docs, Microsoft OneDrive, or Dropbox.

For the tracking of work tasks, again you may have your own in-house workflow tools or enterprise solutions such as Jira, or if you are a smaller business, Trello and Basecamp may be useful for you. Other technologies such as Microsoft’s 360 platform and even their standalone OneNote, will also be useful.

When it comes to using technology collaboration tools across multiple parties, always keep in mind the criticality of security, the need for version control procedures, and the insurance of having data backed up.

PEOPLE & TEAMS

When we talk about people and teams, what comes to your mind?

Do you think about relationships, do you think about high performance, or is it something different altogether?

You see, one of the main contributing factors for which most outsourcing fails to deliver on the promise, is because the focus is too much on process and not sufficiently on people. In other words, we have mapped all our business processes to the most detailed level, but we have failed to fully grasp the people aspects: change management, knowledge management, training, skills, and overall learning, on both the customer side of outsourcing and the actual outsourcing partner’s side.

On top of this are factors such as the client business learning about outsourcing and, that in itself, is a journey, but also the outsourcing partner learning about your business – you; the client! Because the greater the understanding or context from both teams, the more it will ensure a more favourable outcome when it comes to overall outsourcing service delivery performance. However, that will not address everything. To further complicate this, if you are outsourcing to teams located in different countries, then you have the cultural challenges as well.

So taking on board all these factors and implementing ways to overcome these challenges, will lead to an enhanced working relationship between your business and your outsourcing partner’s business.

One of the things we do at The Startup Business is to help our clients appreciate these cultural challenges in a practical way and use a framework based on the work of Geert Hofstede’s “Dimensions Of Cultural Differences”.

To summarise, Hofstede defined six cultural dimensions that vary depending upon the generic culture you are looking at. Now, in outsourcing where you are doing this locally, this is not very relevant. However, if you are outsourcing to India and you are an Australian, United Kingdom or USA based business for example, then this framework will show you the cultural differences for each of these six dimensions. The value of this to you is to have greater insight into your partner’s preferred cultural way of expression and, at minimum, be mindful towards it, as you work together as “one team”.

If you are not familiar with the work of Hofstede, then you can find more at this website:

https://geert-hofstede.com/

PERFORMANCE & STANDARDS

You have now mapped your business processes, you have defined the platforms and taken into consideration all the people aspects; it is now time to define your performance measures and standards.

This, surprisingly, is often overlooked, but essential, if you want to achieve value from your outsourcing. After all, wasn’t at least one aspect of your decision to outsource, to achieve value? But if you are not measuring where it matters, how do you know if you are getting what you want?

Also, just as important, does your outsourcing partner know or understand your standards?

This is where service levels come in to play. What are your minimal requirements? What does your outsourcing partner need to do, to exceed your expectations and, will you provide them performance-based bonuses or similar incentives if they do?

Now, typically what happens is where businesses have not outsourced before, there is little in the way of data to quantify current performance levels. Sure, there are exceptions to this, but as a rule it is only when processes become defined and documented does the true visibility of performance occur.

So, what this means is it just might be that you define some performance targets initially as a guide, but also allow for a period of time, for the data to be validated. Depending upon the actual process, this may only require a few days’ worth of information, whereas other businesses may require months. However, the outcome will be the same in that you have mutually agreed with your outsourcing partner of a baseline to work to.

This baseline will incorporate a series of metrics and key performance indicators and, depending on your desire of sophistication, incorporate them into regular reporting dashboards and balanced score cards; concepts that may take an hourly, daily, weekly, quarterly, or even yearly view.

We also would highly recommend that you put in place formal review meetings, or governance as we call it, with your outsourcing partner. In these meetings, you are initially reviewing the status of the outsourcing transition, but subsequently they evolve where you are collectively reviewing past performance, initiating required corrective action, and planning for future needs.

We will be covering these aspects in more detail, in Practice V and Practice VI.

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