In part one, I reviewed the misconceptions associated to outsourcing. In this week’s blog, I provide tips to delivering successful outsourcing arrangements and, in conclusion, next week’s edition will be listing some of the benefits that you should expect from a successful outsourcing agreement. Given the time, and left to my own devices, this would easily lead to a book. I have condensed this as much as possible but to address the most important tips, it was necessary to provide more information than a mere teaser, this is far from an exhaustive list. I accept that it is quite long for a blog post but felt the benefits outweighed the time required to read it.
Please contribute your thoughts to this blog, items you might find obvious may be revolutionary to another reader.
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Pick your partner carefully
- Do not think about the service you are looking to outsource as merely a one to one head count swap for cost savings. Your supplier’s goal should not simply be to meet your business needs at a competitive price, but to exceed them.
- An initial successful outsourcing arrangement normally takes a full year from the point of decision. Three months to negotiate, six months to establish and another three months to stabilise, this is assuming you are using a knowledgeable partner and a leader with experience in implementations.
- Remember it takes just as long to replace a poor performing supplier with a new one as it does to complete your initial implementation.
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A partner is only as good as you let them, don’t share, don’t get…
- I have heard countless customers complain about their current supplier not leveraging what they already know about the business when they provide proposals. This is a common issue, but more often than not the customer is just as much to blame as the vendor for not working to solve it.
- I suggest sharing all the information that you can, whenever possible. Sharing with your partners will regularly provide your business with the best possible solutions and will make any weaknesses in the chain immediately transparent.
- If you think your supplier can and will obtain all necessary information through simply having staff on premises or providing services, you will regularly be disappointed.
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You should not trust your outsourcing provider to design and structure your outsourcing arrangement
- One of the most prevalent reasons I have witnessed for failed outsourcing arrangements are when the supplier does not fully understand the customer’s requirements, and the customer naively tries to outsource their responsibilities along with the service, thinking that once the contract is signed, their obligations are fulfilled.
- Do not assume you can add this work to your day job. Use a dedicated named individual or team to lead your business initiative, either a neutral third party or one of your trusted senior leadership team with experience in delivering a complex restructure programmes. Ensure that they stay in constant contact with you and are empowered to act on your behalf when making last minute decisions.
- Dedicated resources are critical to identifying, limiting and managing damage control while ensuring the successful and timely delivery of the project within budget.
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A good leader for FTE staff is not necessarily a good leader for outsourced staff
- My experience has shown that this is more of a mental barrier than a fact.
- I find that depending on the role and on an average basis, if contract staff (not account managers/sales) are treated as perm staff they behave as and outperform a majority of the perm staff. The leader/manager needs to treat them fairly and impartially. Focus on the leader, gaps in your leadership teams skills will not likely be resolved by replacing the other staff.
- There are a few tweaks that go a long way. Whenever possible rebadge the supplier’s office and remote sites with your company’s identity. Focus on the little detail; pens, umbrellas, signage, logos and written thank you letters go a long way in establishing pride in the workplace and giving your new resources a sense of identity.
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Your business is still liable, you have outsourced the service not the ownership. You cannot outsource the responsibility of maintaining your businesses operations.
- Far too many leaders complain that they are unsatisfied with the process followed by their supplier. The process in dispute was designed on behalf of and approved by someone within that business.
- If a customer is unhappy with their process, as the process owner, they are responsible for identifying the issue, fixing and ensuring the process is fit for purpose. This is a continual process owned by the business where the supplier can only advise possible solutions, it is not bound or obligated to. Complaining about poor processes within your business is akin to blaming a car manufacturer when you neglect to maintain and add fuel to it…
- When offshoring, the customer (not the supplier), must take into account cultural differences and language comprehension on top of process excellence and delivery. Remember, suppliers have their own agendas, when there is not a mutual benefit, at best, you will get what you pay for.
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Keep a backup on standby and plan for failure but expect success
- Locking yourself in to a single supplier puts you at a long term disadvantage, where you could face significant consequences in the event that the relationship breaks down or you need to provide a third party’s validation of your actions during an audit.
- A very good lesson taken from an IT perspective, is to always have a backup solution on standby. The old saying of not putting all your eggs in one basket is especially appropriate in this case.
- Having a second outsourcing provider readily available (on standby) continually prevents your business partner from becoming complacent and equally ensures that pricing is fair, up to date and remains competitive during contract renegotiations.
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The long term strategy or target operating model (TOM) must be defined
- All businesses need flexibility to a certain degree but asking your outsourcing provider to be able to adapt to your every whim comes at a cost; either through charging for change requests if you have a fixed price bid, or through time and material fees.
- In contrast to the way in which you may run your business’ internal resources, a service provider is accountable to their own shareholders through profitability and delivery reputation. A supplier will hire in as many additional resources as necessary to complete a project to ensure a successful delivery.
- Unless negotiated otherwise, your business will incur the costs associated to these increased resources which could be assigned without limits, likely on a time and material basis, and chipping away at your benefit case.
- These overruns can be kept in check with a mutually agreed tollgate approval process. Without such measures, these questions and increased costs could cripple a business and irreparably tarnish a mutually beneficial partnership agreement.
- Remember, plan the work then work the plan… Not spending adequate time in planning your initiative is much more expensive in the end.
With over 15 years’ experience leading major outsourcing initiatives onshore, offshore, near shore and through captives in various sectors around the world, these are my thoughts, do you agree? I, as well as many of the other readers, would be interested in understanding your thoughts on this matter. The prospect of helping you Smart Source or outsourcing appropriate levels of services to third parties to achieve the best outcome for your business is something that Willard Enterprises specialise in. If there is something I can do to help your business or someone you know achieve their next challenge, please contact me for more information. If you would like to stay up to date with updates to Willard Enterprises including new blogs, service changes and availability, please subscribe to the newsletter.
…Next week part 3 of 3, I will review some of the benefits that you should expect from a successful outsourcing agreement.