Outsourcing is hiring a person or another company to perform some functions or processes for your company. Most businesses outsource one or more of their processes to another company or a freelancer. While cost effectiveness remains the primary reason to outsource, some services are outsourced as they require specific skill sets, expertise and technology. For example, companies may outsource customer helpdesk as it is cheaper to outsource, but the primary reason to outsource digital marketing is to let specialists do the job. Irrespective of the reason to outsource, it is important that you monitor the success of outsourcing agreements. There should be no ambiguity regarding the measure of outsourcing effectiveness, outcomes and success.
A study conducted by the University of Bayreuth, Germany in 2017 to measure the performance of IT outsourcing found that only about one quarter of the 77 surveyed firms achieved more than 80% of their set IT outsourcing objectives satisfactorily. The survey reported that cost reduction goals of more than 10% were realized by only 48% of the surveyed firms.
How often does your company meet its outsourcing objectives? Do you have a framework to monitor the success of outsourcing agreements? What metrics do you measure?
Outsourcing Goals and Objectives
Clarity of objectives and setting up goals is the first step. This needs to be done before you start your vendor search. Why do you want to outsource? If cost reduction is the primary objective, define “how much reduction in cost” is acceptable. Along with the cost reduction goals, you also need to set specifications for other key metrics. There is no point achieving a significant cost reduction with poor quality or productivity.
Example: Call Center Outsourcing
Call center outsourcing turns out to be much cheaper that setting up an in-house team of customer care and telecalling representatives. However you would want to ensure that the outsourced call center team performs at least at par with the in house team if not better. Cost benefit is useful only if the outsourcing partner can be trusted to deliver higher efficiency and better quality of services.
Example: Outsourcing Search Engine Optimization (SEO)
SEO is a specialist’s job. The individual or team managing SEO for your website needs to have certain pre-defined skills and must understand the tricks of the trade to meet the objectives. Outsourcing SEO to an agency will be slightly expensive compared to managing it inhouse, however you will get access to a team of experts. The objective for this would be to get more relevant traffic to your website who become customers or subscribers.
Service Delivery Framework for Outsourcing
Once the goals and objectives are clear, the outsourcing partner needs to share how they plan to achieve them. The service delivery framework should cover the “what, why and how” of the outsourcing model.
It needs to be a detailed document covering all processes. This document is the outsourcing playbook and following it will ensure the success of the outsourcing agreement.
The service delivery framework must include:
- The scope of outsourcing: what processes are to be outsourced? The start and end points of each process. Define the inputs and outcomes of each process. Create a process map to visually represent the flow of information and transactions.
- The structure of the outsourcing team: roles and qualifications of the team members who will work on your business processes.
- Hiring and training plan: if the outsourcing agency needs to hire a dedicated team for your outsourcing needs, check their hiring plan. The source of hiring, job description, selection process. How do they plan to train existing and new resources? Check the training curriculum and provide relevant inputs. What will be the process to identify training needs and conduct necessary refresher sessions for the team?
- Who does what by when? The role of each individual needs to be clearly defined. Everyone needs to be aware of what he or she is expected to deliver and how. Ensure timelines are documented and communicated. There should be clear understanding on measuring the success of desired outcomes.
- Resolution Matrix: List down what could go wrong. How does the team address breakdowns, complaints and bottlenecks? Who gets involved in the resolution? This should be based on the severity and impact of the problem.
Documenting the above prepares you as well as the outsourcing partner to deliver as per expectations. The service delivery framework needs to be a live document. Review it periodically and make necessary changes and updates.
Performance Reporting and Business Reviews
You would have often heard that “what gets measured gets managed”. Or it could be said that “what gets measured gets improved”.
Document a performance measurement and reporting process for the outsourcing partner. When, what and how?
- Define the KPIs. These should clearly indicate if the goals and objectives are met
- Watch for trends and forecasts
- Ask the agency to conduct a deep dive when a KPI is not met or is expected to be missed. Get involved in the analysis
- Schedule regular outsourcing business reviews to measure the success and impact
- Ask the agency to present their input and ideas for improvement
Conclusion
Lack of clarity and communication are the major reasons why outsourcing agreements fail to meet objectives. Clients are quick to conclude that the agency was not competent and the search for a new outsourcing vendor begins. Like all other processes, the success of outsourcing is dependent on the preparation and adherence to the plan.
It does get boring and monotonous to go through the same KPIs over an over again. But more often than not, boring gets the job done. Plan and stick to the plan. Make a pivot when things do not go as per than plan. Being thorough and proactive is what you need to meet your outsourcing goals and objectives.
