Tuesday, April 27, 2010

How to Maximize Outsourcers - Part 1 of 3

"Outsourcing": Quite a word in the modern business setting.  
However, it's a concept that is as old as business itself.  Every business no matter how large or small outsources some function of their business operation.  Sometimes they do this with great success, and then other times the result is abysmal failure.

This 3-part article will cover how to get the most out of your outsourcing relationships.  I will break it down into the following parts:
Part 1 - You (or your company).  Can you handle the truth?

Part 1 - You 

To get started, let's first determine your personal feelings about outsourcing.  
When you hear that word do you feel afraid? Or are you generally un-phased by the word?
Now, how about your department?  Do your team members make negative comments about jobs being outsourced?
Now, how about your company as a whole? Does it use the word in a positive tone?  Or does it try to avoid the word and replace it with words like provider, supplier, or vendor?

Keeping that honest perspective in mind, let's look at the cultural inner workings that occur when a company starts to talk about initiatives involving outsourcing.  No matter what functional role you play in the enterprise, typically outsourcing means one of two things to you:
1) Job layoffs, downsizing, undercutting, or off-shore.
2) Cost reduction, optimization, leverage and focus

The reality is that it's both; most of the time, anyway.  

What often happens, though, is that two camps develop based on arguments and beliefs on either side of this topic.  Presentations and hallway talk around the building start to create perceptions; and dialog is heard promoting one or the other of these camps’ agenda.
Leadership must act to ensure that communication is properly managed.

Camp1 views outsourcing as a threat to their livelihood.  This causes them take a defensive stance towards any initiative to outsource.  

So why does this matter?

The staff currently handling the to-be-outsourced function is going to be either your greatest asset or your biggest roadblock in a successful transition the outsourcer.  

It used to be that outsourcing was kept on the "down-low" until signatures were complete with the selected vendors. However, because of the prominence of the term and concept, employees today are more  likely to detect this initiative, even in its infancy at the executive level.  
Here is an example of how this might look:
-No capital, but new suits in the office.  Teams of sales folks coming into the office after a department has been shot down on their capital appropriation, is typically a dead giveaway that services are being outsourced.

If you respond with "We are having an assessment done." you are going to contribute to the already defensive posturing.  Then, when you start to press them to contribute important information to the assessment, they  may turn into the surly teenager with the "whatever!" roadblock. Outsourcing transitions may even be sabotaged by a few, who are mistakenly afraid of job loss,

My suggestion is to get yourself out in front of this situation by bringing your teams into the fold early.  Determine which roles will be outsourced and which will remain within the company.  Emphasize that outsourcing may free up some folks to pursue their real jobs.
Create an objective evaluation team which can evaluate those who really step it up during the transition and who will remain assets to the company.  Leveraging these folks before and during the transition will provide you with excellent resources to help manage the outsourcer for the long-haul.

Camp2 also presents challenges.  Even though they are pro-outsourcing, they can often view this as the only available solution to reduce cost and management, while increasing productivity and quality. The challenge then becomes that their eagerness to show ROI will be at the expense of proper readiness. So instead of correctly establishing which ownership points should be maintained, they quickly shop and bring in vendors to help determine where the point of demarcation will lie.
While this seems like a good idea and a great way to save on costs, it can wreak havoc on the implementation and here's why. 

Sourcing requires a transition period in which the in-house service is packaged with training and provided to the outsourcer for management.  Most sourcing providers want to take over the action-based activities, while leaving the management, scheduling and reporting features with the client for a while.

While this may seem like a logical approach, the difficulties lie in the execution.  
The activities have to be taught to the outsourcer, and then the quality has to be managed from two perspectives:  that of the outsourcers and that of the clients.  Now you have 2 drivers and 1 steering wheel; not a good situation.

If you truly want to maximize your outsourcer’s value, you should be sourcing more than just warm bodies to do activities.  You should be leveraging the outsourcer’s disciplines and focus within their core competencies.  Thus, what you really want is their streamlined management and already institutionalized best practices.  

Therefore, a much better approach is to transition the management and quality control first.  Allow the outsourcer’s best practices to infiltrate your organization, and lean on the inherent control points that they are already providing.
Now you can start transitioning the activities, and with the established the baseline of reporting and control of the activities within your own organization, you can start reporting on the effectiveness of the outsourcer without requiring the outsourcer change their optimized processes to fit your reporting needs.

Of course, one could argue that "I know how to manage this better than they do"...  Well, you are clearly in Camp1. And I caution you on your choice of provider.  However, even if you are right, it could still be a good idea to outsource to this provider.  
In our next part of this article we will talk about the outsourcer to determine if they are a commodity play or a value play, how you can get the most out of them, and what that means.
Part 2 - The Outsourcer.  Friend, Foe or Value Provider

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