bpo success – best practices for organizational changes

BPO Success - Best Practices for

Organizational Changes

OutsourcePortfolio – Research Article Series

www.outsourceportfolio.com | | November 2008

There is a growing interest in outsourcing among businesses to outsource their business

processes, started as a cost saving technique but now business process outsourcing is

considered as a strategic initiative for companies to stay competitive in the global

market. As the size and complexity of the outsourcing project grows, companies need to

manage multiple outsource vendors, success of BPO depends on coordination between

different vendors located in different countries and time-zones

Organizations must have an effective organizational structure and governance to

maintain successful relationship with the outsource vendors. Having a well drafted

outsource contract alone cannot help, it needs resources like training, change

management, organizational restructure, governance body, etc to successfully manage

the outsource vendor relationship. If the outsource vendor is located in offshore locations

then the businesses need to consider issues like time-zone differences, cultural

mismatch, etc, in managing the project teams. Only few organizations understand that

the hardest work begins only after the outsource contract has been signed. Many

organizations underestimate the complexities involved in executing and managing the

outsource projects.



In this article, we will explore best practices to create different groups in your

organization and align them to successfully to manage and execute BPO projects that

meets your company’s strategic goals.

1. Organization Changes

In any business process outsourcing initiative, some business processes are outsourced

and many are kept in house within the organization itself. If not planned and executed

properly, the separation and integration of businesses processes cannot work smoothly.

First you should make organizational changes to support the outsource relationship with

the vendors. The upper-level management should create four groups within their

organization to support smooth functioning of the outsource relationship.

1.1. Executive Group

This group consists of C-level executives from the organization and from outsources

vendor’s company. Though this group will not involve in daily outsource operational

issues, the group members will oversee all other groups formed to successfully manage

and execute the outsource relationship. The main job of this group is to make sure that

all other groups have their conscience in making the right outsource decisions that will

support the overall organization’s short-term and long-term strategic goals. All other

groups will report to this group either directly or indirectly.

1.2. Governance Group

This group is responsible for ensuring contract compliance, performance management,

and issue resolution. The main purpose of this group is to take care of any issues arises

between the team members of small business and outsource vendor. This group should

consist of senior members from organization and outsource vendor to manage the

smooth execution of business processes. The main responsibilities of this group is to

enable the executive group to make tactical, operational and strategic decisions that

increase the business value resulting from the outsourcing relationships, while reducing

the risk associated with using a outsource vendor.

1.3. Outsourced Business Process Group

This group is responsible for managing the business processes that are outsourced to

the vendor. The focus of this group is to identify the business processes that are good

candidates to outsource and actively involve in transferring those business processes

from small business to the outsource vendor. Generally employees from both

organization and outsource vendor will be members of this group.

1.4. Retained Business Process Group



Generally, business processes that are strategic importance and have legal issues are

kept in-house within the organization. This group is responsible for redesigning internal

business processes based on outsourcing solution so that touch points and handoffs

between internal and outsourced business processes are carried out appropriately. This

group also responsible for operational planning, policy development, continuous process

improvement, process change management etc.

By clearly separating the responsibilities of each group and aligning them with common

set of goals, organizations can achieve their strategic goals like improved share-older

value, increased operational efficiency, and reduced time to market, etc.

2. Avoiding Common Outsource Pitfalls

Any new company wide initiative will bring uncertainties in organizations, outsourcing is

no different to this phenomena. The executive team should align the above groups to

take proper decisions to answer following key questions:

* Due to the outsourcing, what are the overall business process changes and who is

responsible for executing them?

* How do retained and outsourced business processes relate with each other and who is

responsible for integrating them?

* Which groups are responsible for the ownership of the business processes and how do

they make sure the smooth execution of them?



* How the in-house and outsourced business processes are measured and how the

performance degradation reported to the governance group?

* How long it takes the governance group to address and fix the performance issues.

* How the quality of the outsourced business processes execution measured with the

retained business processes?

* How the security of the business critical data managed in, outsource vendor’s location?

How the security breach reported to the executive group?

By rising above questions in the beginning of the outsource initiative, executive team can

understand the complex nature of outsourcing and giving ownership of the business

processes to an outsource vendor. A good solution is to use the business BPO feasibility

framework to answer all of the above questions and have a clear vision for all the

outsource initiatives.

The entire outsource process does not have to be overly complex, but without the

above-mentioned groups organizations may not achieve their outsource goals. Typically

companies wait until they negotiate and finalize the outsource contract and then start

planning for the governance group and define the roles of other groups. This strategy will

not work and companies often miss the expected outsource benefits and may end up in

unsatisfactory service levels from the outsource vendors.

3. Achieving Strategic Outsource Value

Following are the take away points, you should consider in forming the groups:

Senior Management Involvement: The governance group must work closely with the

executive group to convey the daily progress of outsource initiative and get feedback

from the stakeholders on the outsourced projects.

Organization Involvement: Governance group must reach out all the departments of

the organization to educate about outsourcing and get their feedback to achieve

strategic business value of the outsource efforts.

Business Process Standardization: The retained and outsourced business groups

must create business process standards so that the service performance of the in-house

and outsourced business processes can be measured. Without proper measurement

guidelines, you cannot measure the productivity gains and other benefits achieved

through outsourcing.

Achieving Goals: Achieving the goals of both the organization and the outsource

vendor is very important. Organizations want to cut cost and improve the operational

efficiency of the business processes. On the other hand outsource vendor wants to

increase their revenue and decrease the service delivery cost. Good governance should

call for achieving both of these goals so that both the organization and the outsource

vendor will mutually benefit from the relationship.

http://outsourceportfolio.com/bpo-feasibility-framework/





Achieving Synergy: A good governance model should be build upon the needs of both

the organization and the outsource provider. This helps both parties to build trust upon

which they can resolve future problems that arises in their outsource relationship.

Outsource Contract: Having a well written outsource contract is must, but outsource

contract alone cannot help in solving all the problems. Both parties should use the

effective governance model to resolve the issues in a timely manner. Also the outsource

contract must be updated regularly over the life of the agreement.

Management Transition: The executive group must plan proper management transition

so that current team members will be given specific tasks once the outsource initiative

begins. For example, senior managers from the outsourced business process group will

be the members of the governance group to oversee the smooth functioning of the

outsourced business process.

Overall Control: It is important that organizations retain overall control of the outsourced

and retained business processes. Outsource vendor can make decisions for the

outsourced business processes and they will actively participate in the decision but

ultimately it is the responsibility of the organization to make sure the entire business

process value chain is working efficiently and effectively for the customers.

Managing the Risk: Any time organizations engages in new partnership there will be

risks associated with it, it is no difference in outsourcing partnership as well. Both the

executive and governance groups must work together with other groups to understand

and develop proper mitigation mechanisms in resolving it.

4. Conclusion

By creating appropriate groups and assigning proper roles to the team members before

starting the outsource initiatives, organizations can achieve their outsource goals. The

members of the various groups formed for outsourcing helps both parties to invest time

in the very beginning of their outsource relationship so that both parties can mutually

benefit from their outsource relationship.



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