[HROA Essentials] Outsourcing: Getting to better

Better, faster, cheaper… Companies justify shared services and outsourcing, and promise a step change in delivery to end users based on this trinity. Yet few actually take the time to determine what constitutes better

Better than before for all stakeholders, was the mantra of a very large outsourcing project for which I was the client. We â€" customer and provider â€" took this goal as a given, assuming that the service levels specified in the contract would automatically get us to the elusive state of "better." The words sounded great in a meeting and looked serious on a PowerPoint presentation, but no one ever really understood what better should look like ... or how we would get there.

Cheaper is a given. Obtaining cost reduction through the globalization of services is the price of entry; and depending on the as-is state, scope, and program reach, can be the overriding currency for embarking on an initiative. And, as a corollary, faster is taken for granted as an outcome of most business cases.

Yet most major change programs only get credit for cost reduction or an increase in speed for so long … then other expectations often kick in with a vengeance. Most propositions are sold on the promise of "better;" yet for a range of reasons better is never delivered. How often do we hear "you mean all of this change merely for a $20 million savings off baseline ... and service and delivery is no better?"

Why do many organizations gloss over the definition of better? Cheaper and faster can be described by coordinates that corporations can and do construct to justify a business case. They are easily benchmarked and justified, often by third-party data. Cost, especially, can be linked to other financial objectives such as reducing cost to sell or avoiding investments in technology. However, linking better â€" whether it be first call resolution, greater focus on business-line support from a new HR partner role, or more information delivered to the business â€" to services globalization is much more elusive. It requires exploring the ways in which business units and support groups work, or associating data in new relationships, or reorganizing and retraining an existing team to provide different types of expertise to take the business to the next level.

But what is better? Better can be defined in two ways. It is usually defined as improving aspects of backoffice delivery to enhance efficiency and accuracy. And it should be defined as changing those aspects of service delivery â€" and associated policies and ways of working â€" that allow the "business of the business" to perform at a higher level.

Unlike cheaper and faster, better is subjective and often situational. Asking the business line or the end user to help define better in any form â€" be it service, products, process, business-line intelligence or support â€" is key, yet is often seen as opening up a Pandora's box of wishes that cannot be fulfilled.

Building to wants and justifying to affordability is a difficult undertaking. And better viewed solely as a higher service level or expansion of the retained team's products and services can sink a business case. For many, better suggests more cost, not less. Without linking better to business results, it is hard to argue the case.

What Constitutes Better?

Better is measured variously, depending on anorganization's starting point. For some, better is basic â€" being able to close consistently on time. For others, better can mean increasing the number of goods bought with a purchase order to over 90% to consolidate vendors, or being able to reduce the number of authorizations for a new hire, pushing a product to market more quickly.

Better â€" regardless of process â€" for most organizations can be broadly characterized by a combination of one or more characteristics.

An invisible processing engine. Pushing rules-based work offshore or to a third party is justified based on the ability to re-focus on tasks that are considered more strategic. Better is akin to "no noise;" accuracy and ease of processing is taken for granted by the business.

Exceptional customer service. Globalization sponsors often confuse customer service with customer dominance in the solutioning process. The definition of exceptional means that the delivery of services is focused on solving problems in ways that are supportive of the business lines' needs.

Policies that link with processes. Process improvement without requisite changes in policy is only half the transformation equation. Ensuring that the rules and the processes are integrated to achieve the right business outcomes constitutes better.

Level of choice for customers. As much as we'd wish, standardization of services is an impossible task. Not all solutions meet all needs. For many business lines, better means having the ability to make tradeoffs, and choose based upon business exigencies.

Larger portfolio of services and products. Cutting the cost of rules-based work that support the business may result in cheaper processes that do not support business needs. Cost savings ideally should be redeployed in expanding the services and processes that advance business performance.

Business intelligence. Often in the heat of the deal and the subsequent implementation, program sponsors forget that one of the key advantages of globalizing services is obtaining enough of the right, consistent back-office data to inform front-office decision making.

Driving to Better

Defining and moving toward better is the first step in realizing the promise of globalization. The path is the same, regardless of the process under transformation.

Outline the vision. Often service-levels specifications are mistaken for a vision of an improved end state. Defining the "new" function and using services
globalization savings to fund new ways of working is the first step in getting to better.

Align the stakeholder. Service improvement is a contact sport where stakeholders negotiate the art of the possible and the associated price they are willing to pay to get there. Getting all concerned to agree what better is with cost, benefits, measurements and tracking reduces, if not eliminates, alternative and ad hoc definitions of better.

Expand the business case. Most business cases focus primarily on cost savings and avoidance, not on justifying the path to a new services delivery end state. If the costs and benefits of getting to better are missing from, or inadequately described in the services globalization business case, it will be difficult to achieve.

Benchmark, benchmark, and benchmark. Putting the end state in context of both the gap to existing performance and what others have achieved is critical as a description of the art of the possible, and as a justification for transformation.

Set expectations appropriately. Step changes in performance appear over time, not magically overnight. Victory as a first step for most transformations is a shift in delivering the as-is state â€" to a new location, or through a third party or new technology. Next stage improvement comes â€" after base services are delivering to spec â€" from a complicated choreography of end user ways of working, changes in policy, process simplification and new technology. Better is in the eye of the beholder, and must be defined in terms that the stakeholder understands. It is generally the focus of second stage or next-generation transformation after delivery is running smoothly.

Stage improvement. The point of departure for better is generally automation or standardization of an existing specification. Over time, a continuous process of balancing wants with affordability using such tools as simplification, change in policy, reengineering, or new technology.

Better for the business should be the main justification for the change represented by outsourcing and offshoring. Changing a business model solely based on cost justification could be defined as smart procurement, not a transformation. When organizations can define and are willing to make the transition to better, global services will come of age.

Deborah Kops is Head of Program Planning and Development of SharedXpertise. Formerly a partner in two major professional services firms, Managing Director in two global banks and one of the founding executives in an early business process outsourcing provider, Deborah has a unique perspective on an industry that she believes will flourish, often in spite of itself.

Article originally appeared in Global Services Media