[HROA Essentials] Talent issues weigh on BPO & Shared Services

The SBPOA recently interviewed Andrew Kris, Chaiman of the SBPOA Advisory Board. A leading commentator, author and sought after speaker on the worldwide development of shared services and BPO, Andrew's expertise in recruitment leads him to share his viewpoint that BPO is desperately lacking experienced talent, and that firms are making hasty, short-sighted hiring decisions.

SBPOA: In previous discussions, you have mentioned there is a lack of talent in BPO provider firms. Could you please elaborate?

AK: Just recently I had a discussion with an executive from a major BPO service provider's new client. One of his comments - the type I frequently hear - was, "Well, we got the distinct impression that these people are learning with us…they don't have all the necessary expertise and are trying to hire that expertise now, even though our contract has already started."

The reality of this business is that very few firms are making "talent" investments in advance of securing deals.

So, when a deal is signed, there's an incredible rush to find the people that can actually deliver the committed-to work. The world being what it is, the right kinds of people are not that easy to find and it takes time. So, BPO firms end up recruiting people randomly and sometimes in desperation. But the quality of the people they recruit is not necessarily in line with client expectations or needs. The end result is that clients are factoring in ‘early learning experience' into the price they pay for services. BPO firms end up with discounted deals.

SBPOA: With the relative maturity of the BPO industry, it's hard to understand how there can be a talent shortage?

ITO does not equal BPO

AK: In many respects, this isn't a mature industry. While there are experienced people in the ITO space, in BPO - whether it's HR, F&A, Procurement or other functional areas - there isn't a vast market of people with deep experience in running outsourcing operations. With recent larger BPO deals the demand for talent is greater than the available talent pool. So, finding the right people inevitably takes time.

Many of the people who are currently engaged in BPO delivery work come out of the ITO end of the business. Technical delivery of ITO solutions is very different from BPO where the impact on organizations and people is intense. BPO is not a technical business; it is mostly about people. ITO firms can ramp up their hiring requirements and bring in people much faster. That's because the ITO industry has been around for 20 odd years.

SBPOA: ITO is not that people-oriented either…

AK: No, it's much more about technical solutions. But BPO demands much more human interaction. You need different kinds of skills, and those types of skills aren't all the same as in ITO. They are new skill sets that need to be learned.

BPO managers are saying, "We will get the people when we need them". ‘Just in time people', ‘Just in time people' does not exist for BPO today. Maybe in another 20 years we will be able to say that but not today.

SBPOA: What are the solutions then?

AK: I don't think there is any immediate solution, except one that is economically difficult. We are going to go through a period in which BPO providers are learning on the job. Their clients learn with them, pay for that learning experience and discount that from the price for their deals.

On the other hand, I hope that providers with deeper pockets may be persuaded to invest upfront in people rather than doing it in a rush when the deal closes. While it may sound unrealistic to suggest that providers invest in advance in talent, this would be no different than making capital investments in a factory to deliver services. You have to build your factory in advance of being able to deliver. So, think of BPO like any manufacturing business…you need to invest before you can deliver.

SBPOA: One of the problems is that it's people versus bricks and mortar.

AK: That's what it is. You could get away with that in ITO, but you can't get away with it in BPO.

SBPOA: To summarize, BPO firms don't want to make the investment in appropriate staff before they have the contract signed.

AK: That is correct because they do not want to risk up-front investment.

SBPOA: It sounds like there is too much fear that if they don't get this contract, they may end up with talent ‘on the bench' without another contract soon to use the labor that they now have sitting around.

AK: That is absolutely true. But that's a consulting or IT mindset that is not appropriate for a service business.

SBPOA: Switching gears a bit - I'd like your feedback about a customer service problem I had the other day. I was trying to order a magazine subscription. The online subscription service twice took my credit card information and confirmed the order, but nothing happened - I received no email confirmation and my credit card was not charged. After a few weeks, I called the subscription service and apparently they have outsourced their subscription services to a company that probably handles hundreds of various magazine subscriptions.

I explained the problem to them, "I subscribed twice…gave credit card information…no confirmation." The reply, "Yes sir, do you want to subscribe or not?" From my point of view the person on the other end simply did not care and did not see the need to defend the reputation of the magazine.

AK: What!

SBPOA: It was a completely disconnected process because someone with no connection to the magazine was dealing with subscription services. So I wonder what's the "cost" of this particular outsourcing initiative to the magazine? Few people will bother to inform them that they have some kind of problem. How much business is lost when work is outsourced?

AK: Well, there is obviously a substantial problem here because it looks like the magazine has just thrown subscription services over the wall. They have not maintained a relationship with their provider. There is no governance involved and no particular control. It sounds like the outsourcer has people who are not trained correctly and are not representing the publisher in an appropriate way.

SBPOA: So, BPO firms and buyers need some kind of agreement in control, some kind of feed-back loop?

AK: Absolutely. It is called a ‘governance strategy' or ‘governance policy', which serves to ensure the relationship ‘works well. And keeps working.'

I'll give you an example. One of our clients handled their first outsourcing without reviewing their HR processes. They just handed what they did to their outsourcer in India and told them to get on with it. And surprise, surprise, they had extremely variable quality service. The second time round is very different. Our client's current processes were mapped up front. The ideal process was clearly defined. The outsourcer's people are integrated into our client's daily work. They are part of the team; they are fully integrated even though they work for an outsourcer.

SBPOA: Okay. So, they are part of the staff; they are part of the team, like you said.

AK: They are part of the team; they are trained in the company's products and the new process, just as the company's own people would be.

SBPOA: So, that's a mistake when a buyer thinks they can just let go of the headache…

AK: We will pay you X amount of money, go to it and that's where it stops. No, that's not how it works - or I should say not how it works well.

SBPOA: In terms of talent and expertise, how is that developing within buyer organizations? Is there an ‘army of people' developing, as Deborah Kops calls it that can handle an outsourcer, that can really handle the logistics, the delivery and the management of an outsourcing contract?

AK: Today it's still a small army. There is generally not much experience in these areas today. People are learning these capabilities, and getting knocked around in the process. Of course, it's very wasteful. But people very often have to make mistakes for themselves before they learn. Very few people are capable of learning from others. So, what we are trying to do at the SBPOA is to gather all of the knowledge and expertise from other people and bring it together in such a way that it helps; it avoids people having to make their own mistakes…if they are willing! That's part of the whole training and educational mission of the SBPOA.

SBPOA: What about Borderless, the search firm you are leading - do you have clients who are asking for people with expertise in the BPO field?

AK: Absolutely. My meeting today was exactly on this topic - it was a company that failed in its initial BPO approach, and is now learning the type of lesson we talked about earlier.

SBPOA: Are you having difficulty finding the personnel?

AK: Obviously finding the right people is not easy. Otherwise there would not be a need for search firms like ours. Qualified talent in BPO is scarce. And as a result, you can not simply bring in, for example, a Senior Project Director with an ITO heritage to run a major BPO project. While Project Managers have been running IT projects, they rarely possess the skills and subject matter expertise to run a BPO project. It may take 8 to 10 weeks to find the right person and then to bring him/her in takes another 6 weeks. So, you are talking about a 3 or 4-month timeline. But in many cases, the project has already begun, leading to obvious consequences.

Leadership in Shared Services

SBPOA: A final question: How does this relate to shared services? Does it experience the same difficulties?

AK: Shared services has a totally different dynamic. What usually happens is that when a shared services center is developed, in place and ready to run, the person who pioneered the project is then put in as the General Manager or Managing Director. And very unsurprisingly, the shared services center doesn't perform; it often fails. It fails from a leadership perspective because the person that was in charge was an outstanding Project Manager. But the talent needed to effectively run a shared services operations needs the skill sets of a General Manager of a service business. Shared services only survive if they deliver quality at an appropriate cost, timeliness, and with a right level of service that keeps its customers coming back.

When the original project manager does not succeed, organizations try to cure the problem. They say "Let's put our best accountant or our best controller in charge of our finance shared services." Well, terrific controllers are just that, but they are not General Managers able to lead a service business; so failure the second time around is not uncommon. Borderless is frequently called in when an organization realizes what it actually needs is a General Manager who can run a service business and - who, by the way - also happens to understand finance.

SBPOA: Is there any concern if they have had no shared service experience?

AK: No, that is not a concern. What is a concern is that they understand how to run a service business…that's what shared services is. It's a service business that happens to run inside a company rather than outside the company. It may involve internal politics, but somebody with the right general management skills is well equipped to manage those. Bottom line, it's about running the service business.