Posted March 7, 2017
When properly planned, outsourcing your customer support can bring a boost to your business. It can help expand operations, reduce costs and even improve customer relationships.
But transitioning from in-house to external, or adding new capabilities through outsourced services, requires extensive planning and clearly defined expectations.
Deloitte’s 2016 Global Outsourcing Survey found that 78 percent of companies feel positively about their outsourcing contracts. However, it also identified eight common areas which can cause outsourcing partnerships to sour, and their benefits to deteriorate over time.
These common errors afflict large companies as much as they do start-ups. Here’s how to avoid them.
1. Establish clear goals and guidelines
Like all relationships, a successful outsourcing partnership requires ongoing communication, and defining needs and expectations upfront is critical. “The first pitfall is not specifying what you want correctly,” says Simon Tarsh, managing director of Deloitte Consulting LLP.
Companies should set clear expectations of the outsourcing contract, both internally and with the outsourcing partner from the get-go. These living documents of purpose can be a useful reference as the relationship progresses, helping determine where things have gone off-track or where the scope of work needs to change.
Stan J. Lepeak, global research director of management consulting at worldwide professional services and auditing firm KPMG, agrees. “When organizations undertake outsourcing efforts, they have a set of goals they’d like to achieve, but ensuring they have the governance in place to meet these goals is quite challenging,” he says. “One often undertakes the effort with specific goals in mind, but after going through the lawyers’ legal and other regulatory hurdles, six months later there’s a bit of a disconnect between what you’d like to do and what has been agreed upon. ”
2. Leave room to grow
One common cause of dissatisfaction in an outsourcing partnership is the outsourcing provider’s inability to scale and keep up with changing needs of the company. This is especially true for start-ups growing at a rapid pace.
To help curb this dissatisfaction, Tarsh encourages companies to consider how their needs might change over time when selecting an outsourcing partner. “Many companies start with something small that they want to accomplish and they start with a small provider, but as they get bigger they realize that provider often doesn’t have the scale to grow. Matching expectations is pretty important,” Tarsh says.
By ensuring the outsourcing company has capabilities beyond your initial need, companies can avoid having to re-start the time consuming and costly sourcing process prematurely.
3. Reactive vs. proactive service
According to Deloitte, 46 percent of outsourcing providers wait to be told that improvements need to be made rather than making proactive suggestions. However, the very terms and conditions of an outsourcing agreement might inadvertently force providers into a reactive position, by being too limiting or overly focused on cost efficiencies.
True partnerships don’t just happen. They need to be built and nurtured, with expectations established upfront. Lepeak suggests monitoring for proactive service throughout the outsourcing relationship.“It’s a full-time job to manage outsourcing, to ensure a periodic assessment of the progress. You can’t go on autopilot for three to five years. There needs to be a living set of commitments and documents,” he says.
4. Identify the provider’s innovation strategy
One of the core expectations of outsourcing is that the new relationship will help the company stay ahead of competitors. This requires fostering innovation, but Deloitte reports that 33 percent of companies find that outsourcing partners lack the innovation to keep up with changing business needs.
Tarsh suggests spelling out the terms for innovation in the agreement. “For example, a trend in 2017 is towards robotic process innovation — replacing people doing transactional tasks with automated processes. That may reduce the revenue and profitability for the vendor,” he says, creating an obvious conflict.
Instead of putting the outsourcing company in the awkward position of working against its own best interest, companies should build-in incentives which promote innovation. “That can be either more business, or the opportunity to charge differently, or sharing in the savings of innovation. The way in which they are incentivized must be clear in the contract,” Tarsh says. Innovative initiatives should be collaborative, with clear governance on both sides, he adds.
5. Ensuring the outsourcing partner has a sound recruitment and retention strategy
The right people can make all the difference when it comes to success, and it’s important for companies to partner with an outsourcing provider with a proven track record of nurturing and maintaining staff. The right outsourcer will focus a lot of attention and resources on ensuring employees are continuously supported and engaged.
For a BPO provider like TELUS International, which operates contact centers around the world, that means ensuring the programs the company offers in its regional locations are in line with the aspirations of the local workforce. For instance, TELUS International’s university programs help team members in the Philippines and elsewhere get Bachelor’s or graduate degrees on site while working full-time. The results of this people-first approach is increased agent engagement, loyalty and superior performance.
6. Ensuring best-in-class training practices
Deloitte reports that 23 percent of companies find their outsourcing suppliers rely on unqualified resources, meaning inadequately trained or skill-tested staff.
Tarsh suggests companies include standards for training practices in their original agreement, which can be confirmation of specific skill sets, testing and vetting processes, as well as documentation of standard operating procedures. “We do sometimes set out qualification requirements by level [of responsibility]. Typically, there is a ‘train the trainer’ approach in which leaders come to the onshore locations to look at the people who will provide the training,” he says.
7. Auditing for compliance
Deloitte finds that 25 percent of companies must terminate their outsourcing contracts due to a lack of leading practices for quality and operations management.
The adage “trust but verify,” should be a mantra of good outsourcing practices. Before signing agreements, and as part of the ongoing relationship management, it’s important to ensure the provider maintains a high degree of operational integrity. “[Companies that are outsourcing] have to have structure for auditing,” Tarsh says. “A good supplier should tell them some of that information, and their auditors have a role in that too.”
Companies should confirm their outsourcing partner’s compliance to internationally recognized standards, like ISO, which are audited by objective third parties. They should also expect their outsourcing service providers to comply with international documentation requirements which will not expose the company to risks.
8. Ensuring systems continuity
An outsourcing partner should act as an extension of your brand, and ensuring a high level of continuity across both organizations is key. However, Deloitte finds that 22 percent of companies were forced to cancel their outsourcing contracts due to a lack of internal integration.
Lepeak warns against failing to assign the right in-house staff to work with the outsourcing provider. “As an example, the outsourcing company can do your payroll; that’s straight-forward. But in the case of human resources for talent acquisition, you need to have more control of those activities, and that’s a struggle. You need smart people, who know how to run things, to manage those types of outsourcing providers,” Lepeak continues.
Organizations looking at finding a provider to provide turn-key services need to hire the right in-house personnel for oversight.
Bottom line: Manage change and mind the details
For organizations looking to outsource for the first time, change management is often critical. “If you previously performed many tasks internally, and you’re now planning to do them externally, you need to know how you will manage the change in your organization” says Lepeak. By using a formalized and detailed change management approach, companies transitioning to an outsourcing model will minimize disruption and reap the full rewards of the partnership.
For more information on creating an engaged outsourcing partnership, including key factors affecting relationship value, download the “Achieving Maximum BPO Value: How Smart Buyers Structure Contact Center Relationships” white paper by Everest Group, sponsored by TELUS International.