Managing Outsourcing

                Outsourcing is a topic I routinely see folks struggling with.  In most cases it begins with a business case which supports substantial cost savings for outsourced functions within the organization.  In other cases, the business case becomes more of obtaining a level of expertise which facilitates more effective business functions.  In either case, ensuring a solid business case, as well as fully understanding the fiscal implication, is extremely important.  This includes the program or process being outsourced being well defined, monitored, and measured against expectations.  Outsourcing cannot be left to function entirely on its own without any amount of reporting and fiscal tracking.  This is not to say all outsourcing should be a costs savings, but it is to say all real cost implications must be accounted for in the final product or service cost-to-produce or charged rate of service.  In all instances, even though rules, guidelines, and measures are put in place as an effort to manage the arrangement, things still seem to head towards a hands off interaction between the business leaders and the hired external agents.

                Outsourcing does not mean there can be a hands off strategy moving forward.  Without defined guidelines and expectations, things can get out of hand very quickly.   Once the guidelines and expectations are in place, than performance measures can be established to determine if delivery is up to expectations.  From that point forward, success will be highly dependent on the processes in place and to what level focus is placed on the level of communication.  All processes must be defined from start to finish regardless of who is responsible.  Business processes should be in place for normal day to day functions and activities.  These become the roadmap to how you conduct business within the organization as well as how business is conducted to the external agent.  Without them, adequate training and expectations are hard to establish.  Also, it becomes harder to troubleshoot problems when issues which arise.  Business processes should be developed not only for standard routine activities, but also for issue resolution.  This step is important if there is a hope of providing consistent and concise communication between both the internal and the external efforts.  I routinely see business process steps either not completed at the end user level or not provided and communicated.  Along with this, there can easily be a lack of training as different staff members change positions or change roles.  The training becomes hand-me-down type training and the knowledge of business processes are not brought into the picture.

Keeping a finger on the pulse of what is happening between the internal and external organization’s, is value added time spent.  This is not to say there is a need to micro manage and dig into the external agent and their internal processes.  When I see multiple facility organization’s which have outsourced certain segments of their business structure, from the end user perspective, the linkage through the new chain of command seems to become convoluted more than transparent.  In the outsourcing guidelines and plans, there should exist defined parameters for routine and collective communication as well as issue resolution processes.  Performance measures can quickly identify problems which are developing before they become detrimental to the organization.  The one rule in performance measures, is regarding how they are measured and what the intended measurement is actually measuring.  There has to be productivity, efficiency, or effectiveness results tied to the measure more so than simply costs or delivery.  The outsourcing must have a positive result to the organization in some manor to make it value added and worthwhile.  Granted, it may simply be a cost reduction business case, but if the effectiveness or efficiency is gradually negatively affected over time, the value-add becomes lost very quickly.  There should always be a tie back to the internal organizations’ productivity.

Having solid business processes established leads to consistency over the long term.  Problems and issues simply compound over time and lead to high levels of frustration when these are not in place or transitioned to the end user in an adequate manor.  When troubleshooting, I always refer to the business process as a foundational determinant to where things went wrong as well as where to begin repairs.  Performance measures must be tied back through the product or service the business is providing, to ensure the output is not being impacted.  Outsourcing can be a very good thing to the organization as well as provide substantial cost savings under certain circumstances.  Typically where I see things go wrong: 1. Grossly overstated costs savings without a solid and sustainable business case.  Often times it is built at a high level but not factored down to the impact of end user activities.   2. Grossly under supported or communicated once the program is implemented.  Once the program is well into what would be considered a mature stage, routine communication is not given as well as internal support for extended problem resolution.  If you plan to reach out to an external source for assistance or management of routine functions or activities, it is important to fully understand and map the linkage between the external and internal organization’s.  This is best completed using process flows, defined roles and responsibilities, and performance measures as they relate to product or service delivery.

Once these are in place, then all you have to do is transfer everything to the end user and voila, success can be achieved.

Stay Well

Scott B.