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

1. BPO Success - Best Practices for
Organizational Changes

2. OutsourcePortfolio – Research Article Series
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.
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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
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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?
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* 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.
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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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