November 20th, 2007
What makes some outsourcing arrangements successful, while others fail at the first hurdle? To identify the reasons behind outsourcing success and, conversely, failure, sourcing consultancy Quantum Plus and law firm Bird & Bird surveyed people involved in managing outsourcing relationships.
The research highlighted the importance of knowing who you will be working with throughout the course of an outsourcing arrangement.
Look beyond the sales team
During the sales process that leads to an outsourcing relationship, there is a display ritual between buyer and seller. This involves smart people on the supplier side painting a bright picture of what the future will be like once the contract is in place and they take on responsibility for delivering the services.
This selling ritual is led by someone who was specifically selected for the task on the basis of his or her ability to form relationships, to empathise and to enthuse the customer about the prospect of working with their company, as well as their technical, operational and commercial know-how.
A savvy IT director will not rely on their relationship with this person they will insist on meeting the team that will take ultimate responsibility for managing the operation so that they can assess real ability, experience and cultural fit.
Because the supplier is looking to impress, it will field the best team it can to win the business. However, once the contract is in the bag there is a risk that this “A-team” will be replaced over time by “B-team” players and, as a result, the service will never achieve the results that were promised in the contract negotiations.
This scenario will be instantly recognisable to many who have dealt with an outsourcing relationship from contract signature to implementation.
Firms surveyed by Quantum Plus and Bird & Bird said that along with the risk of the quality of the delivery team deteriorating during the implementation period, there is another risk associated with changes in personnel during the life-cycle of the outsourcing arrangement.
Benefits of staff continuity
A stable set of people managing the arrangement on both sides is a key element to success. Building common understanding and personal connections is crucial to founding a relationship capable of surviving the problems that will arise during an outsourcing contract.
Churn in the people will run the risk of weakening the relationship to the point where day-to-day stresses become too difficult to deal with.
This is particularly true where the changes are at a senior level on the customer side. Survey respondents cited examples of new management who did not understand the original rationale behind the outsourcing arrangement, and who sought to introduce changes that destroyed value instead of adding it.
Whereas a change of contract manager will include a structured handover between the outgoing and the incoming personnel, as it encompasses the whole of their role, senior sponsors may not see so much need for this crucial handover process in what may be seen by them as a relatively insignificant element of their overall responsibility.
The exception to the rule
There is, however, one circumstance in which significant churn in personnel is desirable.
A number of participants in the survey commented that where there is a substantial transfer of staff from the customer to the service provider, under the Transfer of Undertakings (Protection of Employment) regulations, particular care needs to be taken to ensure that there is a sufficient infusion of “new blood” from the provider, to bring fresh ideas and approaches to the delivery of the outsourced service.
This need for innovation and a new approach must be balanced, however, with a need to maintain continuity in business and process knowledge, particularly through transition.
If staff transfer is badly handled, or if the customer does not insist on certain key individuals being maintained on the account, this knowledge is at risk of being lost through attrition or dispersal.
Entry Filed under: Why Outsource?