BPO Success – Best Practices for Organizational Changes

November 3, 2008

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 mange 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 mange 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.

Organizational changes for BPO success

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
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, reduced time to market, etc.

Organization changes for Outsourcing

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?

* 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.

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.

3. 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.


3 Responses to “BPO Success – Best Practices for Organizational Changes”

  1. iso 14000 on November 14th, 2008 11:02 am

    iso 14000…

    ISO is a non-governmental organization established in 1947 in Geneva, Switzerland. Today, ISO has more than one hundred member countries. The mission of ISO is to promote the development of standardization and related activities in the global marketpla…

  2. Offshore Outsource Risk Mitigation Strategies | Outsource Portfolio on July 16th, 2009 4:29 pm

    […] project related risks can be mitigated by assessing the organizational readiness, creating internal organizational structure and having an outsource business champion coordinating the outsource initiative between the […]

  3. IT Outsourcing on March 29th, 2010 4:42 am

    While process measurement usually requires some kind of automated business process discovery tool (ABPD), the accuracy of the “as is” model is quite helpful in locating opportunities. The payback is quick and ABPD can use readily available logs, application systems and activity on the glass of a connected device like a PC.

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