Does Business Process Standardization help BPO?

February 21, 2010

We all know how outsource companies brag about their CMM level, Six Sigma, COPC – 2000, etc. Two years back I wrote an article explaining how business process standardization helps customers in their outsourcing projects. Last week I read an article in Harvard Business Review, When Should a Process Be Art, Not Science? that made me to think about standardization and BPO.

Business Process Standardization help BPO Does Business Process Standardization help BPO?
In that article the authors Joseph M. Hall and M. Eric Johnson identified following types of business processes:

  • Mass Processes: Business Processes that follow standard input and output falls in this category. General customer support processes like new credit card PIN validation, general enquirers for product or services, etc, are examples of mass processes.
  • Mass Customization: Business Processes that produce little variation in input and output falls in this category. Processes like computer trouble shooting, upselling product and services, build your own products, etc, falls in this category. In mass customization mostly you can use standard set of processes and services to serve the customers, there will be very minimal variations in outcome of the services.
  • Broken Processes: Business Processes that cannot produce take constant input and output falls in this category. These processes are neither well understood nor documented by the companies. Often companies integrate human driven business processes with automated business processes then inadvertently they create broken processes.
  • Artistic Processes: Business Processes that take variable input and produce variable output belongs to this category. These processes relay on human judgment in serving the customers.

Process Standardization and BPO
Now let me try to answer the question Does Business Process Standardization helps BPO? The answer is both Yes and No. Yes in case of mass processes and mass customization, may be in broken processes but definitely not in artistic processes.

All of the mass processes can be documented with set of rules and procedures, companies have been performing these tasks over a period of time and are already standardized internally. These business processes are prime candidates for outsourcing, companies should make sure the standards are applicable and can be performed by external provider from remote locations. If not modify the standards, make sure the input and output for the mass processes are property integrated in overall value chain ship it to outsource provider. So in these processes business standardization is necessary for successful BPO.

Business processes that belong to mass customization can also be documented with rules and procedures. Even though these processes produces variable output, often times it uses standard set of rules to drive customized output. For example, say you are calling a tech support to fix a issue in your laptop. Once you make a call, remote technician can ask series of questions to identify the issue. If the technician could not identify the issue, then he/she can remote login to your laptop to identify the issue. Though you can have standards to identify the issues, often times the remote technician must use their knowledge to resolve the issue. By standardizing the rules and procedures companies can outsource these business processes.

Often complex business processes are broken and typically companies struggle to mange these processes to execute efficiently. Companies should pay closer look into these processes to identify the input variations that goes into the processes and the output variations produced by it. This helps companies to classify between other types (mass customization, artistic) of business processes to decide if it can be standardized or not. For example take Accounting and Auditing, with international rule based standards you can consider it as a mass customization process. But you cannot blindly use the rules, you need to understand the implications of applying the standard rules for each firm individually. Do you call accounting and auditing mass customization or artistic business process? Companies must analyze the broken business processes to categorize it either mass customization or artistic to decide if it can be outsourced or not.

Artistic business processes are critical for all companies without its existence companies would not exist. Artistic processes are core competency for companies that differentiate it from their competitors. Standardization of artistic processes is not a good strategy and may not be possible. For example, take the customer service in stock trading industry. When a customer calls to report a trading problem, callcenter employee need to first understand the customer’s issue, address it and solve the issue. Often employees need to have indepth knowledge about trading industry and resolve the issue in a timely manner if not lose the customer. These type of artistic business processes cannot be standardized.

Can artistic processes be outsourced?
May be. It depends on what you want to keep within your company vs. what you can send it to outsource vendor. By nature artistic processes are your competitive advantage; in this case do you want to outsource it? If so various issues like security, outsource vendor employee training, intellectual property protection, etc, needs to be understood before you can consider outsourcing.

Except artistic processes other processes can be standardized and are potential candidates for outsourcing. Companies must analyze their entire business value chain classify the business processes into four categories explained above, standardize the processes and decide if it has to stay within the company or  can be outsourced.


Comments

3 Responses to “Does Business Process Standardization help BPO?”

  1. MJ Ahmed, CPA on February 25th, 2010 10:52 pm

    Interested in Accounting and Finance Outsourcing

  2. MJ Ahmed, CPA on February 25th, 2010 10:54 pm

    I am interested to learn more about the outsourcing concepts, opportunties in the areas of accounting and finance.

    MJ Ahmed CPA

  3. outsourcing on March 4th, 2010 4:01 am

    Imm. For a long time I though that business process standardization helps companies. This blog made a good argument in cases where it does not make sense.

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