Tips on managing an outsourced relationship
The Old Ones Are The Good Ones: Tips on Managing an Outsourced Relationship
By David Daly, MD, MVA Consulting
Recently, I was looking back over something I wrote in 2007 – the outsourcing module for the Irish CCMA's Certificate in Contact Centre Management. With five more years' experience, I can see even more clearly the importance of one of the sections I wrote – that of properly managing the outsourced relationship – and with a number of updates, I thought it worth reproducing here.
It is difficult to know what exactly is the failure rate for outsourcing relationships, and how it has changed over the years. I've seen it quoted as high as 60% in the past, but according to Gartner, 30% of relationships will fail in 2012; Aberdeen Group states that 21% of outsourcing projects fail to meet stakeholder expectations. Furthermore, they have stated that 50% of outsourcing organisations express dissatisfaction with their relationships, yet 80% of those renew their contracts in spite of experiencing the dissatisfaction. What is 'failure' is not clearly defined, but what hasn't changed as far as I can see, are the reasons for such failures in outsourcing relationships:
- Wrong or poor outsourcing: The original premise upon which the outsourcing decision was made was wrong (be it for the wrong reason, poor specification or a poor process), and the expectations were incorrectly set, either by the client or the outsourced service provider (OSP). This year (2012) I was brought in by a client to resolve a situation where my client's predecessor had appointed an outsourcer based on an email exchange, with little or no definition of what was required. The stage was set for conflict long before the first call was handled.
- Pricing and cost: The client begins to feel they are paying too much, or the OSP feel they are not earning enough. In another recent case, the client strongly suspected they were being overcharged, but couldn't prove it. My analysis showed that it was a mixture of the way the client purchased the services, and the outsourcer happily continuing to provide the service without any cost efficiencies.
- Communication and understanding: The actual working relationship between the two parties is poor and mired in antagonism rather than a desire to resolve any conflicts. How often have I heard utterances that tell me that emotion has become a major part of every communication?
- Failing to understand the other's perspective, face up to problems early, or manage change: A lot of success requires mutual understanding, honesty and collaboration. Not working together to each other's mutual benefit, refusing to see how you can help each other, ignoring early warning signs through inexperience or poor management, failing to adapt delivery, behaviours and expectations to changing market requirements, or a lack of pro-activity by the OSP can all lead to fatal friction in the relationship.
- Failure to deliver: The inability of the OSP to deliver the service that the client is paying for. This is the starting point for many calls to me. Sometimes it's too late, and much of the pain could have been avoided had the parties done what I have outlined below.
Working together happily and profitably
Some of the above reasons have their roots at the outset of the relationship – such 'structural' issues may be too late to resolve, and the only resolution may be to re-tender the work with a proper tendering process. However, many of the issues can be resolved, and there are a number of behaviours that can ensure both the client and the OSP enjoy a long and profitable relationship:
- Understanding each other's goals: An outsourcing relationship is, to one degree or another, a partnership. The OSP is often the client's principal, or only, public face to its customers, yet both organisations may have different business imperatives. The best relationship will be where both the client and the OSP agree common and complementary goals – for example, the client may want to increase its customer base through up-selling or cross-selling; the OSP may want to increase the business it gets from the client and will do so if they can provide increased customer revenue through such up-selling and cross-selling.
- Agree success criteria: Understand and agree what will make the other party successful, and determine the measures by which this will be judged, so that both parties can work towards them. For the client the key criteria are usually the Service Levels or Key Performance Indicators that the OSP must deliver to the client; for the OSP it may be seat occupancy, long-term tenure or profitability.
- Agree processes – and stick to them: Good processes are vitally important to contact centre delivery, but they are only as good as the people who use them. If one party follows processes, and the other one doesn't, conflict will inevitably occur. Agree the approach to delivery, through formal and informal processes, that are to be used, and ensure that both parties use the processes defined.
- Clear lines of communication and responsibility: Ensure that everyone knows who is responsible for what, and have an escalation path in case of disputes, in order to provide a release valve. Simple disagreements can become very personal and emotional. Too often I have seen junior people at the client and OSP square off against each other, and the relationship suffer as a result, when a short conversation between their superiors would have settled things quickly.
- Meet deadlines: Both parties will have deadlines – for example, the OSP to produce reports, the client to provide supporting information for agents – and must ensure these deadlines are met to ensure ongoing success. Missing deadlines delays delivery, delayed delivery causes missed targets, missed targets cause stress – see above.
- Manage reporting properly: Reporting is vital, but time consuming to produce, and review. The client should specify what reports it genuinely needs and uses, and the OSP should seek to interpret reports and take action according to what the reports tell them – they should not bombard the client with data, but rather with useable information.
- Be honest with each other: If something is going wrong, don't try to conceal it. I have seen OSPs hide systems' downtime and staff shortages from clients, and I have seen clients fail to declare data shortages to OSPs who had staffed based on higher expectations. Neither resulted in pleasant conversations. On the positive side, clients and OSPs should praise each other when they deserve it, give each other honest feedback, and be prepared to accept honest feedback. As Heinrich Heine, a 19th Century German poet said, 'He only profits from praise who values criticism.'
The outsourcing world will continue to evolve over the next five years, and I know much will have changed by then. However, I'm equally confident that if I re-visit this paper in 2017 I'll only need to do another update. I'm sure the principles will remain the same.
If you have any comments or thoughts on this article, please contact me at: email@example.com.