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Rising Above the Tension: The Enduring Characteristics of Long Term Outsourcing Relationships

Rising Above the Tension: The Enduring Characteristics of Long Term Outsourcing Relationships

By Michael Blankman

A constant that runs throughout any outsourcing arrangement is a persistent level of tension between parties over their roles and responsibilities. On one hand, the vendor feels that if the outsourcer was performing well and remaining competitive there wouldn’t have been a need to search for a partner to begin with. Conversely, the outsourcer finds it difficult to let go and clings to the belief that they posses such an intricate knowledge of the business nuances only they can drive the relationship. Often, failing to recognize what got them a seat at the outsourcing table to begin with.

Actually, both positions have merit and it is only through finding a balance that a true partnership will provide long term viability.

Over the past five months I have written several articles on outsourcing for Nearshore Americas and thought I would revisit the key themes for outsourcing success that I have covered to date. To boil it all down, I’ve come up with an official Top Ten list:

1) Build A Relationship: Simply put, it is all about the relationship. This includes listening to the vendor and having a sense of shared responsibility and trust. Finding a path and understanding words like respect, trust, and mutual benefit are not platitudes but tools for success.

2) Effective and Fair KPI’S: A comprehensive program for incentive and penalties needs to be established and mutually agreed upon. Looking at KPI’s as value added measurements not punitive ones. Developing a plan that allows your partners to recoup some penalties are a good way to ensure the relationship remains “healthy” and the vendor profitable. Win-win is not a bad thing.

3) Don’t Relay On The Contract: It isn’t possible to manage the relationship by wielding the contract like a hammer. Once either side starts invoking contract language the battle is usually lost. If it is a bad deal or there are serious performance issues this could be warranted, but by that time reputations have been impacted, customers lost and revenue compromised.

Remember though, when negotiating contracts some terms are not negotiable. These include issues surrounding change of control on the vendor side, regulatory and compliance matters, wind down provisions to protect the business in any termination. Vendors are not allowed to exit early and outsourcers should require 12 months notice, especially in a customer service relationship.

 4) Build A Vendor Liaison SME Team: The outsourcer needs to maintain a liaison group of subject matter experts that remain permanently. This group controls KPIs, daily communication with the vendor, customer issues, site tours, introducing new customers etc. Perhaps the most important function of this group is control of the curriculum and training program. The vendor’s internal training and quality programs will always augment this and need to have been robust prior to any engagement.

5) Use Multiple Vendors/ Sites: If the program is large enough, using multiple vendors and/or multiple sites is an attractive strategic option.  MV&S allows competitive benchmarking by tightly managing the KPI and best practice review process and can increase capacity to handle volume spikes and unplanned turnover. MV&S can radically improve your contingency footprint and expand your resource pool. Quarterly review meetings should be held with all vendors present.

This option can only be utilized if the outsourcer maintains curriculum control and there is a procedural consistency. I have described this in the past as a plug and play training philosophy, which adds to program’s mobility.

At the end of the day it is critical to understand why the vendor has been successful and strive to make their business model work.

6) Understanding Each Other’s Expertise: Ultimately outsourcing is driven by pressure to reduce expenses and avoid ongoing investments that are necessary to stay competitive.

The first outsourcing review I conducted 15 years ago grew from a serious operational/service need combined with the realization that even if we made drastic changes in the short run the ongoing technical and employee development commitments would not be there. I realized outsourcing if done right would bring improvements more quickly and free up funds that could be spent more strategically by the business.

For this to work both sides need to be flexible. As an outsourcer there is a tendency to overly control the conversion, negotiation and liaison process to compensate for a lack of direct control going forward. Vendors try to apply processes that have worked for them in the past but need to understand that some modification will be necessary.

At the end of the day it is critical to understand why the vendor has been successful and strive to make their business model work.

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7) Vendor Employee Engagement:  Too often vendors and their employees are on the outside looking in as it relates to understanding the businesses they support. At the very least, business goals, strategies, results, and milestones should be shared broadly. The more people feel part of and understand the role they play, their commitment to quality and service will be stronger. There also should be straight talk around what isn’t working.

Engagement includes the outsourcer having strong presence at the remote site. This is achieved by implementing incentive programs besides those sponsored locally. Employees love site visits, which should include site people outside operations: senior management, sales, marketing and clients.

Recognition and reward play a critical role. Most importantly any programs that are implemented need to be kept current or they will not become part of the cultural fabric. There is nothing worse than seeing recognition pictures, plaques, charts etc being updated intermittently or not at all. Rewards don’t have to be all monetary; teams based programs are a plus as well.

8) Embrace Transparency: Outsourcing is often accompanied by a Chinese Wall of silence in which the outsourcer hopes to never have to acknowledge their strategy. However, if the support team is in place and the model is working, the relationship should be celebrated.

Clients should know that it is a strategy not based solely on expense and but includes an ongoing commitment to outstanding service and quality. Critical to remember is that outsourcing provides an opportunity to reallocate resources that will free up spending on product development and other strategic initiatives.

I have included vendor management as part of my extended team, introduced them directly to clients and prospects, making their importance clear.

9) Outbound Sales Calls Work Well Offshore: The outbound call side of the call center world is often not discussed in the outsourcing conversation. These calls are perhaps the most misunderstood and underappreciated in the industry.  Prior to outsourcing becoming the global business call center was largely the purview of telemarketers.

With time, the terms telemarketing and outsourcing are no longer mutually exclusive and has been replaced by the global market place. Call centers wherever they are located can and do handle calls for every industry and outgoing/telemarketing/sales calls play an important role.

In addition to introducing and growing new products and providing an important flow of B2C revenue outgoing calls are critical for non-profit fund raising as well as providing data for surveys.

10) Consider Nearshore: Despite the cost benefits of offshoring there are still huge obstacles to overcome especially in customer service applications. Accent problems have created perception issues never considered by outsourcers. This problem has created such a negative impression of outsourcing it has become part of the social and political discourse.

A Nearshore option provides lower cost alternative to onshore, eliminating the time zone differential besides offering robust bi-lingual capabilities. There is also a significant reduction in travel expense while being able to take greater advantage of “home office” personnel.

Any questions or comments please contact michael@michaelblankman.

About Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.
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