Business Process Outsourcing – Plain Vanilla or Sundae?

At the outset of the back office outsourcing era, much needed to be proven. Clients wanted service providers to simply replicate processes in their existing state and demonstrate capability to match status quo – the “plain vanilla” solution. Large teams were expected to travel onshore and get rigorous on the job training prior to assuming production. Despite such extensive training, large on shore quality assurance teams were maintained, indicating low customer confidence.

However, over the years, comparable (if not better) service delivery, better productivity and lower costs of operation have helped establish India as a superior alternate for back office processes. This change in customer perception has also positioned the Indian service providers to assume a lead role in the drive to take consumer experience to the next level. Outsourcing projects are no longer executed with the offshore partner taking the back seat. BPO outfits today act as consultants and work jointly with the clients to determine outsourcing opportunities, models, knowledge transfer plans, critical to quality measures and other migration essentials, demonstrating a clear shift in their role. Their demonstrated expertise has allowed them complete control of the operating strategy, though transparency is still desired.

Although this is the case with the larger service units, smaller outfits still operate in the “vendor – client” paradigm, with little or no role to play in the client’s outsourcing strategy. An important next step for these organizations is to augment their business model and develop process transformation capability, or the “Sundae” solution capability.

“Why should I offer process transformation when my client is happy with status quo?” is the question that you might want to ask. I would like to answer this by asking two basic questions

  • “Do you believe that process transformation can help your client’s business considerably?” There aren’t many processes that neither enhance customer experience nor increase operating efficiencies post improvement. Therefore, in most cases the response should be affirmative. However, if your answer is “No”, you are correct in not offering process transformation to your client and the next question is irrelevant.
  • “Does the client perceive process transformation as value add?” If the answer to this question is “No” then you haven’t established yourself as an expert with the client. The client is either not convinced by your claimed ability to improve processes beyond their current capability or does not think it makes business sense to do so. In either case you have a lot of work to do before you consider outsourcing such a project.

If you are still not convinced, here is a different perspective – With the industry leaders continuously redefining service standards, consumer expectations are bound to change. As this happens, fierce market competition would force the “status quo comfortable” clients to gear up and offer comparable service standards. Therefore, a decline in demand for the “plain vanilla” solution is inevitable and as time progresses vendors would stifle over petty cash projects while distinguished service providers (experts) offer process transformation at a premium.

So, what does process transformation mean?

I would like to define process transformation as the ability to facilitate continuous process excellence through job enrichment, knowledge management, proactive operations and change management. This is neither a definition for the ages, nor one that will be acceptable to every. However, it is sufficient to serve as a working definition for the remaining article.

Though I support emphasis on tactical specialization, I strongly believe that developing domain expertise is crucial to value creation. To be more specific, it would add significant value to agents working for a check (payroll) processing unit if they understood employee benefits and payroll administration. These agents can then be of significant value in identifying the unobvious opportunities for process improvement. Though I am a strong proponent of quality, especially Lean Six Sigma, I do not attribute its success purely to statistical analyses. It is domain expertise that allows project teams to unearth the weakest foundations. Statistical tests merely reinforce the findings.

Therefore, creating a qualified team that adds value to the process in its day to day operation is the first critical milestone on the road to process transformation.

Comprehensive knowledge management on the other hand can be of immense use in standardizing operating procedures and making the process person independent. Stringent quality requirements and ambiguous and subjective operating procedures increase work pressure causing low employee morale, poor service delivery and high agent turn over. All these conditions put together create an environment non conducive to job enrichment. A comprehensive knowledge management system eases work pressure and allows agents time to develop domain expertise. Critics could argue that job simplification would possibly lead to further dissatisfaction among the employees. An obvious and logical answer – “complicating a task more than it needs to be does not enrich job content. However, it does inhibit an individual’s ability to develop skill and expertise”. I would take the argument further by stating that sound knowledge management helps mitigate the impact of high employee turnover on service delivery, employee work load and operating expenses through reducing learning cycle and lower training costs.

So, once you make the process person independent, you’ve achieved the second critical milestone on the path to process transformation.

Proactive operations management is an outcome of the two actions mentioned above; it is not an independent phenomenon. Once you possess the power of domain knowledge, predicting process behavior and planning ahead of time should not be very difficult. Designing leading indicators that could be altered to control process behavior should almost always ensure service excellence. Caution: when I say that these indicators should almost always ensure service excellence, I do not mean that you would no longer be exposed to operational hazards. I only mean that you would be able to identify and address them before they influence customer experience. A sound quality program would be critical to alleviating these issues well in time.

The third critical milestone on the road to process transformation is the ability to identify and address operational challenges before they reflect in the customer’s experience.

It is widely believed that acceptance determines the success of any change or improvement initiative. A program that promises 90% improvement but has only 10% acceptance would deliver a meager 9% (10% of 90%) in realized improvement. Another program, on the other hand, with 50% projected improvement can deliver 45% realized improvement at 90% acceptance. Therefore, active change management is the most critical aspect of process transformation. However, if you have facilitated the development and involvement of a qualified process team, change shall be self managed. Since most of the recommendations would come from this qualified pool, the acceptance and ownership of change should be overwhelming. In an industry where softer issues have a large influence on the process performance, driving ownership among the operating team can alone deliver benefits that most improvement initiatives may not be able to match.

Therefore, the last, yet most critical milestone on the road to process transformation is the ability to successfully manage change. Once all these milestones are accomplished, a truly dynamics and person independent process is established where change is self propelled and customer delight is intrinsic to process design.

About the author: Jaspreet Arora is Partner and Director for business development with TreMyn, a management consulting outfit specializing in the ITES industry. Jaspreet has been actively engaged in operations management, process migration and transformation through his professional career. He possesses a Master’s degree in Economics from the Delhi School of Economics and is also a certified Six Sigma black belt.

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