Outsourcing: Less Pain More Gain

Maybe you’re contemplating outsourcing or you’ve already made the decision to outsource. Either way, it’s probable you have some doubts about transitioning your business services to the outsourcing provider. That is understandable – transferring business services to an outsourcing provider can be challenging from a business continuity standpoint and have a human impact within your workforce. But there are ways you can minimize pain and maximize the value of your outsourcing engagement as you transition services to the provider.

Goals and Objectives Before you dive deep into the details of project planning, dependencies and milestones, all required pre-work for transition planning, it is important to step back and identify your high-level goals and objectives. To do so, you begin by asking a few key questions:

  • Do you want to focus on process quality and minimize the risk of missed service levels at Go-live?

  • Are you more interested in speed to cost savings and can accept a dip in service levels during the stabilization period (post Go-live)?

  • Is your focus solely on minimizing the impact to the organization and employees while transitioning the service?

    If you’re like most employers, your answer will be a blend of all three and so the next step typically taken is to assign priority or weights to your different objectives. Planning the transition will be a joint effort between you and your chosen outsourcing provider, often with the help of a trusted sourcing advisor, and establishing a set of weighted objectives will provide them guidance in applying their expertise.

    High-Level Transition Decisions There are a few high-level decisions to make concerning how you execute the transition:

    • What will be the duration of the transition? Too short and you run the risk of sacrificing process quality; too long and you run the risk of staff flight and decreased morale.

    • Will you go with a “big bang” or phased approach? The answer will depend on several variables to include the number of geographies in play, the number of functions in scope and the complexity of the processes to be transitioned.

    • Will employees impacted by the decision to outsource be retained or incented to stay during transition for their institutional knowledge? Will any impacted employees be “re-badged” (i.e., hired into the provider organization)?

    Internal Communications Once you’ve determined a high-level approach to transition, it’s time to think about a communications plan: what messages should be communicated to your organization, who should receive the communications and by what methods, and when should the communications be issued. In addition to the expected impact on careers and morale, at least two other employee related considerations can come into play:

    • Existence of a labor union and determining whether union employees will be affected by the outsourcing arrangement

    • If more than 50 employees will be affected, then the WARN Act notice requirement of 60 days will apply

    Actions to Stabilize the Functional and Organizational Transition Well-planned transitions are sometimes simple and straightforward, but more often, unexpected complexities enter into the situation and must be handled in sync with previously planned activities. Putting new technologies in place, documenting processes and procedures, and transferring knowledge to the outsourcing provider must be well-planned and executed. Adding the unpredictable element of human reaction and behavior complicates the matter further. Suggested ways to mitigate the risk posed by anxiety or low morale in the workforce include:

    • Involving your stakeholders early and seeking their advice on approach and schedule for the outsourcing arrangement

    • Informing key business partners (internal and external) directly about the changes they can expect as a result of transition
    • Considering all seasonal business influences in the transition calendar to avoid peak periods and finance driven constraints

    • Redeploying existing impacted employees to other jobs in the company to the extent possible

    • Retraining retained employees for the different roles they will play in the future state, and involving their business counterparts in the training whenever possible

    • Offering “stay” bonuses to personnel that are envisioned to fill key roles in the retained organization to ensure that they stay on through the transition and fill their new role for at least a defined period post-transition

    • Employing severance packages to incent impacted employees who are flight risks to stay through the transition and perform high-quality knowledge transfer with the outsourcing provider’s resources

    • Offering retention bonuses to key personnel who are impacted longer term by the outsourced arrangement; it is essential to retain the expertise and company intelligence of key personnel until the knowledge transfer and provider team certification has been completed.

    Outsourcing transitions can be complex and pose some element of risk to the business and the outsourcing organization, but it’s important to remember that they have been executed successfully by thousands of organizations across the globe. There are proven methods for minimizing the pain your organization feels and ensuring you achieve the value laid out in your business case.

    About the Author: John Meyerson is a senior research analyst for Alsbridge, Inc. and ProBenchmark, which supports Outsourcing Leadership. Outsourcing Leadership, https://www.outsourcingleadership.com/ , is the unbiased source for information on outsourcing, benchmarking and shared services. Find the latest news, trends and sources of research and consulting through our home page, newsletter and events.

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