Workplace Engineering

Successfully outsourcing can result in considerable cost savings and performance and capacity improvements for an outsourcing organization and can provide opportunities for economies of scale that would be otherwise impossible.  If an organization could achieve all of its goals by itself there would be no need to  enter into business partnerships and the outsourcing industry in particular would be much smaller than it is today. Ten of the pitfalls an organization faces are:

1. Poor Planning
2. Marry in haste, repent at leisure
3. Faulty Financials
4. Underinvestment in the Transisition
5. Brain Drain
6. Passive Agressive Teamwork
7. The Tower of Babel
8. It doesn’t last
9. Losing the wood for the trees
10. Unrealistic expectations

These pitfalls can be avoided through planning, insight, and a commitment to communication and sustaining the change that comes along with a successful partnership.

The failure to meet unrealistic expectations can have a huge detrimental impact on a business partnership. Business partnerships and outsourcing relationships in particular are complex, lengthy, involve considerable change and require both personal and organizational investment to be successful. Lack of understanding, over ambitious promises and lack of preparation and rigor can all lead to expectations that are not matched by reality.

Knowledge, preparation and communication are the answers to unrealistic expectations. Developing a deep and structured knowledge of your processes, needs, performance requirements and your partner capabilities drives realistic criteria. Deep preparation leaving little to chance ensures that scenarios are thought about and surprises are reduced. On-going, honest and clear communications ensures that everyone is on the same page and there is little room for unrealistic expectations.

Unless there are clear tangible and intangible benefits from the new arrangements there can be a significant tendency to revert to old ways of doing things.

Investing the time and energy to make the partnership and the relationships with in it are the only prescriptions for ensuring that the change holds and continues to deliver value. Using Prosci’s ADKAR stages of change can provide an effective gauge of personal and organizational progress in a transition

• Awareness - Identified that a change is coming
• Desire - A willingness to change (have decided to support the new over the old)
• Knowledge - knowing how to change
• Ability - implementing new skills and behaviors
• Reinforcement - maintaing the change once it has occurred

(Adapted from “Employee’s Survival Guide to Change by Jeffrey M. Hiatt)

It’s quite a time consuming and resource intensive process to find and transition in new ways of doing things. It is the small interventions all the way through that ensure that the change becomes as embedded as the old way of doing things.

So by now you’ve figured out that this is pretty much entirely focused on outsourcing partnerships.

Particularly in an outsourcing partnership, an often unstated goal of the partnership is the transfer of knowledge from one partner to the other while keeping it available for both parties during the life of the partnership. While much of the technical knowledge may be documented as well as possibly in the best practice process charts and proposal documents, much of the organizational knowledge on how to get things done and the nuances of the service or operation is held within the heads of the people currently doing it.

This knowledge is critical importance during the early stages of a transition. People that believe they are being poorly treated or feel insecure may decide to “jump before pushed” or withhold that knowledge they have built. 

A solid retention strategy that explicitly targets key personnel before, during and after implementation is a highly effective way of preventing the brain drain. Communicating widely, clearly and openly during the entire process increases confidence and makes it more likely that people will stick around.

Perceived poor cost performance can be the result of a lack of understanding of the true costs with providing a service or operation, additional costs that occur as a result of managing a partnership, a genuine difference in costs or increased awareness and visibility being mistaken for an actual increase.

Very often and organization has not taken the time to fully evaluate and apportion the true costs associated with providing a service internally until the time comes to have that service or operation provided by someone else. As a result, there may be limited insight into the overhead and administrative costs associated with the service and for some organizations, internal pricing may obscure the true cost of the service itself.

Understanding the fully loaded costs of a service or operation gives real insight into the true cost structure, what savings can and cannot be expected and then provides a suitable benchmark for measuring success over time. It will also help identify where the true costs are and allow the partners to develop an effective plan to improve performance in the right places.

Remember that fully loaded costs include administrative and overhead costs in addition to the costs of providing the service itself.