20 Jul 4 ESSENTIAL TIPS TO MAXIMISE OUTSOURCING SUCCESS-A GUIDE FOR SMEs
What makes some outsourcing arrangements successful, while others fail at the first hurdle? If you want to know the secret behind outsourcing success and have the ability to optimise your company’s performance, then these basic problems and solutions of outsourcing cannot be ignored!
Anyone who has been involved in creating or managing an outsourcing relationship knows that the user and the service provider do not always have a firm understanding of what the contract promises in terms of costs, service quality, innovation, or other benefits. A mismatch in expectations between users and service providers is one of the most common causes of dissatisfaction in outsourcing relationships. That being said, it is inevitable that there will be a mismatch of expectations between outsourcing service providers and their users. Outsourcing users typically want to receive a service that is as responsive as the in-house alternative would be, but also want to reap the economic and service benefits of obtaining those services from an external provider. From the service providers’ perspective, they need stability and certainty in order to be able to plan and manage their processes effectively, in addition to making a profit.
Oftentimes, users feel that the contract specified high-quality, specialised service, but the service provider offered a relatively standard offering. This issue is even more noticeable when there is no standardised measurement of relevant service levels before the outsourcing begins, making it difficult for the user to know what level of service to expect, and challenging for the service provider to know what is expected of them. With longer-term arrangements, it is difficult to predict what the user’s long-term service requirements will be when the contract is initially formed. This often means that only a vague description is included in the contract, which then causes frustrations later when the user and supplier’s expectations do not match up. Competitive procurement processes are not particularly effective at achieving a common level of understanding between the user and potential service providers. These processes can create additional problems by forcing service providers to oversell and underbid. Some competitive processes aim to reduce proposals to a mandated common level in order to ease the process of selecting a provider, but this actually inhibits innovation by the providers and denies the user visibility of what might be a more attractive proposal from a particular supplier.
Outsourcing arrangements developed with divisional objectives in mind, rather than covering all user locations, tend to experience additional pressure from corporate management, because corporate requirements are not necessarily aligned with the objectives of the local outsourcing arrangement. Internal expectations, therefore, also need to be managed, adding another layer of complexity to an already complex situation. Outsourcing relationships that work well tend to have a small joint project team that works together to unite the diverse expectations of the user and service provider. These joint project teams bridge any divisions that occur between the service provider and user organisations, often by working in a relatively informal capacity. Outsourcing relationships that fail to handle mismatched expectations tend to have low levels of both formal and informal communication between the two organisations.
Although it is possible to create successful mechanisms to eliminate mismatched expectations between service providers and users, a lot depends on the intrinsically unpredictable chemistry of the individuals involved. If trust cannot be achieved at an individual level, then it will be difficult for the organisations involved in an outsourcing relationship to operate on a functional, professional level. Trust is typically only achieved if there is a strong alignment between each organisation’s perspectives. If the pressures of the organisations and the individuals working within them are understood, then mismatches of expectation can often be recognised and overcome, to the benefit of everyone involved.