7 Rules Every Outsourcing Relationship Must Abide by to Avoid Fallout

Outsourcing services to another company, especially, to a foreign one is a hard pill to swallow. It is one of the hardest business strategies to implement and maintain. Who wouldn’t be apprehensive to entrust a function of your organization to a complete stranger, even though that stranger is a well-known company in the outsourcing industry? Outsourcing is all about taking risks but you have to set pre-emptive measures to be able to handle those risks.

Are there rules or guidelines that both parties could follow to have a healthy and proactive outsourcing relationship? In ComputerWeekly, Martyn Hart posted a ten-point rule for successful outsourcing. Whereas, seven of these can be applied to prevent fallouts:

“This is going to be all about people, not technology, methods or tools. So put people first.”

People are not robots. We are referring to the employees of the outsourcing company you’re going to hire—don’t treat them as tools but as human beings who just happened to have an exceptional knowledge and skill on the job you’ve asked of them. Consider them as your business partners and not paid workers. You’re not just outsourcing services but also the people behind them. Another article in ComputerWeekly says, “The key to getting outsourcing right is to take a holistic view.”

“In reality, because this is a change programme it will be difficult, so be realistic about the business case, especially the predicted benefits and timescales.”

The business case occurs during the decision-making stage. It is an act of convincing the top management that such decision will have effect on profitability or return on investment (ROI), as defined by BusinessDictionary. Therefore, you should set realistic, measurable, and attainable benefits and timescales. Carefully identify and specify the scope and limitations in detail. Don’t set requirements that are too general and ambiguous. Put everything in paper. This last item is a necessary step so once the specifications in a form of service level agreement (SLA) are handed to the outsourcing company, it wouldn’t be lost in translation.

“This is likely to be one of the most important programmes you’ve managed, so beg, borrow, or steal the best people to work with you on it.”

Bring in competent, dedicated and skilled people on your project team that will capably deal with the ups and downs of the relationship. According to the paper entitled “Outsourcing the Finance and Accounting Functions” published in CIMAglobal.com, a team consists of a project manager; at least one expert from the department who understands the process you want to outsource; someone who is good at negotiations; and a legal expert. The most important characteristic the team must possess is that they have an unwavering confidence in the outsourcing deal.

“You must have visible senior management commitment, so get them involved and supportive.”

CustomerThink pointed out that “stakeholders only commit to change as they see senior leaders do it.” You can secure a support of a senior leader by showing a realistic business case. This also establishes a reassurance to both parties that someone from the top-level of the organization supports them.

“No surprises – up or down, keep bosses and staff involved.”

“Aren’t we enough? What if this decision is only a waste of time, resources and money? Will there be lay-offs?” These are the questions you are going to face once the top management nods their heads in agreement without the knowledge of those who are below the organizational ladder.

Also, involve the bosses and the affected departments before changes are made in agreement. On the part of the vendor, establish a process on how you’re going to do such alterations in the SLA so everyone is on the same page.

“Track the programme from the top down; make it simple by measuring a few key goals with key performance indicators (KPIs), [and] take the helicopter view.”

Establishing key goals with KPIs is a good tool to monitor the progress of the work performed by the outsourcing company. However, avoid creating vague KPIs. Klipfolio recommends using the “SMART criteria” in making KPIs. According to their website, a KPI must answer the following questions:

• Is your objective Specific?
• Can you Measure progress towards that goal?
• Is the goal realistically Attainable?
• How Relevant is the goal to your organization?
• What is the Time-frame for achieving this goal?

Make sure these KPIs are delivered clearly to the provider so they can execute them well.

“Communicate! Communicate! Communicate!”

Communication is the most vital ingredient of a successful outsourcing relationship. What are the communication barriers you need to overcome with your vendor? Chron identifies three problems such as:

Language or Dialect
Choose a provider that understands and fluently speaks your mother tongue. The universal business language is English. One of the safest bet is outsourcing in the Philippines because based on the 2010 TOEFL (Test of English as a Foreign Language) it ranked 35th out of 163 countries worldwide, as stated in the Huffington Post. In Asia, it is on the 3rd spot next to Singapore and India.

Cultural Differences
This barrier can be overcomed by spreading cultural awareness. According to CIO, it “involves conducting workshops and sessions… to make both sides aware of each other’s cultural practices.

Communication Technology
This is no longer a problem nowadays because today’s technology has a wide range of applications to connect people regardless of the time zone and distance.

Communication and cultural understanding are important factors to maintain trust in outsourcing relationships as well, based on the paper entitled “Critical Factors in Establishing and Maintaining Trust in Software Outsourcing Relationships” from the University of New South Wales.

Outsourcing services is a risky endeavor but it could be well-managed by observing the rules stated above so you and your vendor can have a smooth outsourcing relationship.