Why Selecting the Proper Outsourcing Metrics Matters: The Census, Metrics, and the Tailor | Article

Census MapWipro Point of View

Maher Maso, Mayor of the city of Frisco, Texas, recently knocked on every door in the city. His slogan: “10/10 for Collin County,” meaning it takes just 10 minutes to complete the U.S. 2010 Census form.

“Does the Census matter?” one resident asked Maher. “Yes, it does,” he replied, because the government uses the census information to allot about $500 billion per year in federal aid for everything from jobs to streets.

His campaign forced me to open the census form. Two questions caught my attention: Question 1 related to the head of household (me or my wife in an era of equality!!) and Question 9 asked my race (it is like the caste in India).These questions, an important part of counting and profiling the citizens of the USA, didn’t get my value vote.

In my opinion, the census numbers won’t be reliable because the questions were misleading.

Don’t let performance metrics be like the U.S. Census

Performance metrics are a measure of an organization’s activities and performance. Performance metrics normally support a range of needs from stakeholders such as customers, shareholders, and employees. Like the census numbers, performance metrics need to provide end-user value.

All too often in the world of business process outsourcing, the measures that focus on day-to-day operations have no relevance to the end reality. They are transactional, which is the mindset I had when I filled out the census form. Employee perception and customer satisfaction surveys have a plethora of questions that don’t drive real value. The questions generally are outdated or don’t mean anything. So, the person filling out the form gets bored and provides information that leads to an unreliable rating. The end result: top management acts upon it just the way federal aid pours into the wrong areas.

The lesson here is: Performance metrics need to focus on the core areas that affect the organization’s performance.

“For with what judgment ye judge, ye shall be judged: and with what measurement ye mete, it shall be measured to you again.” The Holy Bible

From good information to informing good results

The biggest challenge for any organization is how to focus on those aspects that create real value. More often than not, both the supplier and the customer focus on schedules, on-time delivery, go-live dates, and many non-value-added metrics. Meeting deadlines is important, but it is not a metric buyers need to measure.

One large U.S. retailer took 20 months to move away from data measurement to value creation. Today, it has a long log of value-creation projects with priority to implement. Every quarter the joint teams at Wipro and the retailer’s retained finance organization recommend projects that really create value. Each one has a defined dollar benefit and goes through a prioritization chain. A steering committee studies the impact.

Such focus on value creation enabled the team to focus its energies on the right measurements and helped create a valuable partnership. For example, the retailer’s pharmacy ran receivables of $45 million consistently. One of the value-creation projects was to reduce receivables. Wipro successfully lowered the number to $33 million.

“It is an immutable law in business that words are words, explanations are explanations, promises are promises, but only performance is reality.” Harold S. Green

Time to value

Any transition from a current to a future state tends to be sequential in the world of outsourcing; transformation always comes last after the lift and shift. Service providers only focus on transformation after they transition the entire process to their organization.

During this time, the customer often gets frustrated and feels the service provider doesn’t provide value. The relationship becomes bumpy. The biggest challenge is the mindset of the service provider that it is successfully transitioning the work into its organization and thus maintaining the stability of the customer’s business. According to the customer, this is a given.

Further, the customer’s retained organization launches several transformation initiatives during the outsourcing transition; however, the service provider doesn’t have the resources to support or play a part in these initiatives. For example, at a leading telecom company, the retained organization launched a one-day order-to-bill project (requiring the service provider to bill the customer within 24 hours of the order hitting the system) while the Wipro organization was lifting the processes from the customer locations.

Here again, both the customer and the service provider focused on wrong measurements. Also, their expectations were different.

Time to value is a key metric that both parties need to measure from the first day of the partnership. This enables both the service provider and the customer to separate operational from transformational activities. It also separates the companies that remain operational from those that transform. Such a metric enables the service provider to allocate resources up front. It also assures right budgeting, program investments, and early focus on value.

“Bullfighting is the only art in which the artist is in danger of death and in which the degree of brilliance in the performance is left to the fighter’s honor.” Ernest Hemingway

How to create correct SLAs

Often, the service provider’s contracts and project communication are full of service levels, such as application availability, down-time, up-time, error rate, kilo lines of code, project schedule, on time, within budget, attrition rate, ramp-up, ramp-down, span ratios, call volumes, accuracy of forecasts, and many more. (We do this too!) If one goes through the entire service provider’s customer contracts, the service level agreements (SLAs) tend to be similar across customers.

Service providers should understand that every customer organization is unique, irrespective of its business, industry, or market. The complexity of the customer’s organization is unknown. It is important that the metrics are unique and differ from customer to customer depending on the profile of the customer, the nature of the work, and the customer organization’s focus. It is important that the service provider and the customer review their metrics every year if not every quarter. There needs to be a few that drive value. Also, they should review if they need to change any if the customer expects any changes in its business.

Moving away from metrics that don’t provide value

In the world of customer services, average handle time (AHT) is the key metric that every customer holds its vendor to at gun point. But AHT only calculates the speed of a transaction.

The service provider uses AHT to determine staffing needs, employee performance, and average call cost. If the average handle time is five minutes, the service provider can predict how many employees it needs to handle the expected call volume and define the average labor cost per call. Service providers also use AHT to measure employee performance; they can identify below-average performers and schedule further monitoring or training. Very internal, isn’t it?

What happens if the customer is happy but the AHT is longer? What happens if the customer has a larger order that makes the call and hence the AHT longer? What happens if the quality of the transaction is poor but the agent consistently achieves a good AHT?

If we externalize the viewpoint and change the metric to customer attrition, everything changes.

A telecom case study

In 2006 Wipro BPO consistently outperformed the AHT targets set by a large European telecom customer. But the telecom’s customers were always unhappy about the service they received. In every business review the customer team complained about the growing customer unrest.

Further, the telecom was running a huge backlog of orders since customers had to call more than once about the same order, which required longer to provision. The telecom ran approximately 40 million GBP in order backlog due to this wrong metric measurement. Even worse, there was a steady increase in backlog, reaching a staggering 22 percent of sales. The heat was on Wipro although Wipro was consistently achieving its operational metrics set in its contract.

There was also another challenge: the order-to-bill cycle was increasing. It had gone up to 70 days, impacting billing and revenue flow. All in all, there was a huge impact on the brand, sales, and customer satisfaction.

The Wipro BPO team and the customer did a root-cause analysis and changed the metric measurement to first-time resolution, i.e., doing it right for the first time. The first-time resolution metric enabled Wipro to focus on various aspects of the order-to-bill cycle such as:

  • Having the same-day launch for clean orders
  • Improving upstream data quality to reduce downstream impacts
  • Improving the productivity of individual agents by hiring the right talent with subject matter knowledge. Previously, Wipro recruited data entry people for order entry; now it recruits order management agents with telecom knowledge
  • Reducing the errors and delays on reallocation of ports for rewind orders

The first-time resolution metric forced Wipro to fix the SLAs with suppliers for delivery times and confirm the actual provision date with them. Such supplier management helped Wipro focus on the customer experience. This change provided flexible and predictable lead times, improved the revenue flow, and made the cost of fulfilling the order predictable.

The result: the-order-to-bill cycle improved to 32 days and helped early revenue recognition to the tune of $32 million. Telemark Services recognized this telecom for delivering the best customer satisfaction among the European telecom providers.

In conclusion, metrics measurement needs to emulate the tailoring profession. The tailor reviews our measurements every time we get a new set of clothes. The tailor always takes into consideration our age, fashion, reality, growth, and belly size. He frequently improves his stitching methods to be at par with the fashion trends.

There is a constant drive to focus on one metric: the fit.

“The only man who behaved sensibly was my tailor; he took my measurement anew every time he saw me, while all the rest went on with their old measurements and expected them to fit me,” George Bernard Shaw

Nagendra P. Bandaru, Wipro BPO

Nagendra is the Vice President and Global Head of Business Development for Wipro BPO. He is based in Dallas, Texas.

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