Business Process Outsourcing (BPO). The concept is relatively simple: instead of hiring employees to handle the necessary but non-core, transaction-based business functions in your company, pass these on to someone else.
But, here's the thing: BPO is not like dropping off your dirty clothes at the dry cleaner and having them magically transform into fresh-pressed garments the next day. The client has to play an active role to make the engagement successful. However, that doesn't always happen.
So, what are the most common missteps that cause potentially great BPO relationships to start a downward spiral? We asked our experts to weigh in on the biggest pitfalls – the seven deadly sins of BPO – as well as the best ways to get on the road to redemption.
1. Basing Your Buying Decision on Price Alone
Yes, it's a competitive market, with a lot of players making a lot of promises – many of which are legitimate. But, according to Bill Randag, president of DATAMARK, Inc., if the price is far below market, buyer beware.
"There are a lot of educated people with computers out there who claim capabilities at a low-ball price. Without due diligence, the result can be a horror story," he said.
His advice? Don't rely on hearsay, marketing pitches or RFP alone to choose vendors. Instead, go see for yourself.
"If your prospective BPO provider is doing what they say they're doing, then you should be able to see it," Randag said. "Take the time to talk to references, make a site visit and talk to the people on location."
It's also important to evaluate potential providers' capabilities beyond the initial project scope.
"In this market, staying competitive revolves around having the agility to change. So, it's important not only to chose a BPO partner who can provide what you need today, but has the capabilities to support your long-term strategic roadmap," explained Heinz-Werner Glueck, director of BPO Transition and Transformation for HP. "You don't want to be in a situation where your needs outgrow your provider's ability to deliver."
2. Ignoring the Necessity of a Cultural Fit
You prefer face-to-face meeting; your provider only meets virtually. You're in an industry that can change on a dime, but your provider likes to take things slow. These cultural conflicts could escalate into big trouble down the line.
"With BPO, you can't ignore the necessity of a cultural fit," Glueck said. "In a competitive RFP process, you spend three days in a room with your prospective partners, with a lot of written documents passed back and forth. That's not going to tell you if your company styles, ethics or values are in sync."
So, a formal evaluation of cultural fit has to be part of the due diligence process.
"We see companies sign contracts and six months later, they have to make a change – only to discover that that provider isn't flexible enough to respond," Randag of DATAMARK, Inc. said.
Before the contract is signed, Randag recommends talking to your internal operations people and identifying three or four situations in the past that have thrown you off guard.
"When you're interviewing references, ask about how those vendors would react in a similar situation," Randag said. "If you need flexibility, find a company that works that way. If you want to take the 'penny for a change' route, then go with that type of provider. The real key is planning for all of that up front."
3. Entering an Agreement Without Stakeholder Buy-in
BPO is a procurement decision, right? We send out an RFP and we award the contract. No need to make a big production out of it.
According to Tom Blodgett, Xerox's COO for financial services, if the client's entire organization isn't committed to the transformation, things could head south fast.
"Many projects have failed because key stakeholders in the organization weren't involved in the decision and didn't believe in the objective," he said. "It is imperative that executive management, operations, procurement, IT, and any other impacted area, are committed to making the engagement work -- especially when unforeseen challenges come up."
Skillful change management and communication upfront eliminates some of the stumbling blocks down the road.
"There will be roadblocks to overcome in every engagement. If you don't have upfront buy-in from the key stakeholders, you may have a difficult time navigating the roadblocks in an efficient manner," Randag of DATAMARK, Inc. said. "Everyone has to have one common goal."
4. Believing "Executive Sponsor" is a Part-time, Short-term Job
Executive oversight is equally critical – and that means choosing an executive sponsor who is far more than a figurehead. It's a full-time job.
"BPO requires a lot of change. The rules of the game have to be clear and there has to be a referee. If the top sponsor doesn't play an active role, if he or she isn't at meetings to make decisions, things can come to a grinding halt," Glueck of HP said.
Glueck is quick to point out that, nearly 100 percent of the time, when a sponsor checks out, it is because of bandwidth constraints, or a belief that his or her involvement is only needed during the initial transition. The reality is that involvement and executive governance spans the life of the engagement. So, it's imperative to assign a sponsor with the resources to have that kind of availability and focus.
5. Refusing to Adjust "The Way We've Always Done Things"
When you hire someone to clean your house, that person typically does the job faster and better than you can yourself – and get rid of that spot or stain that, try as you might, you never really could. That's not a surprise. Cleaning professionals have their own techniques, tools and probably tried something you didn't on that stain. After all, they are professionals.
When you hire a BPO provider, you want to increase efficiency and probably take care of one or two problem areas. But, if you're resistant to trying a new way of solving that problem, you're blocking the path to resolution.
"It's essential that clients are open to new solutions and approaches to solving problems, "Xerox's Blodgett said. "BPO is our business, so we're looking at our clients' challenges through a different lens. To solve them, we might have to try something new or innovative. If we're going to succeed, our client has to be open to these new approaches to old problems, and support those agreed-upon ideas as we go forward."
In other words, use your BPO provider's expertise to help you succeed.
6. Moving Too Fast
No question, every company wants to realize the benefits of BPO as quickly as possible. However, rushing into the initial pilot can often cause setbacks.
"It is essential that we get that first step right," Glueck said. "The initial showcase – that pilot – sets the foundation for the subsequent transitions to follow."
His recommendation? Plan more time for the first wave of the transition and your patience will be rewarded with greater long-term returns.
7. Approaching BPO as a "Vendor-Client" Arrangement
Finally, we come to what all of our experts agree is the deadliest sin of all: lack of partnership. If you approach BPO with the words "us" and "them," you're probably doomed to failure. If you want it to work out, you've got to make a commitment – in a big way.
"The walls between service provider and customer must be non-existent. It is not 'my problems' and 'their problems,' but 'our problems'," Xerox's Blodgett said. "This intimacy; this 'we' approach to the relationship is the greatest indication of how successful the relationship will be. It's an engagement that hopefully will evolve into a happy marriage. It's that strong of a commitment."
Take that route, and you may just fall in love with the results – and discover the real virtues of BPO.
What sins would you add to the list?