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Outsource magazine: thought-leadership and outsourcing strategy | September 21, 2017

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How to determine whether there is a business case for BPO/transformation (Part 3)

How to determine whether there is a business case for BPO/transformation (Part 3)
Howard Spode

To read the preceding section of this article, click here


9.0 Key pitfalls to avoid

To conclude, here is the “top ten” of mistakes I have seen organisations make when considering whether to launch a BPO/transformation proposition. I guess that most readers will have experienced at least some of these situations themselves. And hopefully it will be obvious how adopting the approach I have outlined above will ensure that these pitfalls are avoided.

9.1 Initiating a BPO/transformation proposition without a clear business case

Believe it or not, I have seen sizeable BPO/transformation initiatives launched in the absence of a compelling business case. A half-page Excel that isn’t even formatted properly, some rough savings projections, the as-is metrics (eg numbers of people currently employed) hopelessly inaccurate which rendered the to-be numbers meaningless anyway, non-cost benefits not considered with any rigour – just some vague spin about “making ourselves world-class”. Basically then, a “suck it and see” approach. Not a particularly wise business strategy.

9.2 Keeping the business case secret

In some cases even where there is (purported to be) a business case, I have experienced it being kept secret for the duration of the programme – only seen by a small inner circle of client and supplier executives. Perhaps some of the detailed financials may be commercially sensitive, but to keep the key principles hidden from the people affected removes the possibility for the business case to be used as a powerful justification tool as described in Section 2.0. Without proper justification, change resistance can flourish – for example, when the inevitable teething problems are encountered even in the best-run programmes, rumours such as: “this is terrible and it’s probably costing us more money than it was before” are likely to abound.

Readers might want to take a look at my paper on how to run the Organisation and Change Management (OCM) domain in BPO/transformation programmes – especially the section entitled “Don’t Patronise”, which gives an example of how in one programme it was decided not to communicate that cost savings were a key driver for the change because this was “not a good message”.

9.3 Insufficient strategic context

As described in Section 4.0, ideally both Sourcing Strategy and Functional Strategy will be in place to provide the link between Top-Level Strategy and the business case for a particular sourcing proposition. However, this is often not the case.

The absence of Sourcing Strategy can be understandable because the need for it might not be obvious before an organisation has contemplated or even implemented a few specific sourcing initiatives.

As for the absence of Functional Strategy, this is a bit more surprising. Nowadays, any key business support function should really be asking itself tough questions about what it should be doing and how it should be doing it, in the light of the mission, vision, values and strategic objectives of the organisation it is part of. And then documenting the answers somehow.

It is beyond the remit of this paper to explore this subject but the point here is that if no such strategy is in place, then it is very good practice to draft the “bones” of one as part of the BPO/transformation feasibility study, in order to provide that strategic link.

Here for example is an outline strategy for a Finance function that was created as part of a feasibility study because no such analysis had existed previously. It was not a major piece of work, just a brainstorming session at a workshop, but hopefully it can be seen how the principles developed could be of use in guiding the subsequent shaping and consideration of the BPO/transformation proposition (and indeed in numerous other contexts):

 

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9.4 Assessment of Current Operations at wrong level of detail

As I said in Section 5.0, the “Assess Current Operations” step of the methodology is one where it is very easy to get the “rapid but robust” balance wrong. I have experienced situations where there has been too little emphasis on the as-is, and situations where there has been too much.

As for too little emphasis, one programme sponsor once said to me: “I don’t care about the as-is, I only care about the to-be”. I think I understand the underlying sentiment, but if one is planning a trip to Brussels, it makes a real difference whether one is setting out from Bristol or Baltimore. And in the absence of a good understanding of what constraints and challenges from the as-is may carry over into the to-be, most suppliers will be forced to price for the worst-case scenario – ie with some “padding” just in case.

As for too much emphasis, I have seen a multi-million-euro budget devoted to a totally unnecessary exercise of producing a complete set of detailed as-is process maps as the first step in a BPO/transformation programme. The large household-name consulting firm who performed this work must have been delighted to get so many of its junior staff off the bench.

Using the checklist for assessing current operations described in Section 5.0 will of course achieve a Goldilocks-accredited “just right”!

9.5 Future state designed without need for change specified

Different stakeholders will have different views of what the future should be like and some of these are likely to be inappropriate pre-suppositions that have not flowed from the strategic context through the analysis of current operations as per the methodology. For example, I have seen senior stakeholders strongly debating where a future operations centre should be before any other aspect of the to-be blueprint had been discussed (“scope” for example) and even before the as-is assessment had been completed. The Need for Change “keeps people honest” because it is a specification for the to-be state, not a description of the to-be state itself, so it prevents premature discussion of the to-be and, when the time for discussion of the to-be does arrive, it sets the key parameters – “hang on; didn’t we say we needed a future state that will XXX? So why are we contemplating something that would YYY?” It’s a bit like the rather-sensible practice of agreeing the rules before starting to play the game.

9.6 Future state designed without adequate review of external world

People in client-side organisations responsible for BPO/transformation initiatives are not usually deep experts in the field (why should they be?). Moreover there will always be new developments in the market (technologies, locations, suppliers), some of which will inevitably turn out to be vapour-ware despite the analysts getting all excited and some of which will be a bit bleeding edge, but some of which will have genuine potential to deliver real benefits. For these reasons it’s essential to invest quality time in getting to know what is out there – hence the “Review External World” step of the methodology.

Possible sources of insight include: web research, asking acquaintances in other organisations, attending conferences and seeking the advice of “intermediaries” (ie advisors). But to me the best way is to engage with potential suppliers, even in the feasibility phase, in a mature, open, non-committal manner.

This is pretty counter-cultural because many if not most intermediaries like to position themselves as i) the essential gatekeeper between their client and the (nasty) suppliers and ii) the fount of all knowledge. But when I act as an intermediary I certainly do not presume to know more than the suppliers – after all, they are the people who “do this for a living”. And I do not see myself as a gatekeeper – more of a facilitator. I have run many effective exploratory sessions between clients and suppliers – once even with multiple suppliers in the same room as the client in a round-table format.

In such cases the “groundrules” have to be clear of course – the supplier is not there to sell, but neither is the client there to get a bunch of free intellectual property or a head-start on any future commercial negotiation.

But such interaction can certainly form part of the supplier selection processes, because the client can really start to see the ways of working and cultural styles of different suppliers.

9.7 Transition plan not robust

I lost count long ago of the number of times I have seen unrealistic transition plans. In my view there are two main reasons why this happens.

The first is basic inexperience amongst the project leadership, even externals who claim to be experts. One such person once proudly said to me “we have a 1,000-line plan”. I presume this was meant to give me confidence, but the project in question was only a lift and shift BPO of one function from one country, so 1,000 lines was way too heavy – a classic case of trying to cover underlying incompetence with a spurious level of detail. I recently managed a global transformational BPO with a template plan of about 125 lines, adapted a bit by each of the regional teams within the organisation. This is an example from the transition phase of a programme of course, but the same principle applies in the feasibility phase when envisioning the Transition Approach.

The second reason is inappropriate incentivisation of key stakeholders – so for example personal bonuses for hitting a deadline but with no account taken of the other key project parameters such as scope, quality, budget, risk, etc. It’s pretty easy to tell from personal behaviours when key members of the supplier or client teams are driven in this way! Again, equally applicable in transition or feasibility.

As for the best way forward…well, make sure that true expertise is available – this means people who have the knowledge, the experience and the personal qualities to be able to give sound advice and facilitate proper agreement between stakeholders. And take care to design in the correct approaches from the start.

9.8 Not enough or too much risk management

There is a “just right” to be had in risk management too, which sits between not devoting anything like enough attention to it and devoting far too much.

In terms of not enough attention, it’s often a case of senior sponsors paying lip service to the subject – proclaiming how they want to be rigorous in seeking out and dealing with risks, but when key risks do emerge, their getting nervous that this might reflect negatively on their reputation and so proceeding to talk the risks down or try to sweep them under the carpet. This is especially prevalent when incentivisation is misaligned as described above – if you’re getting paid for hitting a go-live date you don’t want any uninvited issues spoiling the party.

In terms of too much attention, some project managers like nothing better than to make an entire industry (and a good living) out of risk management. These are usually external “professional” project managers who believe they can manage a project from behind their desks by focusing on the process of project management as opposed to the content of the project itself. Hundreds of risks are identified with religious zeal but with an emphasis on quantity not quality because they know very little about the actual details of BPO or transformation (or indeed about actually getting anything done). The risks are then allocated out via some clunky system to anybody but themselves with the unfortunate recipients being immediately chased as if the risks in question were the only things that mattered in the cosmos. Any perceived failure on the part of the recipients to be trying hard enough to address the risks is immediately escalated to senior sponsors like a school prefect telling teacher. This scenario is from the implementation as opposed to the feasibility phase but hopefully you get the idea. Watch out – there are plenty of these people out there looking for work.

Turning to the “just right”, all the key risks and risk management actions pertinent to the high-level business case can be identified by running a workshop session with the right people lasting somewhere between half a day and a day. I have a structured approach and agenda that I have used successfully many times but I wont include it here for reasons of space. And in the implementation phase (since I mentioned it above) it is perfectly possible to run a regime where key risks are identified, assessed, prioritised and managed in an effective but efficient manner employing fit-for-purpose tools, common sense and personal energy and maintaining team commitment and goodwill all round.

9.9 Conclusions not “holistic”

As mentioned in Sections 3.0 and 4.0, the conclusions should be holistic in that they cover all the relevant benefits and challenges. Often cost is the dominant factor on the benefits side but it is usually the case that other factors are in play too, even where cost is the main driver. Sometimes for sure cost is the only factor, but this is pretty rare. And sometimes cost is not a major factor at all. For example, let’s imagine a smallish company where the Payroll team consists of only four people, one of whom is approaching retirement and another of whom has started looking for another job because of certain life-changes. Here the main driver for potential Payroll outsourcing could well be the removal of the risk of service failure due to skills loss. Cost savings and quality improvements may be way down the list – perhaps the client would even be happy to see costs go up.

So, again, watch out for experts who use the phrase “business case” to mean “financial model”. At best, it’s a sloppy way of speaking; at worst it signals a one-eyed view of the drivers for BPO/transformation.

It’s always good practice to try to put numbers on non-cost data of course. For example “the process will be completed to x% accuracy y% of the time” is an example of a quality metric couched in very quantitative terms. It’s possible to do this with various other non-financial elements but business is not science and there is a place for purely qualitative information too – statements of vision, concern, expectation; conclusions, recommendations. After all, the decision of whether or not to launch a BPO/transformation proposition is ultimately a matter of opinion – opinion based on facts for sure, but opinion all the same.

9.10 Project team not formalised

As mentioned in Section 7.0, it’s important to set up a dedicated project team to run a feasibility study. “Dedicated” does not mean that the members have to be full-time, but they have to have enough time carved out of their day-to-day responsibilities to be able to do the work, and they have to have the mind-set that the project is different from that day-to-day work. Unfortunately, I have experienced several situations where one or other of these criteria is not in place.

As for external help, the key is to get resources with the right knowledge, experience and personal skills as mentioned in 9.8. It is wise in the feasibility phase to minimise the external support. One person should be enough, with the rest of the team drawn from within the client organisation. This will generate a high level of ownership of outcomes, form a nucleus of in-house expertise to manage the project if it proceeds to later stages and, of course, keep the costs down.


About the Author

Howard Spode 150Howard Spode has worked in BPO since the mid-’90s when the industry began. He is hands-on familiar with every stage of the life-cycle, from all angles of the market (client, supplier, intermediary), in numerous geographies, sectors and business functions. He is the Managing Partner of BPOpronet, an organisation that provides advice and support to help BPO initiatives be evaluated, initiated, implemented and operated.

 


 

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