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

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Why quality counts

Why quality counts
Outsource Magazine

Does your outsourcing contract disappoint you? I am going to let you into a little secret that some of your competitors do not want you to know. Whilst some decry the word quality, the most successful companies embed it within all they do. So if quality is a dirty word in your organisation then you may well be missing a huge opportunity.

How often have you heard these refrains around contract and service performance?

  • “We missed our SLAs and KPIs.”
  • “The customers are dissatisfied and client executives exasperated.”
  • “We missed our revenue and margin targets again but are not sure why.”
  • “There are never ending surprises, usually bad.”
  • “We are just wasting time and resources on a deal that is plain bad.”

Sound familiar? Then it is probably time you started to consider introducing a quality framework into your organisation.

Service providers can lose anywhere between 1.5% and 2.5% of corporate margin due to poor quality. These losses are typically clustered in a small proportion of contracts, something like 3% of the entire portfolio. It is also likely that some of these problem contracts are not just dilutive of margin; they sustain losses for many years.

The usual response to such challenges is:  “Tell me what is wrong and how I fix it” – and “What on earth has any of this got to do with quality?”

Let’s be clear of what we mean by quality. Outsourcing quality is all about ensuring:

  • Contracted outcomes are delivered.
  • Performance targets are met.
  • Positions on commercials, service delivery and customer satisfaction throughout the contract lifecycle are aligned and stay aligned.
  • Outcomes are predictable .
  • Risk is managed.
  • That contracts are crafted which are flexible enough to deal with changing business circumstances and emerging solutions.
  • Proper governance mechanisms are in place to manage the services, contract and issues .

Quality is about foremost about putting your customer front and centre of all you do.

Implementing Quality

Given this definition, how do we go about implementing quality? Quality sits alongside day-to-day selling and delivery. It necessitates a degree of separation from the sales and operations teams. Many clients and vendors engage independent QA advisors who bring insights and experience from the most complex deals. Others use specialist internal teams and experts from within their business.

This means that in the sales cycle you need to be prepared to implement a robust control process to ensure:

  • All risks are assessed and mitigated.
  • Operational capability is tested – especially elements that involve pioneering technology, processes or locations.
  • Dependencies and their impacts are identified and understood.
  • Revenue and margin drivers are understood and tested.

As you move into operational delivery, quality

  • Listens to the voice of the senior clients.
  • Checks the fulfillment of contractual commitments .
  • Evaluates and advises on the management of risk.

Quality is not about ticking boxes and following templates, it is not TQM or the latest ISO standard.A quality mechanism should be an integral part of the business: the way a service provider sells and delivers, and the way clients manage contracts.

If you think this is not for you then hold your horses as the best is yet to come. Yes, this may all sound worthy and nice to have.  I used to be one of the choruses singing “We have account managers who do all of this!” and “We paid our lawyers to write the contract!”

However, experience tells us that in too many instances there are no quality mechanisms, no risk management processes, no standard contracting approaches and no governance. The account managers and lawyers are working to narrow terms of reference and nobody has taken ownership of the contract as a whole. The scale and complexity of modern contracts exposes everyone to uncertainty, risk and underperformance.

Quality organisations:

  1. Consistently manage client satisfaction as their priority.
  2. Make risk management an integral part of the way business is conducted.
  3. Consistently attain service and financial performance targets.

Poor quality is a significant cause of bad contracts, client dissatisfaction and margin dilution.

Is Quality For You?

If you still think you can get by without quality then this is your world:

  • As a client you will rely on your buyer to manage the contract, and your vendor to protect your interests.
  • And as a service provider, you are too busy to filter out the bad deals in the sales cycle.
  • “Revenue for vanity; profit for sanity” is someone else’s soundtrack.
  • Once you have sold the deal “things will take care of themselves.”

Hope is not a strategy. Quality is. Making quality count is a professional approach to outsourcing. It is integral to the way you do business if you want to be a quality organisation.


About the Author

Peter Colley 150Peter Colley FCMA is a leading quality assurance expert for outsourcing. As the Quality Managing Director for Accenture’s $9 billion global outsourcing business he was responsible for client satisfaction, risk management and the resolution of many of the most difficult outsourcing contracts.

Peter now heads Colley Enterprises Ltd, (http://colleyenterprisesltd.co.uk)an advisory company providing expertise to outsourcing clients and vendors. He specialises in quality assurance and risk management, improving commercial processes and troubleshooting problematic contracts.

Comments

  1. Michael

    Super article written by someone who really understands the challenges and has lived and delivered in the quality and risk space.
    In my experience the land grab approach of many providers has left them and their customer exposed to some real quality issues which they usually try to muddle through leading to sub-optimal solutions and service.
    My advice would be engage an expert and see the results.

    • Many thanks for your comments.
      We are seeing a growing trend whereby the race to the top of the revenue league is resulting in a race to the bottom of the quality league. This is not sustainable.

  2. Ian

    a good dose of practical sanity. Having worked on the supply and buy side in global organisations it is easy to spot those who have embedded quality in the operations, it is a competitive advantage and great risk reduction/management approach. The difficulty is how to get this started and institutionalised as many of the activities are often trivialised as margin diluting or unnecessary overhead.

    the old adages of buyer beware and don’t throw stones in glasshouses come to mind as responses to nay-sayers

    • Many thanks for your comments.
      They certainly resonate and you are correct in that there are too many glasshouses out there.
      I will return to this theme next time – look out for ‘It will be alright on the night.’

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