What do these entities have in common? Procter & Gamble, Acer, Unilever, BriteVision Media, a manufacturer of coffee cup sleeves based in San Francisco, Mark McRae, an Australian entrepreneur, and Ohio-based Goodyear Tire & Rubber Co.! They were all faced with challenges that forced them to review the strategic choices that defined their comparative advantages. The problems could have related to scalability, competitiveness or even a call for innovation. The solution came via a simple decision; they all resorted to outsourcing. In the case of Procter & Gamble, “its Global Business Services unit reduced costs as a percentage of sales by 33% for its outsourced operations.” – areadevelopment.com
Outsourcing successes depend on the approach. Many companies have failed when they focused exclusively on quick cost-cutting plans without considering qualitative factors such as cultural differences. A white paper based on a survey among half the members of the U.K. National Outsourcing Association identified cultural differences as a major pitfall. – osf-global.com
It is important to think “long term” and invest in training. A “tunnel vision” is a common cause of failure, according to a Deloitte report on outsourcing pitfalls. Choose a “partner” who can function as an “extended office” and for this, the team on the other side needs to understand your workflow management style and work culture.
An intelligent execution plan is the key to success. These seven steps will allow you to phase out the outsourcing process in a structured manner and establish a winning approach.
- Start Small, Start Simple. Choose a project that is easy to define and execute. A project that involves only one division, with clearly documented requirements, becomes easier to implement. The cost savings might not be considerable, but what is important is not to end up with a fumbled first project.
- Start Easy. Your management might be skeptical, and many employees may not want to see the project succeed. Choose a project that doesn’t require a lot of explanations, that causes minimum disruption to existing teams and for which it is easy to document savings.
- Partner’s Strengths. Before choosing a service provider, you should answer a few questions. What are the strengths of the firm? Are they purely cost savings? Is the firm proficient in a specific area such as HR, Finance, IT, Customer Service? Do you need a partner that is proficient in multiple areas?
- Invest in Training and Cultural Integration Between Teams. It is only after a successful blending of work culture, process and procedure between your team and the partner’s team that gains start flowing in. It could be 30% or even 50% depending on how well the transition and human capital management plan is executed. Visit the partner, and if possible, arrange key members from their side to visit your site. Arrange a 1-week training session, or more, depending on the project.
- Build Slowly. If you expect your partner to achieve miracles which you cannot perform yourself, the plan is hardly realistic. Work with your partner to draw up an effective project management plan that leads to recurring savings. Incentivize your offshore partner to enable constant improvements.
- Find an Internal Champion. The company and not the vendor retains accountability for outsourcing activities. An executive or a manager from within the company should, therefore, take on the responsibility for project success and risks. This champion should also decide what data/knowledge stays within the company and what can be shared. Certain initiatives involve proprietary knowledge that should stay within your borders.
- Ramp Up. Following the successful completion of the first project, you could go ahead with the optimize phase. Identify and implement process replication and automation areas and develop initiatives aimed at making the outsourcing arrangement flourish: ramp up, optimize costs, invest in innovation, and identify project replication opportunities…set up the next milestone.
