8 Reasons Why Outsourcing Fails To Deliver The Desired Results

Author: Elizabeth Knight

Outsourcing – the word everyone loves to hate. I was at a seminar last week talking about outsourcing with law firms. In the Q&A session that followed a delegate took it upon herself to grab the microphone and tell everyone never to even consider outsourcing because she had a bad experience! Luckily the voice of reason from another delegate who was able to tell of her good experience with outsourcing.

It is this kind of reaction that shows me just how unpopular and unrealistic the view is on outsourcing. If I put this in perspective, we as business people have all had employees in the past that did not work out for variety of reasons but none of us would stand up and say ‘I tried to have an employee once but they did not work out – so I suggest that no one ever looks into employing a person again!’

Yes sometimes outsourcing fails to deliver the expected result, but there is always a very logical reason for this.

So let’s look at some of the reasons why outsourcing fails.

1) The process is not clearly defined or properly mapped out.

This is especially prevalent in processes which are considered low value and low risk for example transcription services. Because anyone could type a letter or enter a purchase ledger invoice why spend valuable time on something that seems easy. And this is where it all goes wrong, your outsourcing provider will be bound by the written process document if they are ISO certified, so what happens where no punctuation is dictated? If you stick to the process  where this is undefined then you will receive an entire document returned with no punctuation. A worse case scenario is receiving a document with punctuation of the transcribers interpretation, thereby running the risk of changing the entire meaning of a sentence by the use of punctuation. Other things to consider are how are addresses written, how is capitalisation handled, how are numbers written? These things all need to be mapped out and believe me when I tell you this will be around 10 pages of documentation and this is just for transcription and I have not touched on Finance and Accounting.

2) Trying to go it alone

This is probably one of the most important reasons why outsourcing fails. Don’t be tempted to take the project up on your own, although the concept seems easy, there are many pit falls that professions know how to avoid or to manage effectively and it should not cost you extra. Setting up an outsourcing programme is also a very time consuming thing, if you have a project manager provided by the outsourcing company they handle the end to end process for you and it will cut the time you need to spend on the project by 85%. Think of it like making a cup of tea. Simple process – you put water in the kettle, turn it on, wait for it to boil and add milk right? Wrong! What if there was no power supply to the kettle or it was not plugged in, same with water supply,  if there is a water supply how much water? Where did you get the tea bags? Was there a cup, was there milk? How much milk should you add. Was sugar required. All these things need to be defined because you’re not going to get a cup tea you want if you don’t!

3) Senior management backing

You have made the decision to outsource and you got a professional outsourcing company in to project manage the process but your job is not done. When staff hear the word outsourcing you will hear a collective sharp intake of breath and then it will start – the negativity. I have not been to one company on a project where I have been welcomed by all staff on day 1. The amount of staff welcoming me will vary from firm to firm and company to company but with each project at least one person was anti outsourcing. This negativity is borne out of fear, even where the persons role is not affected there is negativity because the view is if they can outsource this then my role is the next to go.  It is therefore essential to put the minds of staff at rest and explain what the intention is. It is also essential to ensure that they project is backed by the appropriate senior staff who will ensure the process is put into action.

4) Outsourcing too much.

You will lose control of your process and you never ever want lose control of a process, if you lose control of a process you are looking for trouble.  If we look at accounting and finance outsourcing. Outsourcing of purchase ledger and sales ledger are excellent functions to outsource as they do not require specialist knowledge and are easy processes to spot check and although the actual data capture is done externally you still retain complete control of the overall processes. . Bank reconciliation are good SECOND phase function to outsource.  (See more about phasing on the point below.) What should you never outsource? Things like banking, writing cheques and making internet payments, financial reporting.

5) Not phasing:

All good outsourcing should be done in phases. This is done for various reasons like gradual training and building understanding of processes for the outsourced teams etc BUT most importantly for retaining control and ensuring that each phase is working 100% as it should with no errors before anything else is taken on. Ignoring the importance of phasing means that finding the origin of a relatively minor problem could be so time consuming and would make such an impact on delivery that by the time it was identified confidence in the process is lost and the project fails.

6) Outsourcing everything:

Some people believe in an all or nothing approach to outsourcing. This is closely linked to keeping control of your processes. Good outsourcing firms would never recommend getting rid of an entire department or role. For example you should never and could never get rid of all you secretaries, because of the variety of work that they do it would be impossible. But by selective outsourcing of transcription services you can either reduce the number of onshore secretaries or free up existing secretaries to take on value add roles. This applies to the finance and accounting department, you would always retain at least one person (more the larger company is) in a senior role onshore. As a rule of thumb you would never want to outsource more then 50% of your accounting staff. If your company only employs once accounts person then outsourcing your accounts department would not be recommended.

7) Change Control Procedures

This is very important as you would have spent a great deal of time on your process, and although you would like your process to continually develop around the changing needs of your company, change control procedures are essential to maintain the integrity of the project not only for ISO compliance but also so that junior members of staff cannot change to procedure to the detriment of the entire process. Therefore always have a written request process where senior staff members and the project manager must approve. The request will be allocated a specific date when the changes will take effect. It is also important to keep a copy of the process version as it was as well as a running list of changes with versions and dates they took effect so that if you need to go back to the old process you can do so quite easily.

Effective Reporting

We get inundated with so much information everyday of our lives that we simply tend to ignore or give a cursory glance at reports we receive. It is essential that you receive a report from your outsourcing provider but you need to be selective about the information you receive. For example many outsourcing firms will send you detailed spreadsheet on a daily basis listing the start time of the document transcribed, and the end time – ask yourself do you need to know this? If you do need a lot of information, identify what information is essential to you to keep control of you processes and that information which is nice to have (but you will probably glance at it once a year) Get the provider to split the information into 2 or 3 segments. Or deliver reports that have daily information as weekly information. When effective reporting systems are in place senior managers will keep effective control of their processes without spending a large amount of time reading reports looking for it.

The article is bought to you with the compliments of Magellan Consultancy Services

www.magellancs.com

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