Making outsourcing work by measuring what matters.

The Telegraph Business Club this week published research by payroll & HR outsourcers HR Access that argues that outsourcing specific skills and services carries a risk and therefore demands the business decision maker takes their time, does due-diligence, appoints the ‘right’ supplier and ensure they undertake regular performance reviews.

You might think that this appears to be sound advice – but when you dig a bit deeper, what they’re recommending could really harm the client company. For when you look closely, you find that the research doesn’t recommend developing and implementing and effective mechanism whereby the two companies work together. Rather, the research recommends that the outsourced operation is managed from a distance by senior people under the terms of a contract (with regularly reviews of a set of relevant service indicators or KPIs).

I guess the thinking behind these KPIs is well intended - it would seem sensible for companies planning to outsource parts of their business to document at length what is required of the outsourced provider so that there is a contractual obligation to deliver a clearly-understood minimum acceptable level of service for the company within defined and agreed cost parameters.

Unfortunately, though, it is rare that KPIs achieve what they set out to. For example, in my sector, the call centre industry, complaints can be rife, even when an outsourcer is meeting their KPIs: it doesn’t take a genius to work out that this can result in an adverse impact on the bottom line, as well as lots of unhappy customers (whether those customers are internal staff members or paying customers of the business)!

This is ironically because the problem lies with the very KPIs that are put in place by the company to ensure their outsourced provider delivers a quality, efficient service on their behalf! Regrettably, the KPIs aren’t linked to the needs or wants of the customer (internal or external) which the outsourced operation exists to serve. KPIs measure things that are of little consequence to the individual customer, (for example in a call centre environment, this could be call durations or average abandoned rates), and force the managers and team leaders of the outsourced provider to focus on productivity – to demonstrate to their client that they’re delivering a quality service and value for money.

Before taking steps to put in place KPIs, companies should pause to think, take stock and consider how they can develop a longer term, more customer centric approach to their outsourced relationships. By encouraging their outsourced provider to create and use measures that help them understand customer needs and how to improve meeting them, a company can really make a difference –in fact they can enable their outsourced provider to deliver world class service on their behalf!

In summary, companies may feel they need the security afforded by KPIs to protect them against ineffective outsourced providers. Unfortunately, such KPIs tend to achieve the reverse of the desired outcome, and the natural response by many companies is to fight their outsourced provider contractually.

However, there is a better way: company and outsourced provider working together as partners, to deliver an optimal quality service, is the most cost-effective and sensible way to run an outsourced relationship. Furthermore, by listening to what their customers say, and measuring what matters to them, an outsourced service provider won’t go far wrong!