Challenges with outsourcing
Whatever side of outsourcing you’re on — the vendor doing the outsourcing, or the client requesting the outsourcing — you might be surprised to know that both parties share a set of challenges.
The challenge specifics (and their solutions) look different for each side of the equation, but we’re broadly able to categorise these as four common roadblocks.
- What you see isn’t always what you get.
- Penalties don’t ensure success.
- Lost knowledge.
- High staff turnover.
Challenge 1: What you see isn’t always what you get.
The client and the vendor interact on multiple occasions. First, the bidding process where sales people of the vendor are involved, then the due diligence process where technology experts are involved. If the vendor wins the project, next is the transition phase, where transition experts are involved, and finally it’s over the operations people who’ll run the show.
With vendors having so many departments involved with the same project, the sales team may make promises to the client that are forgotten or lost by the time the operations team takes over. Obviously, this is frustrating for the client. They’re either left feeling like they were “tricked” during the sales process and the trust is broken, or they feel like they’re working with an incompetent company that simply can’t deliver on their promises.
There’s an additional challenge for the client. Often when a deal is won, the vendor might appear to cut costs by putting on cheaper resources to run the account. The client notices the drop in communication and/or competence, and feels like they’ve been handed the “B Team”. Not only does project performance take a hit right after the switch-over of vendors, it also takes much longer to get back to the previous levels of performance. In any case, the client feels like they’re getting a different service or solution than what they were initially promised.
However, it goes both ways. Often, the client isn’t able to communicate their challenges or pinpoint exactly what it is they want, leaving the vendor with the task of filling in gaps. The vendor is left with an open-ended brief, or one that is continuously being changed by the client — either way, it’s almost impossible to nail a brief that isn’t clearly defined.
Clients and vendors must anticipate these challenges and prepare ahead of time. This involves rethinking how to efficiently transfer knowledge from one vendor to the other (for clients), and how to transfer knowledge internally (for vendors). Both parties must know how to create and capture knowledge themselves.
- Clients must document as-is processes before engaging a vendor, so vendors have a place to work from.
- Clients should perform reference checks on vendors (this could be as simple as reading reviews).
- The vendor must ensure information is being effectively communicated between internal teams — an external software is often needed to ensure this.
- Both parties must ensure documentation is clear, easy to find, and easy to update — as we all know, things change!
Challenge 2: Penalties don’t ensure success.
One of the most common practices seen across the industry is strict SLAs on vendors; should the vendor miss an SLA, a penalty is imposed. There is a fundamental flaw in this model. Imposing SLAs and penalties does not solve the business problem, because it doesn’t address the root cause of why the SLA was missed in the first place…
To make matters more complicated, the penalties paid by the vendor are often woven into the pricing they submitted during the bidding process. So actually, it’s the client who pays themself if the vendor misses an SLA!
However, when the client empowers and equips the vendor with the right set of tools, it’s less likely that the SLA will be missed. In this situation, the vendor doesn’t worry about how to meet the SLA, but invests time in thinking about innovative ways to transform the business. One sure-shot way of doing that is by ensuring all the procedures are documented in a manner that is future-ready and consumer-friendly.
- Resist penalties when signing contracts. Instead, set goals to be reached or outline incentives that can be redeemed when service levels are exceeded.
- Ensure exceptional knowledge transfer that empowers the vendor to deliver.
- Don’t set and forget — prioritise honest feedback that goes both ways and keep the lines of communication open as the vendor finds their feet.
Challenge 3: Lost knowledge.
Obviously, for a project to succeed, the vendor must understand what the client wants — otherwise it’s impossible to provide the right solution. In the professional/IT services industry, the next step is understanding how clients have been doing it in the past, because before transformation, comes BAU. Vendors need to help clients run operations as-is and steady the ship before making transformative changes (unless it is a greenfield implementation).
As such, the transition of services is a critical stage. Here, the vendor sends technology experts to the client site to document how they have been running the show until now. This is where the first communication breakdown occurs. When client representatives are giving information to the vendor, knowledge leakage is inevitable, simply because of inappropriate tools being used (the standard office software tools). Another loss happens when this transition team has to train the Operations lead — who are the first set of people chosen for that project. Subsequently, these leads train the troops on the ground and the same pattern continues here as well. As information is communicated from client to vendor, and then within different teams at the vendor, information is accidentally “watered down”, not communicated at all, or completely misinterpreted.
- Document as many processes as you can before transferring — ensure all processes are documented, not just the simple ones.
- Utilise one tool to ensure central storage so everything stays organised and updates to processes are easily implemented.
- Screenshots are your best friend! Use them (lots of them).
- Ensure you identify processes that are subject to compliance — those need to be closely monitored and managed.
- Base training material on thoroughly documented processes.
Challenge 4: High staff turnover.
High staff turnover can have many contributors — an unhealthy workplace culture, thankless jobs, poor onboarding, tedious and repetitive tasks, and much more. It is not unusual nowadays for employees to not stay in one job, or at one company, for an extended period.
To put this in perspective, the attrition (churn rate of employees) in Asian countries — which are outsourcing powerhouses — is between 20 - 25%. Not only is a quarter of the workforce constantly on a notice period, but the company is constantly struggling with the perpetual problem of knowledge transfer.
Building on lost knowledge, a fallout of high staff turnover is lost “tribal knowledge” — the tacit knowledge that only exists within a person’s head. Experts who have spent a lot of time within an organisation often develop a parallel knowledge base within their head. Unfortunately, that head knowledge may not ever get documented. When these professionals leave the organisation, the organisational knowledge they’ve acquired over the years leaves with them.
When high staff turnover is unavoidable, exceptional training materials become imperative.
- Training, training, and more training — based on processes that are known, documented thoroughly, and updated regularly.
- Ensure thorough training for each new employee.
- Invest in appropriate upskilling and professional development opportunities.
- Ensure training material is readily accessible, even enabling self-driven repeat training sessions.
The solution to all our solutions...
At this point, you’re probably wondering how to start implementing the solutions we’ve outlined. You’ll also probably be relieved to know they actually all have the same answer — Runthru.
Runthru exists to simplify the knowledge transfer process for clients and vendors — particularly for complex processes. With clear, organised procedural documentation, sharing information from one party to another, or within the same company, is streamlined. Documents are easy to locate and understand, leading to successful project outcomes for clients and vendors. It also streamlines training and ensures new staff members receive the same onboarding information. With Runthru, parties no longer have to rely on verbal knowledge transfer, which often leads to “watered down” information, but can utilise a single source of truth.