By Jagdish Dalal

George Santayana once wrote: “Those that fail to learn from history, are doomed to repeat it.” I also like what Albert Einstein wrote, “Insanity is doing the same thing over and over again and expecting different results.”

So it is for many providers who do not have a structured process for learning from their past performance. Customers expect their providers to continuously improve their performance. In a competitive world of outsourcing, providers benefit by reducing service defects, thereby improving customer satisfaction and their bottom line. After all, failure to meet performance levels ends up costing them in their margin – directly or indirectly.

Working with providers, I have encouraged them to use a formal “lessons learned” process. I advocate that this be an ongoing, established program rather than a periodic event.

Lessons Learned Process

It is a formal process and a foundation for quality review. It provides a method for clinically dissecting performance, documents factors impacting the outcome and creates a framework for learning. It is not a “witch hunt” or “who shot John” game. The intent of a successful lessons learned process is to identify factors influencing results and delve deeper into the root cause for each of them. Therefore, the process is designed to evaluate both failure – missed performance –and success– expectations met. In quality process, this is often associated with creating a “fishbone” (or Ishikawa) diagram. Let’s look at how to design and successfully conduct a lessons learned process.

Creating Lessons Learned Framework

A structured framework for the lessons learned helps not only in identifying factors but also as a learning tool for future performance. A typical “fishbone” diagram describes the outcome and then creates a set of categories for factors that affected the outcome. In a structured lessons learned framework, it is important to have these categories standardized, so that over a period of time, we can establish patterns and trends. The following diagram shows one of these standards that I have recommended to providers with whom I work.

Conducting Lessons Learned Exercise

It is essential that a lessons learned exercise is formal, consistent and involves all people that are directly, and at times, indirectly, engaged in the activity. As mentioned earlier, these exercises should be for both successful and unsuccessful outcomes, so that learning can be analyzed from both perspectives. I recommend the following seven step process:

1. Assemble the team that will conduct the exercise. A discussion leader and a scribe need to be appointed so that the meeting rules and etiquettes are followed. Ideally, the conference room is organized so that there are seven category flip chart pages and a separate flip chart for documenting brainstorming items. I have found that a conference room without chairs (where everyone is standing) is more conducive to brainstorming than people sitting around a large table.

2. Agree on the “head” of the fishbone, describing the outcome as specifically as possible. For example: “project metrics were not met” or “project completed ahead of schedule and under budget.” Clarify categories for everyone involved, so that they do not become a matter of interpretation later during the exercise.

3. Conduct brainstorming session. Typical brainstorming process is:

a. Each person (on a round robin basis) lists the contributing factor. These factors should be as factual as possible and not just “here-says” or opinions regarding the cause. Causes will be determined later.

b. As each person contributes a factor, no discussion takes place (except for clarification purposes only).

c. Round robin process continues everyone has exhausted factors to contribute (people can “pass” during the round robin if they have no new factors to contribute).

d. Document all of the factors on a flip chart (as they were stated).

4. Once brainstorming is complete, each of the factors are discussed, categorized and placed on the appropriate flip chart. Discussion can lead to adding more factors or eliminating ones discussed.

5. Once all factors are categorized, each category is studied to see common causes and a more thorough “root” cause analysis done. Root cause analysis is conducted by asking the question “why” until there can be no further drilled down. Typically it will take at least five “whys” to get to the root cause. These root causes, by each category are documented separately and if necessary, prioritized by their perceived influence on the outcome.

6. Final steps in the lessons learned exercise is to document these root causes, and projects created, to either reinforce their impact (if they resulted in a positive result) or come up with a solution to avoid/mitigate them on future projects.

7. Final outcome, lessons learned categories and root causes are then stored in a single document so that others can study them later and learn from past mistakes or accomplishments. When I worked at Xerox, we called this our “book of knowledge” and each project manager was required to study the book prior to launching a new project. This is a process that allows one to learn from history.

Honest, open lessons learned exercises and in depth assessment of root causes, helps create an environment where past performance becomes a guide for future improvements. As George Washington wrote in a letter to Fielding Lewis (July 6, 1780): “To rectify past blunders is impossible, but we might profit by the experience of them.”

Jagdish(Jag) Dalal is Founder and President of JDalal Associates LLC (JDA) and Managing Director, Thought Leadership for IAOP and a world-renowned consultant in the field of outsourcing. Dalal is a Certified Outsourcing Professional (COP®). He can be reached at JDalal@JDalalAssociates.com

By: Linda Tuck Chapman

Developing and implementing consistent, actionable performance metrics for your Application Development and Maintenance and Testing program is one of the best ways to ensure you get value for money. One of the most important aspects of developing effective metrics is to resist measuring everything that can be measured. Focus only on measuring what matters.

According to CORE (Centre for Outsourcing Research and Education) research conducted in 2011,  one of the largest weaknesses found was that almost half of the organizations struggled to identify a compact set of metrics that aligned with business priorities. Over-abundance of metrics often obscured the core set and made it challenging for clients to aggregate relevant information and derive intelligent insights. Others recognized the issue not as a problem of quantity but of quality; stating that metrics were being tracked, but did not link to the organization’s ultimate goals.

This is an area where there is a tendency to try to measure too many things, often resulting in lots of data, plenty of noise but not much actionable information

No matter how complex or far reaching your metrics are, most managers pay attention to only a few metrics. In addition to simplifying the metrics measurement process, this guide to “best practices” will help you develop metrics that marry the relationship and performance information you really need with the information vendors can readily provide.

There are three types of Metrics that you should consider creating to measure the success of your program and vendor relationships:

1) Relationship level – these Metrics focus on how the relationship between the two companies is working, and how satisfied you are with their responsiveness and your access to their thought leadership and innovation.

2) Customer level – these Metrics focus on how well the vendor is performing tactical, “table stakes” tasks, like invoice accuracy and incident management.

3) Statement of Work (SOW) level – these Metrics focus on how well the vendor is delivering quality outcomes, on time and on budget, against each Statement of Work.

Measuring Performance

Relationship and Customer level Metrics are performance management tools and controls that are not unique to ADM and Testing vendor relationships. A good way to simplify governance processes and reduce workload associated with managing multiple vendors is to develop and deploy a generic set of Relationship and Customer levels across the population.

The primary focus of this article is on the SOW level Metrics. This is an area where there is a tendency to try to measure too many things, often resulting in lots of data, plenty of noise but not much actionable information. The best way to simplify your thinking about what to measure is to establish an overarching framework that addresses expected and important outcomes. By this I mean deciding how to group everything you want to measure into a few overarching categories. Three or four categories are simple to remember, easy to manage and simplify the communication process.

Grouping Metrics

I’d recommend grouping SOW level Metrics into “Quality,” “Efficiency” and “Effectiveness” categories, then creating sub-level metrics that align with each category. When you’re deciding on the sub-level Metrics, which are labeled “Type” in this example, give careful consideration to which metrics are referenced in best practices research coupled with what the vendor already measures internally. If you’re not sure what your vendors measure, just ask. They’ll appreciate your efforts to align your performance reporting requirements with their existing processes.

This is an example of “Quality” Metrics for Application Development and Maintenance. The Type column identifies the type of quality metric being measured; the Description specifies what is being measured; Waterfall or Agile refers to the software development methodology; Reporting periods can be set according to the timing of SOW deliverables, against major milestones or for long term relationships by quarter.

The same approach is taken to develop “Efficiency” and “Effectiveness” Metrics and any other categories you wish to measure. (Click on the chart for an expanded view.)

And here is an example of “Quality” Metrics for Testing: (Click on the chart for an expanded view.)

Conclusion

This approach is extremely useful for managing outcomes for each SOW and every vendor. Over time, you will have a sufficient volume of actual results for each vendor and every SOW. The data can be analyzed for opportunities and issues. You can identify fact-based opportunities for Project Teams and vendors to achieve better quality, higher productivity levels and lower costs. Ultimately, this is the most predictable way to increase the value for money.

Linda Tuck Chapman is a seasoned Outsourcing and Vendor Governance expert. You can reach Linda at (416) 452-4635, lindatuckchapman@ONTALA.com  or visit ONTALA Performance Solutions

By: Michael Santamaria

There’s little doubt that Business Process Outsourcing is here to stay; the lure of “easy” cost savings is just too powerful for companies to resist. But the truth of the matter is that implementing a successful outsourcing project is hard work and realizing those “easy” savings is by no means a foregone conclusion. While data on outsourcing failure is hard to come by, the Aberdeen Group has reported that 21% of outsourcing projects fail to meet stakeholder expectations, and Gartner puts the outsourcing failure rate as high as 30%. Although neither study defines what constitutes a “failure,” the bottom line is a large percent of projects end with unhappy clients.

When an outsourcing project fails, it’s easy to blame the vendor. But having experienced the situation from both sides of the table, I would suggest that more often than not, the purchasing company lays the groundwork for the poor performance. The onus is on the purchasing company to do an adequate due diligence and to manage the project. Can you really blame the vendor when they were put in the position to fail from the beginning? Ultimately, no one wins the “blame game,” you are better off doing the project right the first time around.

To avoid being one of the Gartner statistics, there are four considerations that need to be part of your outsourcing initiative, 1) set an outsourcing strategy, 2) choose the vendor that best fits that strategy, 3) own the transition, and 4) create the structure to manage the relationship.

Strategize Wisely

Setting your outsourcing strategy is the all-important first step. To a certain degree, outsourcing strategies can be classified as either tactical or transformational. The tactical model is designed to take advantage of labor arbitrage and often employs what is referred to as a “lift and shift” approach. Work is lifted from your company and shifted to one in a lower cost area. Vendors of lift and shift models typically use existing processes and work in your existing systems, requiring little change on the part of your company. Essentially, the location of the worker changes, but the work itself does not.

On the other hand, a transformational model almost always involves a software implementation, which leverages optimized workflows. Under a transformational model, your company replaces existing processes and technology with the vendor’s processes and technology. As such, an IT project is embedded within the implementation. Clearly, implementing a transformational model is more involved than lift and shift, but it yields some notable advantages.

So, how do you decide which approach is best for your company? While there are no pat answers, I have found that companies often shy away from “yet another IT project” and end up following the tactical path, which is a mistake. My advice is to start assuming the transformation/software dependent solutions. Many of these solutions are very sophisticated, their processes and technologies successfully encapsulating industry best practices, and they have a large installed base so you can take comfort knowing that most of the bugs have been worked out. In addition, most solutions have a relatively streamlined and formalized client onboarding process, mitigating many concerns about implementing the solutions. In some cases, of course, there are no transformational options that fit your needs, forcing you to go the tactical route. This approach is workable, as each model has its benefits.

Figure 1 below breaks down the strengths and weaknesses of each.

Choosing the Right Vendor

The next step in implementing a successful outsourcing project is choosing the right vendor. If your company’s strategy employs the transformational approach, the process of choosing a vendor will be driven by the software solution, actually making selection easier. Comparison of tactical vendors is more difficult, because, for the most part, you will be comparing intangibles.

Regardless as to the approach, it is necessary to spend adequate time on due diligence checking all references, asking the hard questions, and arranging to visit reference sites in order to observe the process in action. Observing the process in person provides a better understanding of the processes, handoffs, potential issues related to team integration, and challenges communicating across distance. A vendor demonstration cannot compare to an onsite visit. A trip to one or two reference sites will prove to be money well spent.

Once vendor selection is complete, the planning stage begins in earnest. Generally, vendors will provide the overall implementation work plan. That said, since this is ultimately your project, you have the responsibility of owning it! Your company should remain integrally involved in the transition, which means dedicating the appropriate staff, assigning a sponsor, and holding senior leadership governance and gate reviews. It is also necessary to spend time developing a comprehensive risk mitigation plan. Your company needs contingency plans to address potential obstacles, including negative employee-client reaction to temporary performance dips, the PR response if contacted by the local press, transition plans for the local staff, and most importantly, plans to deal with unforeseen departures.

Regardless of severance packages or retention bonuses, once job eliminations are made public, employees begin searching for new opportunities. Needless to say, their departures don’t always align with your company’s staffing needs. Recently, I had the opportunity to experience this issue first hand, when my client on a six-month outsourcing project announced to me that we needed to go live in one week, three months early, because they no longer had the staff in the department to process the work. It goes without saying that the next few weeks were not exactly smooth.

Manage the Vendor

The last factor to consider for your outsourcing project is post-implementation vendor management. Unfortunately, this step tends to go overlooked until problems arise. Communication is one of the most vital elements in making an outsourcing relationship work. I recommend you plan to over communicate at the beginning of the project. The communication plan should include daily supervisor calls, monthly management reviews, and a quarterly sponsor meeting. Over time, if this proves cumbersome, you can dial it back. At the beginning, though, plan to over-communicate.

The daily calls should occur at the supervisor level, last no more than 10 minutes, and address yesterday’s challenges and today’s expected volume. I try to keep the daily calls informal to help forge a relationship between the team’s supervisor groups. Monthly management meetings should focus on the service level agreement (SLA) and performance metrics. It is critical to agree on what will be measured, how it will be measured, and what performance levels are acceptable before going live. In my experience, failure to exercise rigor in this step is where many outsourcing initiatives go wrong. Finally, the sponsor meeting should be a review of monthly trends and discussion of performance issues.

For these meetings, it is important that sponsors treat the two teams as unified and hold them jointly accountable. When issues inevitably arise and a “blame game” begins, sponsors need to be able to cut through the noise and force the teams to work together towards a solution. After all, one team cannot be successful if the other fails.

Outsourcing is not easy. But if you start with a sound strategy, leverage the right vendor, and are prepared to manage the project and relationship you can achieve significant savings. Let’s face it, those savings are hard to ignore.

Michael Santamaria is a director at ScottMadden. His consulting experience spans a number of areas including business process outsourcing, process redesign, organization design, operations improvement, and project management. Prior to joining ScottMadden, Michael ran operations for a business process outsourcer, consulted for Clarkston Potomac Group and Emerson Consulting, and held several positions with General Electric. Michael received an M.B.A. from Case Western Reserve University, Weatherhead School of Management and his undergraduate degree from Washington and Jefferson College. He is a certified GE Six Sigma Master Black Belt.

By Michael Blankman

In my recent article, we concluded that the most important aspect of managing remotely is building a strong and trusting relationship. Creating a partnership that doesn’t rely solely on the contract for the outsourcer to get performance security. The partnership is critical because once operations are outsourced, real influence over daily management will and should be limited, or why outsource at all? The partnership needs to be based on respecting each other’s expertise, ensuring roles and responsibilities are clearly defined and that the underlying business model justifying the decision to outsource is protected.

Managing the ongoing performance (real time, daily, weekly, etc.) is the second most important area on which to focus. Performance management is conceptually aligned with the concept of trust, but verify.

Customer service expectations that are critical to the outsourcer can seem at odds with the operational efficiencies targeted by the vendor.

Recapping what we have covered to date:

• The toughest decision, which is to outsource has been made.
• A general observation is that businesses aren’t unique and that it is important to let go and to fit into their operating model.
• The outsourcer has created a small but influential and agile group of subject matter experts to be the primary interface with the vendor; the vendor has assigned dedicated account management.
• Depending on the size of the business, it is important to accept that the overall number of support and management staff dedicated to a program may be small.

Customer Satisfaction / Quality Management

The vendor and the outsourcer may have service and quality goals, which seem contradictory. Putting a process in place is the moment of truth between the supplier and the vendor. That is why it is critical during due diligence process that the vendor’s commitment to quality is understood that they are not providing lip service or view quality as a necessary evil. A vendor’s true commitment is easy to recognize by understanding what local processes they have in place and if they are followed consistently.

A good way to see if customer service and quality are truly integrated into the management process is to ask the staff their opinion and to find out from them what reward and recognition programs are in place. Everybody in every function, whether or not they are writing code or answering calls, wants an opportunity to be recognized. Integration and consistency, although seemingly obvious, are critical. It is interesting to see how many initiatives are the “flavor of the day” and dwindle in importance, replaced by new programs that also dwindle in importance. For example, consider when the last employee of the month was awarded.

Additionally, during contract negotiations change of control protection is critical. It is very easy for a change in ownership and management philosophy to alter customer service dynamics. This is as important as protecting the financial model contractually.

Qualitative versus Quantitative

Many of the relevant statistics will be relatively easy to track and done systematically.

In call centers, vendors will focus more on agent performance and outsourcers more on qualitative data that will enable them to understand the underlying reasons for a call and to apply that data to specific customers, where appropriate. In the call monitoring process, vendors will target a statistical sample by agent to quantify performance versus call type and client specific metrics favored by the outsourcer. Important also is the ability to disposition calls correctly. Vendors often bristle at free form wrap and want to rely on system driven algorithms to deliver MIS. Attention needs to be paid to the integrity of this process or the data derived will not be useful.

Call Monitoring: Call monitoring is the best process for both parties to really understand quality and make improvements. It is also labor intensive but can be done efficiently.

The Program

• Call monitoring has to be a dedicated function on both sides: don’t engage with a vendor unless it is already a part of their quality process.
• There needs to be agreement on what metrics are tracked during monitoring and the vendor should try to accommodate the outsourcer’s needs, especially where regulatory attention must be paid. Some expansion to the vendor’s current process will most likely have to take place.
• Whatever the final process looks like the outsourcer will always have to monitor additional calls. There are nuances to the businesses and clients that the vendor will never understand completely. To avoid undue bias and potential line of business conflicts, call monitoring at the vendor should reside as part of an independent quality group. This is not an attempt to create layers – the assumption is that the vendor already has this group in place for their own monitoring and other quality initiatives.

A multi-tiered process should be established. For example:

• Both quality teams should monitor calls together according to a formalized schedule for calibration purposes. Ultimately the vendor will monitor the majority of the calls therefore both sides need to be in synch.
• Calls need to be monitored separately as well with the results distributed and reviewed by all parties.
• Underlying clients, where possible, should be included in some of the monitoring sessions (relationship management should also be involved so the vendor hears the voice of the client).
• Utilization of third party remote monitoring organizations as an independent counterbalance should also be considered.
• An underutilized and sometimes poorly managed tool is mystery shopping. Mystery shopping is a tool to gage your own service and an opportunity to compare the metrics and best practices of your competitors. The outsourcer can accomplish mystery shopping internally by calling both competitors and the vendor or by hiring an independent firm.

Anytime multiple sites or vendors can be utilized, the ability to competitively benchmark and drive improvements is enhanced. To emphasize, quality and reward programs need to be consistent and tightly managed with tangible goals.

Michael Blankman, a global outsourcing senior advisor, can be reached at: michaelblankman@aol.com

By Kevin Church 

Latin America has received lots of buzz in recent years as a preferred location for shared services operations. An educated and affordable labor pool, business friendly climate, and the necessary infrastructure all make Nearshoring a very attractive option. At the same time, companies establishing new shared services centers have migrated directly to process-centric structures to maximize the benefits of their service-delivery model. One such process model, Purchase-to-Pay (P2P), can provide significant benefits to organizations if an integrated process is established and the appropriate technology is in place to support it. As such, the collaborative workforce and the high rate of technology adoption in Latin America make it an extremely attractive market for P2P solutions.

Companies are increasingly evaluating sourcing options in Latin America. In 2009 the outsourcing industry in Latin America grew by 11.3%, as shown in Nearshore Americas’ and PA Consulting’s “Executive Buyer’s Guide to Nearshore Outsourcing,” 2010. At the 2011 Shared Services and Outsourcing Week, Latin America ranked second as the “primary location of choice” for shared services and outsourcing, ahead of the United States, India, and Eastern Europe. Although India still reigns supreme in terms of cost, global businesses increasingly appreciate factors that are not necessarily captured in cost-to-do business. For instance, according to the Outsourcing-Center study: U.S. Companies Prefer “Farshore” to Nearshore Outsourcing, Send Higher Value Work Abroad, 2012, an increasing number of businesses consider location-specific advantages, such as time zone, when determining the location for their service center. Many Latin American countries also rank above their global competition in terms of overall competitiveness, as shown in Figure 1.

Figure 1 

The shared services industry in Latin America is young, but the region has been quick to adopt new technologies. In Latin America, 95% of businesses have either implemented or have plans to implement cutting-edge, real-time strategies, which is significantly higher than the global average of 76%, as noted in Oxford Economics and SAP’s, “Real-time Business,” 2011. Moreover, as determined by the Shared Services in Latin America Survey, 2011, Latin American countries are more receptive to multi-functional shared services centers than the rest of the world, with 72% implementing multi-function versus 47% in other regions in the world. It is important to note that this figure is largely driven by companies planning to install such systems (69%), which gives an indication of the transformation that is happening in the region at this time. Indeed, all signs show that the Latin American shared services industry is rapidly maturing, as multi-national companies global operations centers are added to local and regional plays.

Unfortunately, negative perceptions regarding legal and statutory requirements for invoice processing have perhaps impacted the P2P growth in Latin America. Although there has been an increased amount of public and private collaboration in the region, there is still considerable confusion between a local process variance and a law. As organizations establish their shared services operations, distinguishing myth from fact in the regulatory and legal space is an effort they must approach in a methodical and thorough manner.

Even though there are aspects that position Latin America as a shared services center hub, there are other factors that may pose challenges. The workforce as a whole is not as proficient in languages as other parts of the world. Even though the literacy rate is good in most of Latin America, the educational system varies greatly from country to country, as seen in Figure 2 below. Security is a perennial issue in parts of Latin America. This is improving in some countries in the region (e.g., Colombia) while degrading in other parts (e.g., Mexico). Sometimes these challenges will restrict locating your service center in Latin America, while others can be overcome through careful strategy or extra investment.

Figure 2

The Deloitte survey also found that in Latin America, 90% of existing shared services operations include finance, while only a fraction of that (36%) include supply chain and purchasing. This presents a significant opportunity to establish P2P service centers, which marry the finance and purchasing operations into an integrated process model. The high adoption of technology in Latin America supports P2P structure and enables remote processing. The receptivity for multi-functional processing models provides a collaborative environment to implement the typically difficult P2P structure.

Organizations can take advantage of advances in leading practices, improved invoice processing laws, and new technologies to implement highly efficient P2P operations in Latin America.

Technology advancements have also enabled the deployment of P2P delivery models that would have been challenging to implement just three to five years ago. The adoption and acceptance of vendor catalogues, e-invoicing, and portals have permitted service centers to take advantage of leading practices and support tools to achieve dramatic improvements in shorter time frames. As a result, shared services organizations are able to take advantage of more remote and cheaper locations and still achieve high performance levels.

An often cited challenge to P2P service center implementation in Latin America is the regulations and how they vary across the region. In recent years, some Latin American countries have passed regulations to ease the constraints surrounding invoice processing, but a great deal of confusion still exists. Thus, how these regulations specifically impact P2P service centers can be open to multiple interpretations. Fortunately, by following a proven methodology, organizations can separate myth from fact when establishing a P2P service center.

In order to do so, organizations must review each process from end-to-end to evaluate local process variants and determine legitimate legal requirements. This involves asking key questions at each step in the process in order to understand invoice formats, electronic invoicing regulations, and payment methods. The evaluation also reviews key policies including documentation retention, signature requirements, and storage regulations and then compares them to local laws. Regulations will vary across the region, so this evaluation must be completed for each country that will interact with the service center.

The methodology helps organizations distinguish the validity of exceptions or variants from standard process models. Project teams review each step in the process and focus on the key questions that must be answered, as shown in Figure 3. Multiple iterations of review may need to be undertaken for more complex requirements, but it is typically only a small portion of the total effort. In these cases, variants will need to be evaluated by more knowledgeable resources before the final determination of its validity can be reached.

Figure 3

 The approach escalates process variants to specific resource groups based on the complexity of the regulation. These levels include:

• Level 1 – Local in-country staff
• Level 2 – Country investment agencies
• Level 3 – Local or country auditors

The Level 1 review engages local in-country staff to review and validate the identified statutory requirements within their processing areas. Accounting and procurement resources experienced in completing these transactions are familiar with the local processing requirements. This group can help explain the need for the process exceptions and support the review of regulations to validate whether they are truly legal requirements. Including this group in the first level of review also has the benefit of building local buy-in on process decisions and improving the overall acceptance of the delivery model.

Process exceptions are escalated to Level 2 if the initial review fails to verify the validity of the variant. These reviews utilize country specific investment agencies to assist with independent research and evaluations. The complexity of regulations will vary by organization, but often only 1-2% of the exceptions will be escalated. Investment agencies provide access to local expertise to help clarify country laws and work with local authorities to help understand how they are enforced. Examples of agencies in Latin America that provide this support include:

• ProMexico
• CORFO (Chile)
• CINDE (Costa Rica)
• ProExport (Colombia)

Level 3 evaluations employ external auditors to provide more detailed evaluations of complex regulations or validate the output from Level 1 and Level 2 reviews. External auditors provide local legal and statutory expertise and can be excellent resources to complete final validations on key design decisions. Many auditors have offices across the region and can provide country-based resources to support the evaluation.

With each level using different sources of experience and expertise to determine the validity of process variants, the approach may generate multiple interpretations regarding how the local requirement is to be applied. As such, local authorities should be included to support the final decisions for more complex regulations. Engaging the local authorities early in the process ensures that the processes are compliant and establishes a good working relationship with the officials who will interact with the center once it is operational.

Latin America is well situated to host P2P service centers. Organizations can take advantage of advances in leading practices, improved invoice processing laws, and new technologies to implement highly efficient P2P operations in Latin America. However, companies must be prepared to undertake a complete and thorough analysis of their processes to separate myth from fact during their implementation. There will always be some local variants in the P2P process, but a relentless pursuit to minimize exceptions will maximize returns.

Kevin Church is a Director with ScottMadden, Inc. Church has over 15 years of experience with operations and organization transformations. He is also experienced in leading shared services deployment teams in conjunction with rollout of ERP systems and other leading technologies.

]]> http://nearshoreamericas.com/establishing-nearshore-purchase-to-pay-operations/feed/ 0 http://nearshoreamericas.com/startup-chile-transformation/ http://nearshoreamericas.com/startup-chile-transformation/#comments Thu, 26 Apr 2012 15:52:29 +0000 phaller http://nearshoreamericas.com/?p=19505 By Shagun Malhotra I knew I was in for a ride as soon as I arrived in Santiago and ventured out to the local neighborhoods to hunt for an apartment. It was not so much the huge language barrier, but rather, the non-stop honking and the playful wolf whistling that followed everywhere I went – [...]]]>

By Shagun Malhotra

I knew I was in for a ride as soon as I arrived in Santiago and ventured out to the local neighborhoods to hunt for an apartment. It was not so much the huge language barrier, but rather, the non-stop honking and the playful wolf whistling that followed everywhere I went – a surprisingly warm Latin American welcome for an Indian-American girl. That was when I decided to put away my tight white shirt for the rest of my time in Santiago. But that’s a story for another time. Let’s rewind.

I am from New York City, a city bustling with all kinds of incubators but unfortunately, cost expensive equity. I wasn’t really looking for incubating opportunities as the city’s entrepreneurial spirit, diverse community and phenomenal resources were enough to nurture me. Reading the article on Start-Up Chile (SUP) in Inc. Magazine, however, had me intrigued by the equity-free offer of $40,000, access to international networks, and support from the Chilean government with just an agreement to relocate to Chile for six months.

On our part, the timing was fantastic. My company, SkyStem, recently launched ART — a month end balance sheet account reconciliation management system. The market was responding favorably, and I had just expanded my management team. A cash infusion and new networks were just what we needed to skyrocket the business. So we applied, thinking that our chances were slim as this program was open to Start-Up entrepreneurs from around the world.

We were accepted the day before my birthday and it was surely the perfect gift. The feeling of having SkyStem validated globally was priceless. As a bonus, six months in Chile meant that we’d skip winter in New York! I was exhilarated by the possibilities: the people I will meet, the diversity of the other teams, the idea of fast-tracking the company, and the excitement of the unknown.

Immersion

Upon arrival in Santiago, we received the VIP treatment from SUP personnel who escorted us through the maze of immigration paperwork. Within days we had our residency ID cards, bank accounts and cell phones – if only it was that simple to immerse oneself into all countries! We also had a great orientation to familiarize us with the program and rules. But then we had to find a home, get Internet and figure out how to live in our new city. With the language barrier, it was a really tough few weeks trying to get settled in, despite the help from SUP – but there was some comfort in knowing that others were experiencing the same things.

Other than having monthly meetings to provide status and expenses updates, there seemed to be no input or interference from the program office. It is a very autonomous program. This kind of management style does not work for all. I wish that they had implemented more disciplined guidelines on reaching goals that varied depending on each start up’s maturity.

The program has also been struggling with getting the attention of investors because the local climate does not yet support a culture of tech investment. But after almost a year of hard work, SUP has made immense progress in this area. They are organizing and training entrepreneurs for demo day on May 23, 2012, which has attracted many investors.

If I could change one thing it would be access to more mentors and other entrepreneurs to provide guidance on the business side of things. In some ways SUP is a Start-Up itself – one that is flexible and fluid and only getting better each month. The previous director Jean Boudegar, and even the current one, Horacio Melo, agree that these changes need to be made. We have some great advisors from the US and Chile – such as Vivek Wadhwa who came here in March and Nicolas Shea who is from Chile and the founder of SUP. SUP is making great efforts in bringing in connected and relevant people. Like today (April 10, 2012) – Richard Branson is in Santiago and Start Up Chile is doing a Twitter and FB campaign to see if he can be convinced to come into SUP headquarters.

Reaching Beyond Expectations

Being a part of the SUP program forced me into a sense of community. Apart from my own business – I became motivated by the energy of all the start -ups here and I decided I, too, wanted to make a difference in the Chilean ecosystem. I came up with the idea of Santiago Se Atreve (SSA) –  which is an event that unites the local and Start-Up Chile community through technology. Inspired by a popular tech event in New York called New York Tech Meetup, SSA brings entrepreneurs on stage to demonstrate their products without regard to business models or monetization.

The idea is to focus on innovation, creation and connecting people. I thought it would be brilliant to have the same sort of energy, passion and community in Santiago and maybe around the country eventually.

We had our first event on March 13th and it was a success – a true surprise ! I feel grateful for that sense of accomplishment that comes with having pulled it off, and that makes me a more confident entrepreneur. There are many others doing similar wonderful things for the community in the spirit of entrepreneurship. You see leaders, motivators, doers and the formation of international networks being created right in front of you.

I am surely a better person, a more connected person and absolutely a better entrepreneur after this program. I helped a lot of people fine-tune their business models, pivot their businesses and counsel them through tough periods, and this taught me patience and how to give without expectation. The loyalty for the country I feel now is something that money cannot really buy. Chile is definitely my first choice for my Latin American office!

By Rosanne D’Ausilio PhD

Average turnover, reported at 40% to 50%, has always been, and continues to be, a chronically costly problem for call centers, a problem that seems to be tolerated rather than solved. Respondents to a FurstPerson survey reported an average monthly attrition rate of 7.18%. Annualized, a 40% annual turnover estimate becomes an actual turnover rate of 87%. As you read further, you’ll see what that costs!

Although 90% of corporate executives say that employees are the most important variable in their company’s success, a Towers Perrin survey reported that in practice they rank people-related issues far below other business priorities. Executives agreed improving employee performance would improve business results; 73% even said their most important investment was people. However, people-related issues, such as training and compensation, consistently ranked at the bottom of the list. It seems the mouth and the feet don’t always go in the same direction.

Training is Crucial

A profitable workforce requires well-trained, knowledgeable, conscientious, service-oriented employees who enjoy their responsibilities. Training is crucial. Recent studies in service industries link increased training to decreased employee turnover.

For example:

• Ryder Truck Rental discovered that among employees who participated in training programs, the turnover rate was 19%. For employees who did not participate, the rate soared to 41%.
• Guest Quarters Suite Hotels report their low turnover rate is one indication of employee satisfaction. Additionally, but not surprising, there is a positive correlation between training, employee satisfaction, and guest satisfaction.

Turnover is a Priority

At this time when nearly all businesses, are looking for ways to cut costs and save money, turnover should be a priority. Disruption of workforce stability should also be of concern to those who manage the customer care process.

FurstPerson reports the average cost of attrition at $5,466 per person. Interestingly, the cost of attrition in an internally managed contact center was reported at $7,994 per person, more than twice the cost of attrition at an outsourced center which was reported as $3,420 per person.

The disparity in cost is most likely related to the amount of time and money that is dedicated to training individuals in an internally managed contact center. And we’ve seen turnover in other reports as high as $8,500 per person +++

Following is a typical scenario with 100 people and a 30% turnover rate:

100 people

x30% turnover

30 (people are leaving annually)

x$7,500 average (conservative) cost of new hire

$225,000+ + + = Turnover cost

Note: The +++ represents the additional cost of the learning curve. For instance, when senior representatives, supervisors, and/or managers need to sit with or give time to new hires this obviously takes away from their productivity.

Also, you need to factor in consideration of the people having to take on the additional workload because of the short staffing, or because new hires are too ‘green’ to be on their own. Then there is the subsequent declining morale that goes along with these examples. All of this impacts productivity negatively, customer (internal and external) satisfaction, and employee satisfaction.

Can you see the easy justification for investing in a training initiative of say $60,000 that could reduce turnover for almost a 4:1 return on your investment? Sounds like a slam dunk to me.

Rosanne D’Auslio, Ph.D., President of Human Technologies Global, Inc. known as ‘the practical champion of the human,’ is an industrial psychologist, consultant, master trainer, bestselling author, executive coach and customer service expert.

By Kenneth Hess

No one wants for a relationship to fail but sometimes you have to quit on one that isn’t working. How do you know when to say, “When?”

Relationships are difficult. Band members have creative differences, teammates have ego problems and marriage partners have irreconcilable differences. Likewise, vendors and clients in business-to-business relationships experience all of the pains of band members, teammates and marriage partners. Maintaining a positive relationship is challenging when everything goes well but adding in technological differences, language barriers and time zone disparities has the effect of widening the gap between client and vendor.

But, everyone knows those problems exist and takes steps to mitigate them. Awareness of the potential problem areas is a good start but relationships deteriorate on a subtler level. Relationship failure occurs in much the same way as the boiled frog story. The story is that a frog dropped into boiling water will sense the heat and immediately jump out. However, if you place that frog into cool water and slowly heat the container, the frog will boil and never know until it’s too late.

It would be a better business environment if relationships would fail at the initial introductions rather than waiting until both parties have invested resources. If only we could sense the boiling water at the beginning instead of having the water slowly heat up around us. The reality is that most relationships, personal or business, fail over time and in small amounts. Like the frog, we boil one degree at a time.

The question is, “How do you recognize when your vendor/client relationship has failed?” The answers and experiences might surprise you. There are warning signs that you should pay attention to that point to problems. You have to be brave and be ready to cut your losses before it’s too late to leap from the boiling pot.

Testing the Waters

First time offshore outsourcers smile when they hear the pricing from vendors. And why shouldn’t they when quoted prices are as low as one-twentieth the price of local labor. It’s high-fiving and glass-clinking all around the conference table. The pricing, the promise of short delivery times, the open discussion and the friendly atmosphere coalesce into what can only be described as the business equivalent of “finding your soul mate.”

Everyone walks away happy from those first few “honeymoon” meetings. The calls go without any problem. Your offshore partners on the other end have an uncanny grasp of the English language. And, they understand the urgency and depth of the project ahead.

Taking the Plunge

You and your staff decide unanimously to engage the offshore partner for your project. You set milestones for progress and agree on delivery dates. Your partner keeps you informed, attends meetings conveniently scheduled during your standard working hours, keeps communications open and delivers your milestones as promised. Everyone is happy and you celebrate your win.

Turning up the Heat

The first sign that something’s going wrong in your newfound relationship is when your offshore partner begins to make excuses for non-delivery. Kevin Chandler of C3K Enterprises said that, “Everything went fine until our three week promised delivery stretched into nine months with no usable progress. We found a local resource for the work and enjoy an ongoing and successful relationship with the company.”

Once a commitment had been made between Chandler and his offshore partner, the partner came back to him with, “It’s going to take longer and cost more.” This is a common ‘bait-and-switch’ routine with some offshore companies. This one came highly recommended to Chandler.

Chandler didn’t give up on offshore outsourcing. He tried a total of five different companies in various countries for his projects. All but one was a total fail for him. For the others, he’s decided to use local US-based resources. He said that he might try offshore outsourcing again but with caution.

Jumping Out of the Pot

Unfortunately, the lure of low cost labor is just too irresistible for some. This lure might not be palatable after several failed attempts. As Paul Midler writes in his book, Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game, the frequently heard phrases, “You heard me wrong” and “Price go up” wipe any cost benefits of going offshore.

Often what happens with offshore partnering is that you end up spending more time mitigating problems than you do producing results. Chandler said that he spent a lot of time on the phone at all hours of the day and night managing projects. One company “flat out lied about their capability,” he said.

You have to know when it’s time to cut ties with your offshore partner. Non-delivery, a breakdown of communications, rescheduling calls to times that are very inconvenient for you, prices that mysteriously rise in double or triple digits and inexplicable or repetitive production delays are all good reasons to sever your relationship. US-based companies want to create good working relationships with their foreign partners and most are willing to deal with a significant amount of delays, misunderstandings and price fluctuation but, at some point, the cost savings aren’t worth the headaches.

Keeping the Waters Cool

All such relationships aren’t bad nor do they have to fall into complete disrepair. When you find that something is going wrong, you have some options to revive the relationship and maintain your margins and your sanity.

What’s needed in such cases is honesty on the part of both partners. A candid phone conversation or a visit to your partner’s location will often resolve problems. One vendor suggests that you maintain close contact with your partner to keep the project and the relationship moving in the right direction. If you find your partnership failing because of missed deadlines or cost overruns, you need to discuss a detailed plan of action with your partner’s management team. You might have to revise milestones and expectations but you should put in the effort to create a productive and ongoing relationship with your partner. But, don’t be afraid to call it quits on a partnership that just isn’t working.

There are many companies, legitimate ones, with which to work on your projects. By selecting the right offshore partner, you can still save money, enjoy decent profit margins, meet your deadlines and not get boiled in the process.

By Steve Rudderham 

Most outsourcing arrangements are literally “out” sourced in that services are delivered from a remote location. Whether that location is within a few miles of your corporate headquarters or on the other side of the globe, you need to ensure the services are delivered in the appropriate manner without physically being there to oversee the operation. The provider often promises an “extension of your operations,” but this task often winds up being one of the biggest challenges of BPO, but fortunately there are a few basic steps BPO buyers can take to manageably ensure quality service delivery from remote locations.

Communicate to Effectively Run Your Virtual Team

When BPO services are delivered from a remote location, the buyer becomes the head of a virtual team whose members may be scattered across different countries and continents. The most important factor in effectively running this type of virtual team is communication. There needs to be a regular rhythm to your virtual BPO team communication, with team meetings happening on a monthly or even weekly basis. With the continuing advances in communication technologies such as videoconferencing, getting remote employees “together” for regular meetings should be less of an issue than it was in the past.

Remember it’s important for team members to see faces. Also remember that when you are communicating your goals and expectations to your virtual BPO team, the substance of your communications should go beyond “Here’s my agenda.” Let team members know why your agenda is relevant, so they don’t say “so what” upon hearing it.

Select the Right Team Members

Of course, even the most effective communications have little impact if they fall upon the ears of those who don’t understand or care what you are trying to accomplish. Members of the virtual team should be collaborative people who are open to other ideas, work cross-culturally and are effective communicators themselves. 80% of being a good communicator is being a good listener. These people will then help translate your goals and expectations to the broader local culture of your BPO provider. Ultimately it will be about communicating your shared vision to the teams.

Metrics, Metrics, Metrics 

Ensuring quality remote BPO service delivery also requires transparency and control of the operation. The best way to achieve transparency and control is through the use of metrics which are regularly updated and drive the entire operation.

It shouldn’t matter where in the world your BPO services are originating from, because you should have one common global standard, which everyone understands, and is easily communicated. This means you need to have a good measurement system. For example, Capgemini has a BPO command center which drives consistency through metrics. The basis of your standard should be a well-documented operation manual with regular orbits against it, with the measuring system sitting on top.

And remember, part of being a good overall leader is communicating, so the leader in charge of it all needs to communicate what you’re trying to do but also live and breathe what you’re trying to do. Create a culture based on metrics which people can listen to and translate.

Obtaining Quality Service Delivery from Emerging Economies

Many popular BPO service destinations are located in emerging economies which pose their own special set of delivery challenges. When dealing with a provider located in an emerging part of the world, remember that your corporate headquarters must embrace the local culture – one shape does not fit all! Sometimes the local operation will have a “that won’t work here” attitude. To avoid this, make sure you get collaboration and provide clear guidelines so you can share consistency.

You don’t want the local operation interpreting anything, so you must provide them with strict guidelines while still respecting local customs and established ways of doing things. And the best way of all to ensure you obtain top quality services from providers in emerging economies is to simply get on a plane.

Despite advanced communication technologies, there is still no substitution for going out and seeing the operation and having the operation see you. Directly share what you expect and why you expect it. One strong initiative of Capgemini BPO is that we educate associates in different countries so they can answer the all-important question of “Why do I matter?”

Shake Things Up

My final, brief piece of advice is within the BPO operations and to look to shake things up to make sure lines of communication are open and best practices spread organically. Mix up your leadership. Send the leader of your Guatemalan BPO center to Poland and the leader of your Polish BPO center to Brazil, all while rotating executives in and out of your Indian BPO center. This allows you to share best practices from different delivery centers. Remember that best practices are not only about conforming to ideas from the top, but about adopting new ideas from every corner of the business.

Steve Rudderham is VP, Global Transition and Delivery Excellence of Capgemini.

This article appeared originally on our sister publication BPO Outcomes

By Heather Littlejohns

Companies seeking to locate new outsourced or shared services centers to offshore or near shore locations typically focus their exploration on factors such as price, local government support and incentives, cultural affinity with the target market, unemployment rates, labor pool, language skills, etc. But are companies really taking the necessary time to explore, assess and discuss their own points of differentiation as they are perceived by the local population?

Beyond providing a basic salary, what contribution can the business make to the lives of the people who will be employed? These cultural considerations should be an important component of the due diligence process as they are crucial to the long-term sustainability of the business. Unfortunately, they are too often overlooked.

Act “Corporate,” Think “Local”

The most effective way to select a successful and sustainable market, community and location to facilitate an operation is to spend time on the ground with local community leaders and prospective employees, using the language skill with which you expect services to be delivered. In a sense, this is a grassroots and tourist approach to the region, building on a foundation of previously completed market analysis, research and the corporation’s strategic vision.

Before investing in a destination, many basic requirements “on the ground” should be fully identified. These are easily gained through market analysis and research and by speaking directly with economic and government groups within the country/region of choice. The following check list can serve as a starting point:

• Local government investment and support

• Technology and infrastructure

• Education

• Safety and security

• Tourism

• Like industry success

• Transportation

• Labor pool

• Education level and graduation rates

• Language skill–English bilingualism

• Skills learned (preferred)

• Customer service orientation

• Affinity to Western culture

• Employable population–demographics

To truly test the likelihood of success, spend time on the ground in the community. Ask questions, document observations and understand the community from which you will hire and where you will be a corporate citizen:

• Understand how education works in the destination. Is it public or private? Is it mandatory? What is the local government’s degree of engagement in the education system? How do people get to school? Is there an emphasis on learning English/other language?

• Assess the rates of school attendance.

• Visit a school, university or community college. Build relationships.

• Determine who are the economic and community development supporters and funders in the community. When do they meet? Who are the members? Do they live in the community in which they serve?

• Attend a meeting of these community development supporters. Take notes and make observations about interactions and behaviors such as tone and pitch in conversation; gender based interactions; non-verbal communication such as eye contact and handshaking. These observations will help you adapt your body language and mannerisms to put people at ease when interacting with the local population.

• Discover the cultural customs of the local community including holidays, events and religious ceremonies. This knowledge will help when managing your new workforce.

• Understand the demographics of the region. What is the average employable age and are they male or female? What is the current make-up of the population interested in the BPO industry? Are they well-educated males or single mothers? Are they second income earners or primary breadwinners?

• Investigate local restaurants, shopping facilities and tourist hot spots. Eat at local favorite restaurants. Attend a local customary event, read the tourist brochures and spend time in the recommended areas. This will tell you what the local people are proud of within their country. Knowing exactly what gives a person pride can also act as a motivational tool. This can allow you to better identify with the needs of the people that the corporation will employ. It will allow the opportunity to learn, understand and place value on what is important to the team.

• Learn how local services are facilitated and distributed. Are these services valued and utilized? How does the role of the family contribute?

• Research health care, child care, transportation, etc. This will help provide a more comprehensive view of total costs. It will also help you “design the differentiators” that I referred to earlier to strengthen your value proposition as a “glocal” employer, and can help you in “positioning” your corporate philosophy to your future employees.

Integrate Cultural Components with Business Goals

By integrating the “softer”, cultural components of the destination you are reviewing with that of your strategic business objectives and long term priorities, your answers to questions like those below will become far more informed and accurate.

• Is a local staffing agency required to help launch the business?

• Does it make sense to place the business in the duty free zone or is an urban, centralized location more feasible?

• What type of community participation and recruiting event will need to be held?

• What aspects of the corporation should be advertised? What are the value added benefits for employees that will matter most? What are your differentiators as they relate to the community?

On the surface these concepts are relatively simple, logical and one would assume being facilitated, however, this is not the case in many situations. Cross-cultural communication and a grassroots approach is not often practiced for a wide variety of reasons. These include the assumption that knowing the statistical facts about unemployment rates and government incentives is enough to be successful, aggressive timelines, low price points driving a quick transition, lack of regional expertise within the organization or simply an attitude that cultural considerations are an “after thought.”

To truly minimize new geo risk, not only should the selection team conduct the formal process, but drive the due diligence from a grassroots perspective and through a cultural prism. Once this knowledge and, more importantly, experiences are gained, the transition or execution team should act as the “cultural interpreter” for the enterprise. This is crucial to see a new operation through to success.

Heather Littlejohns, Director-Operations at Aditya Birla Minacs and also an independent consultant, is responsible for strategic Country and Site Leadership and Client Relationship Management. She also serves as Partner & Contract Liaison, Implementation & Launch Project Sponsor and Government Point of Contact. Heather brings 16 years of rich and varied experience in directing, developing and implementing effective near shore and offshore BPO global service delivery solutions. Heather.Littlejohns-Brown@minacs.adityabirla.com