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Culture and control. (Best Practices).

GUNN PARTNERS HAS HELPED MORE THAN 80 companies implement shared services--so business process outsourcing (BPO) for human resources seemed to us like an evolutionary step along the journey of administrative improvement. The tools and methods are well tested. Concepts such as consolidating back office operations, investing in common technology platforms and tools, and making process improvements have been employed for more than 20 years. Shared services is a well understood framework for driving efficiency and effectiveness across a wide range of back office processes--everything from facilities management to accounts payable.

But as we discovered, BPO is to shared services as climbing Mount Everest is to hiking the Catskills. We never imagined for a moment that it would be so challenging--or energizing--to be climbing these new heights.

Culture and loss of control are two paramount reasons that cause both the client and the provider to acknowledge, "This is no walk in the park."

Culture

One of the best definitions of culture came from a client of mine, who once said, "Culture is nothing more and nothing less than the norms or guiding principles--expressed in decisions or taken as actions--that we have learned are crucial for our market success."

The profundity of his words hit me right between the eyes. Until that moment, I had dismissed "culture" as a fancy psychology term that had no practical significance in my business world. It sounded like consulting jargon interesting to those who read the Harvard Business Review. But my client showed me the ephemeral connection between original, creative thought and practical, effective behavior.

During the course of our work together, I began to see the profound effects of his company's "culture" and its power to influence thousands of people in a few hundred operating units scattered across the globe.

Nearly 20 years later his company's net income has increased tenfold, while the few paragraphs describing their culture have only two or three new sentences and a handful of fresh words.

It goes without saying that every company's culture deeply embedded in the policies and procedures that arise from the two most influential staff functions--human resources and finance. These departments literally touch everyone working in any institution. Many of the policies are geared to ensuring that behavior does, in fact, conform to cultural dictates.

Outsourcing back office staff activities runs the risk of running headlong into the client's cultural walls, which are clearly obvious to everyone inside but usually unseen by outsiders. These unspoken norms are like trying to walk through a stranger's home at night--the walls are hidden from view until one innocently bumps into them. Ouch!

Kevin Campbell, Exult's COO, says that when they are taking on a client's work for the first time, "it's not what you inquire about that causes service issues, it's what you don't ask about that leads to mistakes' In other words, it's the assumptions, unspoken observations, and unquestioning attitudes that blind people to the cultural tripwires.

Since the client's customs are always that important, "crucial to their market success," it behooves the outsourcer to learn how to discover what they are and figure out how to honor them.

Discovery is the easy part--all that's required is being able to listen. Deeply. Just like someone who travels to a foreign country for the first time without speaking the language, the words may be unintelligible, but the feelings and gestures can be unmistakable. The traveler picks up on the nonverbal cues, gets a hunch, and acts on intuition. Pretty soon, he finds that he is able to communicate and take care of basic needs.

That works in the short run, but in the long term, both parties need to rely on something more sustainable: trust--be understanding that the one party won't consciously do something that knowingly causes harm to the other. When trust is present, people assume innocence instead of intention. When someone makes a mistake, they readily apologize and mean it. When someone is struggling, a helping hand is extended.

When both provider and client are able to listen and trust, the cultural language becomes clear. Communicating about the intangibles becomes routine. The provider can make intelligible decisions that support and sustain the client's customs by eliminating redundancies and clarifying inconsistencies. The outsourcer's "dumb questions" help clarify the behavioral norms that matter, and they also add rigor to the behaviors and actions that support these norms.

Loss of Control

Bringing an outsourcing agreement to life is a giant step into the unknown for both parties, even if both entities may have done it many times before. In part the challenge arises because the BPO provider gives the client what they really want--guaranteed outcomes for end-to-end processes, such as fixed pricing, assured service levels, predefined customer satisfaction scores, or six-sigma quality. Guaranteed in the very real sense that the provider is at risk when performance falls short of the agreed levels.

As every client knows, the process works under their command--they get the job done because they own it. Not everything is perfect, but the imperfections are known, and compensating procedures are in place. The staff knows how they could make their functions better given money, time, and resources. The internal customer is generally satisfied. In the event that something goes awry, he knows that he can walk down the hall and ask someone to fix the problem.

When things are going well, the process is invisible--who has ever received or given a pat on the back for getting a paycheck right? But everyone also understands that an administrative process failure can easily become the CEO's pet peeve of the moment.

So the decision to outsource staff activities is a big risk for everyone. The stakes are high. The outcomes are uncertain. The biggest challenge for the client is stepping back from doing the tasks to gain perspective about directing the process so that it meets evolving business needs. The biggest challenge for the provider is stepping into the daily activities without losing perspective about changes necessary to enhance the process so that performance improves.

Measures, of course, are the common denominators that unify the parties. Metrics give everyone the ability to describe performance, discuss issues, and assess improvements. But more than this, rigor in definition and discipline in application change perceptions about the meaning of "loss of control." When everyone can readily see actual performance as well as observe trends from the data, the folly of trying to keep control by owning activities become obvious.

Data are like spotlights, shedding light on where improvements are needed so that progress can be made. These efforts often require joint action because administrative work knows no organizational boundaries. The client, the employee, even a third-party vendor always retains a certain set of activities. Maintaining control of back-office work is a cooperative task--the client and the provider share decisions and risks as they provide guidance and requirements to employees, managers, and outside parties.

The outsource provider and client need sophisticated and deep insight about culture and control if they are to form a productive, long lasting partnership. Truly they need as much professional skill about the less tangible issues as the expert mountain climber needs to know about weather forecasting if he is to climb the highest peaks.

Bob Gunn is the co-founder of Gunn Partners, a consulting firm that helps companies improve the relevance and value of staff functions. He is responsible for client relationships for Gunn Partners' parent company, Exult, Inc., a premier business process outsourcer. You can e-mail Bob at robert.gunn@exult.net.
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Title Annotation:outsourcing
Author:Gunn, Bob
Publication:Strategic Finance
Geographic Code:1USA
Date:Dec 1, 2002
Words:1255
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