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Why Aren’t Clients Getting Innovation?

BPO has been stabilized into a coma.

by Mark Hodges

One of the biggest disappointments corporations face after adopting BPO as a transformation strategy is the lack of true process innovation and excellence introduced over the course of the agreement. Although it is frequently invoked during the pursuit and solution development of BPO agreements, it is rarely executed upon. Therefore, it should not be surprising that the most critical issue surrounding customer dissatisfaction is the lack of innovation introduced by providers.

How can BPO buyers be dissatisfied when providers typically meet, and often exceed, service level commitments? Unfortunately, there is a confluence of factors that make the lack of innovation the norm, not the exception. It is called stability at all costs. It is systemic to the industry and is the preferred service delivery model and it must change. If it doesnt, customers will begin to bring processes back in-housenot because of poor performance by the provider, but due to lack of innovation and process excellence demonstrated over the life of the agreement.

The provider selection process is much more formal and agnostic than most industry professionals give it credit. Factors, criteria, weighting formulas, and automated scoring tools are frequently used to eliminate bias and reduce pre-existing preferred relationships. At the end of these evaluations, the top three criteria in EquaTerra engagements are almost always: 
1) confidence in the provider achieving the desired future state; 
2) chemistry/cultural fit with the service delivery team; and 
3) ability to achieve cost savings and predict going-forward costs. 

Ironically, as soon as the agreement is signed and the relationship is formalized, the top two criteria are discarded! Instead, a focus on cost savings, stability at all costs, and noise reduction is undertaken. However, innovation and transformation always creates noise. Once the BPO agreement is signed, the avoidance of noise, even in the pursuit of innovation, is routinely suppressed by BPO providers. On the client side, noise is even more dangerous. Noise, to them, means the decision was not correct and second guessing becomes rampant. Client executives fear second guessing and being wrong far more than the upside of being rewarded for making the right decision. Buyer executives are rewarded for stability, not for noise, particularly in large, publicly-traded corporations. Noise leads to actions that support stability instead of pushing for needed transformation and innovation.

All the momentum for achieving the future state is diminished, and achieving the promised cost savings becomes paramounteven though that wasnt the primary objective of the BPO relationship in the first place. Worse, governance and relationship management staff pushing for innovationand creating noise in the processare often fired. They are made scapegoats by executives who lack the perseverance and commitment to achieve the desired future state. Unfortunately, most buyer and seller executives are more comfortable talking about the future state than actually achieving it.

Instead of communications that focus on transformation, motivation, and truth, the message is softened. Typical comments are The agreement is now signed, You will not notice much change in the beginning, or Give everyone time to settle in. The message is never, The journey has just started, It will get harder, not easier, or We are leaner and there is no going back. Because communications are soft, execution becomes soft, and the theme of stability is reinforced. Stability means the business case is realized, margins are met, and the customer is satisfied (theoretically). Compensation formulas are geared toward ensuring all key performance indicators are green, but innovation and process excellence make it difficult for all indicators to be green. Yet, management processes, organizational systems, and reporting processes are all designed to promote stability, not innovation.

Additional factors include: the wrong skills composition of client relationship management and governance teams; clients extremely fragmented and decentralized internal HR and exceptionally poor HRIT infrastructure at the time of contract signing; and the severe capacity/supply constraints of BPO providers. Almost every examinable factor promotes stability, not innovation.

Large, marquee accounts are asking for innovation. Those providers who listen, and risk the status quo by implementing innovation, will have profitable accounts and happy clients who will renew their agreements. One thing is certain, BPO buyers will get innovationwith or without the cooperation of the BPO providers.

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