Eight key drivers of best-in-class BPO relationships.
By Jill Goldstein
Business process outsourcing (BPO) has become standard operating procedure for most companies during the past two decades. But as comfort levels increase, so do expectations. With the performance bar raised, BPO is becoming a more complex endeavor.
Until recently, companies were seeking something relatively straightforward from a BPO relationship: greater efficiency, streamlined operations, and lower costs. In the HR space in particular, buyers were laser focused on reducing HR operating costs. Today, companies expect more: business insight, innovation, industry expertise, and solutions adapted to their individualized needs. A newly sophisticated HR buyer is emerging—a business buyer—who is demanding continuous improvement in workforce operations.
So what separates the best-performing BPO relationships from the rest? Accenture set out to address that question in a new study, conducted in conjunction with the Everest Group and The Outsourcing Unit at The London School of Economics.
The study found that the majority of respondents—about 60 percent—are trapped in an outdated mindset that views BPO primarily as a tactical cost-reduction tool. Just 20 percent can be classified as high performers—those that are fully capturing business value from their relationships. These practitioners of high performance BPO exhibit best-in-class behaviors and practices across eight areas.
1. End-to-end approach. For those seeing most success, the entire end-to-end business process is within scope of the BPO arrangement. This includes elements managed within the client’s enterprise, those run by third parties, as well as related processes that might impact overall performance. For HR, this translates to optimizing, integrating, and standardizing processes across the full spectrum of HR services: recruitment, learning, performance management, employee administration, payroll, and benefits. This will deliver truly competitive talent and workforce management solutions, rather than focusing on the performance of individual services. SLAs are important, but both client and provider need to work together to focus on overall process excellence and the business outcomes to which the SLAs are simply an indicator.
2. Collaborative BPO governance. The disparity between high performers and their peers is particularly evident in this practice. Nearly 85 percent of high performers consider their BPO provider to be a strategic partner; by contrast, only 41 percent of typical performers operate according to that mindset. Collaborative BPO governance is much more than a set of committees or a schedule of meetings; it also comprises the attitudes toward the relationship and the behaviors that strengthen it and drive both parties toward higher levels of performance.
3. Change management. The gap between high performers and typical performers is large, not just in terms of attitudes toward change management, but especially when it comes to executing a robust change management program. Eighty-eight percent of companies working within a high-performance BPO relationship regard change management as important, and 77 percent successfully execute carefully planned change programs, compared with just 34 percent of typical performers.
4. Value beyond cost. In high-performance BPO, both client and provider acknowledge the importance of cost reduction, but do not see that as the prime motivation. Two-thirds of high performers focus on the potential value of business benefits beyond cost alone when creating the business case, compared with only 26 percent of typical performers. HR clients are seeking providers that can help them achieve tangible results that include better selection of top performers, improved retention of critical performers and workforces, and accelerated time to competency. They want partners who can help create competitive advantage by forecasting and fulfilling talent requirements, as well as aligning talent plans, workforce capabilities, and employee performance with business strategy.
5. Business outcomes. High performers aim for specific strategic outcomes from a BPO arrangement that can be measured and that can help achieve competitive advantage. Beyond that, they are also willing to forge deals such that an outsourcing provider commits to the achievement of those outcomes—paying a penalty if they are not met or sharing in rewards if they are. High performers see more potential from the relationship to achieve greater ends: 56 percent say they gain competitive advantage through BPO, as compared to only 28 percent of typical performers.
6. Domain expertise and analytics. As BPO evolves and matures, high performers are working with their providers to realize new sources of value. Part of that value lies in the ability to apply deep domain and industry knowledge—and the ability to analyze data (see figure 6) about the functions and processes being outsourced—to more predictably drive business outcomes. In the HR realm, workforce analytics affords the ability to monitor the progress and effectiveness of HR programs to ensure they are optimizing resources and building the right workforce capabilities. It also offers greater visibility for helping control costs, increase employee productivity, manage compensation, improve retention, and reduce voluntary turnover.
7. Retained organization transformation. High performers place as much importance on internal transformation as they place on transforming the outsourced processes. More than world-class outsourced processes is needed; companies also need to align the retained organization with the outsourced delivery model in terms of roles, responsibilities, and requisite skills.
8. Technology as a business enabler. Technology should be a source of innovation and advantage, not just the infrastructure of delivery. For example, 56 percent of high performers consider access to technology to be an important component of the BPO relationship, compared to only 34 percent of typical performers. Effective technologies and architectures contribute to cost reductions and more efficient operations by streamlining the systems environment and reducing the number of systems involved, often standardizing the technology environment on a centralized platform.
It’s clear there’s a significant opportunity for organizations to capture greater business value from BPO, adopting the behaviors and practices associated with high performance to build new competitive strengths. Those that continue to view HR BPO purely in terms of transactional processing and cost will be competitively challenged.
Jill Goldstein is HR BPO offering lead for Accenture. All charts are from Achieving High Performance in BPO, Accenture 2012.