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Business process outsourcing or BPO, refers to contracting specific projects or processes to a third-party provider. A third-party may offer services related to functions such as payroll, accounting, marketing, IT, and customer service.

Startups, medium sized companies, and Fortune 500 organizations often turn to BPO to support their operations and propel growth. By taking advantage of BPO, companies can reduce costs, improve service delivery, focus on key business functions, and expand their national or global presence. BPO can be leveraged as a tool to enable flexibility and improve an organization’s ability to respond to trends, changes, and disruptions.

Importance of BPO Governance

If you pursue BPO, governance must be a top priority. After all, your goal should be to work with a trusted, long-term partner, not a one-time vendor. From the moment you embark on a BPO journey, it’s vital to design and execute a solid, uniform governance model that will allow you to structure the relationship with the BPO third party providers and manage the arrangement. This way you can ensure mutually beneficial, long-lasting relationships with all your partners.

Challenges of BPO Governance

Multiple aspects feed into a well-designed governance structure for BPO, specifically strategic alignment, value management, performance measurement, risk monitoring and resource management. It is critical to institute mechanisms in the governance model that address these key aspects. It is often when one of these key aspects is lacking that governance is sub-optimal, leading to issues impacting the BPO endeavor effectiveness. An example of this is companies hiring third parties to handle one or more of their business functions, but lack to provide a uniform structure that sets out the goals, explains how to meet the goals, and outlines how to measure the results of the efforts expended by the third parties. When this happens, third-party providers will likely resort to behaving as vendors, instead of strategic partners and extensions of the organization’s business units. This can be particularly true when companies outsource processes across multiple vendors, geographies, time zones, and cultures.

How to Plan for Governance of Outsourced Processes

Fortunately, there are certain steps organizations can take to unify exceptional governance across all outsourcing service providers.

At the heart of any outsourcing attempt is an in-depth understanding of a company’s own processes and the way it creates value and delivers services. Only through this self-examination will an organization be capable of understanding and assessing which of its functions and processes therein are ripe for outsourcing, as well as the potential impact of doing so. Any organization considering BPO must start with the exercise of gaining insight into its own operating model through process discovery, analysis, and process modelling. This is in no way a frivolous exercise, as its results will inform not only the decision of which processes to outsource, but the choice of governance model and details of it as well. The exercise by the way, should not be limited to process only, but most encompass all other relevant aspects of the operating model (People, Organization, Technology and Culture).

This then should be followed by attempts at harmonizing and standardizing the way the processes are executed, with the goal to arrive at optimized unified processes for the functions to be outsourced. This will pay dividends down the line as it will also yield insights into potential opportunities for process automation, which can be a significant component of achieving the stated cost or execution improvement objectives.    

Once this internal component is covered, an organization is ready and equipped with the information to move to design the governance model to transition the function to the service provider. And here is where the components mentioned above again rear their heads. A truly effective governance model must account for these key aspects, and give form through the following components of the governance structure:

  • Process ownership and accountability: a clear breakdown of outsourced functions, processes, subprocesses and activities, with a clear delineation of responsibility for execution of each of these and accountability for overall service delivery.
  • Service level expectations: agreement on what targets and metrics will be utilized to assess quality of service and which thresholds constitute satisfactory performance. Better yet, transcend service level, and focus on generation of a true service partner agreement, more reflecting the spirit of strategic cooperation, with acknowledgement of the organization’s own role in delivering proper and quality inputs to the service delivery process.
  • Collaboration model: what touchpoints, interactions, dependencies, hand-offs and agreements are recognized as part of the service delivery
  • Governing bodies: what will be the mechanisms for control and which bodies, or forums will be created and tasked with the steering and control.
  • Communication model: type and cadence of reports, meetings, decision-making, issues escalation protocols and other rituals aimed at transparency and dissemination of information regarding service delivery execution status.
  • Risk and Quality monitoring: through regular execution of audits, benchmarks, health checks etc. and performance measurement to determine if service level agreements have been met.

Lastly, it is best practice to agree with the BPO service provider on how these components and the governance model in general will be effectuated during each of the individual stages of the BPO lifecycle (Discovery, Transition, Steady State Execution/Continuous Improvement)

 How Mavim Can Help

There’s no denying that strong governance directly impacts the success of outsourcing initiatives of organizations. That’s where Mavim comes in. With its robust BPM capabilities, our platform is excellently positioned to function as the repository to capture, design, improve and document the processes to be outsourced, as well as all aspects of the operating model related to these processes. Furthermore, Mavim’s process mining capabilities help accelerate process discovery and analysis, which is a key step in the BPO lifecycle. By leveraging features like RACI matrices and reports contrasting People, Process, Organization and Technology aspects of operations, Mavim can help visualize and clarify for the outsourced processes where, when, how, with what and by whom, the work is being done. Mavim also facilitates the implementation of the communication model in the governance structure through task assignment and notification, structured and unstructured feedback capturing capabilities and approval workflows configuration. With a web-based portal that is easily deployed to large numbers of users in an organization, communication and collaboration across business units, domains, and even geographical borders can be instituted with relative ease.  For more information, we encourage you to schedule a consultation today.

 

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