Strategic Outsourcing Professionals

Let us begin by stating the obvious - The Internet has empowered consumers, and the online consumer wants their products cheaper, faster and without hassle.  For this reason, online business needs to have a great customer experience to ensure the level of satisfaction necessary to set itself above the competition; the first impression by users will determine the success of the business over time.

In the online world, there are so many opportunities to provide world class customer service in a manner that is smart and cost effective.  Most organizations look at customer care as a cost center that only needs budget to keep the revenue stream flowing; it is viewed as a burden of doing business versus the cost of providing service.  I hate to say it, but this is ‘Old School’ thinking.

When companies forgo the opportunity to capitalize on ensuring customer satisfaction through all contact channels, companies are impacting both the top and bottom lines because the experience of their consumers is purely reactive.  In other words, the services offered are only established to assist a customer when there is a problem.  In general, this can leave a poor impression upon consumers and they are more likely to abandon a product for another if there are competitors proactively retaining their business. 

The successful online business will incorporate proactive customer care programs into their operations to ensure customer satisfaction (CSAT), stronger customer loyalty and improved brand recognition, which in turn promotes customer persistency and improved customer lifetime value for the business.  The beautiful thing about proactive customer care is that companies actually enable themselves to outsource more of their operations to drive down the ‘burdensome’ cost of providing service.

This is going to be the first article in a series of posts that discuss different methods of building a proactive customer care organization.  This article lays the foundation for the governance structure, and follow-up articles will explicitly detail how to improve the customer service operations of any online business.  The goal is to demonstrate that great customer experience and proactive servicing techniques translate into stronger revenue, higher margins, cost reduction strategies and additional revenue opportunities.

The building blocks for an online business to deliver proactive customer service are as follows:

• User-Friendly Website
• Customer Loyalty Programs for Customer Rewards
• Tailored Newsletter for Product Reinforcement and Value Proposition
• Leveraging IVR, CTI, ACD and CRM to Promote Superior Consumer Experience
• Leveraging Chat to Increase Acquisitions and Transactions
• Skills-Based Routing for Both Email and Contact Center Services
• Optimized Knowledge Base for Customer Self-Service
• Tailored Value Retention Programs
• Organizational Readiness to Outsource Operations

In each article of this series, I will present best practices for building proactive customer service organizations.  These posts will specifically discuss cost control, revenue production and transforming all customers into happy consumers of more products and more services.

Vince Lombardi was not only a great football coach, but an inspiring leader who knew how to get the most out of his players. He was a fierce competitor and ensured that he instilled solid values of hard-work, perseverance and a winning attitude into all that listened. He has provided America with some of the most memorable leadership quotes of the 20^th century. More importantly, his views on leadership are not only relevant to achieving success on the field, but parallel that of a successful business leader.

When managing business, successful leaders need to demonstrate and project the same attitude and values that made Vince Lombardi so famous. Successful leaders bring people together to collaborate, work-hard and focus effort to a common goal – winning.

Here are some favorite Lombardi quotes that are applicable in the business world:

“The achievements of an organization are the results of the combined effort of each individual.”

“The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack of will.”

“Individual commitment to a group effort - that is what makes a team work, a company work, a society work, a civilization work.”

“The leader can never close the gap between himself and the group. If he does, he is no longer what he must be. He must walk a tightrope between the consent he must win and the control he must exert.”

“Dictionary is the only place that success comes before work. Hard work is the price we must pay for success. I think you can accomplish anything if you’re willing to pay the price.”

“Football is like life - it requires perseverance, self-denial, hard work, sacrifice, dedication and respect for authority.”

“If you are not fired with enthusiasm, you will be fired with enthusiasm.”

“Once you learn to quit, it becomes a habit.”

“Perfection is not attainable, but if we chase perfection we can catch excellence.”

“Practice does not make perfect. Only perfect practice makes perfect.”

In the call center or transaction processing environment, employee attrition seems to always be a continuing struggle for operations. Historically, the industry sees high turnover for reasons that include low-pay, repetitive work, lack of career path and difficult customers. A theory with outsourcing operations in emerging economies is that attrition risk is reduced by providing better pay and opportunities where they otherwise did not exist. In my experience, this theory has not exactly been proven, and employee attrition seems to be just as much of a problem offshore.

When examining the economies and markets of where business operations are outsourced, it becomes apparent that attrition occurs for different reasons. The largest impact is economic growth of the emerging economy. An influx of competition drives wages upwards and produces turnover for incumbent vendors and/or captive centers. An even bigger problem is that employees do not feel loyalty to provide notice; they simply leave for a better opportunity. This becomes extremely costly when dealing with outsourcing operations and is a key performance indicator that needs to be managed and governed appropriately.

For managing attrition in an outsourcing paradigm, be sure to think of creative ways to protect the operations from experiencing this pain.

Here are a few tips to help with managing attrition:

• Define and develop an attrition metric that can be agreed to at contract. Look to drive vendor behavior with incentives and penalties associated around attrition.
• Drive individual behavior by developing incentive plans that can be lucrative for tenured resources. For example, in a sales paradigm, drive commission structures to be both quality and annuity based. The higher the quality rate coupled with the persistency of sales drives larger commissions over time.
• Track all attrition on a monthly basis; this should be the minimum amount of time used to measure attrition. It is important to track both voluntary and involuntary attrition across the skills, management structure and geographic location. Also, track an annualized rate on a monthly basis.
• Develop earned value metrics to validate the cost of replacing more experienced and tenured resources; new resources will have longer cycle times and be more prone to error; this adversely effects budget and operational costs.
• Develop a governance model that ensures resources feel a sense of corporate pride and ownership.

Attrition can be devastating to a business if not properly managed. To drive higher quality, increased customer satisfaction, better resource efficiency and lower costs, attrition management must be incorporated into an outsourcing governance model.

Within the Vendor Management discipline of a Global Operations organization, the process of a Quarterly Business Review (QBR) should be established to achieve high-quality performance and ensure a healthy, successful partnership with your vendor(s). While some people use the QBR as an excuse for a boondoggle (which isn’t always a bad thing), I feel that they are extremely valuable for managing your business; I wanted to share my viewpoints and guidelines for facilitating successful meetings and enriching partnerships.

The QBR process should be established immediately upon execution of a sourcing relationship. It acts as a forum for all parties to establish clear understanding of business goals, objectives, expectations and future direction for the business. This meeting should be viewed as an important tool to discuss and work through change activities for the benefit of performance improvement.

In my opinion, the QBR meeting should be setup in a similar fashion to what is outlined below:

• Established Agenda and Participants
• Develop Decks for Both Your Company and Vendor(s)
  • Strengths, Weaknesses, Opportunities, Threats (SWOT) Assessment
  • SLA Root Cause Analysis –Both Positive and Negative
  • Performance Improvement Planning
  • Project Updates/Proposals
  • System Enhancement(s)
• Corporate Initiatives
• Forward Planning and Strategy
• Appendix of Agreed to Performance Data
• Action Log for Meeting Follow-up(s)

When preparing for a QBR, I also suggest following these tips:

• Set the date for the meeting no later than five weeks in advance
• Set the agenda and participants in advance
• Share the decks prior to the meeting to ensure discussion points can draw actionable items by each company – remember, this is a collaborative process for the greater good.
• Do the QBR face-to-face (this can be challenging with cost center budgets)
  • Personally, I like to have vendor(s) visit us
• Document and share all actions and discussion points that evolved from the meeting
  Manage the actions to ensure improvement within the organization
  Enrich the relationship with some extracurricular activity

If you would like to read a similar article on managing a QBR, you can check out a site I like to frequent - 360VendorManagement. This author needs to remain anonymous, but he is a tenured professional and I respect his ideas and thoughts. Great minds think alike!

My February has been very busy with travel and work, which is why I haven’t posted anything this entire month. My travels and workload are calming down so I figured I would take this opportunity on a lazy Sunday to get something out on the site. I wouldn’t want to give the impression that I am a slacker.

I started off February in Asia, and my last post discussed the benefits of Cebu as a BPO Destination in the Philippines. I went to Central America the following week to visit facilities in Guatemala; we were impressed with the infrastructure and have started discussions to acquire some Spanish services for our business. After my travels, I have spent the last two weeks getting our team’s 2008 goals aligned, presenting project plans and financial goals to executive management and obtaining buy-in that we are going to accomplish great things throughout the year! The workload is heavy; we have approximately twenty projects to deliver by year-end. As always, I am confident we will come in on time and within budget.

One of the biggest things that we are going to accomplish this year is improvement upon our call abatement strategy, customer self-service and customer retention while also building upon our existing service experience for our customers. When looking at all these projects, it occurred to me that there is an extremely heavy focus on the discipline of Business Process Management. That being said, we instituted a paradigm to manage this discipline by leveraging the core principles of process design and improvement.

Business process management is a common term that means different things to different people. For me, I find this to be a simple core component of an organization and sum it up as the constant improvement of the foundational and ancillary processes that govern the business functions. The goals are to measure the success of processes to keep the ‘trend your friend’ (trend moves Up and to the Right) and demonstrate constant and continuous improvement. In turn, constant improvement drives down operational costs, which will land you in the ‘circle of trust’ (can’t resist, sorry…I liked Robert Dinero’s character in Meet the Parents…a lot).

There are many ‘best-practices’ for managing business process. Within my team, we have implemented a lot of six-sigma methodology to measure our success and improve how we operate. The idea with six-sigma is that you quantify improvement through statistical analysis. It has helped us a great deal on many levels; especially with our quality program. We have also adapted some of Microsoft’s approach to business process management and use this methodology to model our process design today.

• Model & Design
• Develop & Deploy
• Manage & Interact
• Analyze & Optimize

By adopting six-sigma principles and Microsoft principles, our business has and will continue to improve immensely. In my opinion, our business process efforts will improve the following for 2008:

• Increase Customer Retention
• Reduce Operational Costs
• Improve Regulatory/Compliance Objectives
• Improve Efficiencies Across Organizational Boundaries
• Enable Reuse
• Greater Employee and Personal Satisfaction
• Reduce Risk
• Agile Work Environment

I hope this post satiates all of you for now. My apologies again for taking so long to get something out on the site, but my real job and family take priority. Maybe I will develop a process to improve my available time for the website. I think this would be the hardest goal to conquer all year.

Cebu is a great destination to provide business continuity in your global sourcing plan; this is true even with Manila as an existing destination. The island is far south of Luzon (island where Manila resides) and is surrounded by neighboring islands. Because of the location, it is shielded from most tropical storms and typhoons. If Manila gets pounded with weather, Cebu usually doesn’t feel more than strong rain. Additionally, the island has the fastest growing economy in the island chain and is the second largest metropolis in the Philippines.

Here are some other factoids about Cebu:

• The island boasts a population of about 3.5MM; most speak English well
• Cebu graduates 20K students annually from its universities and offers a strong, educated labor pool
• Power sources are a mix of fuels and geothermal energy, ensuring long term reliability and protection of the environment; all power and water supplies are mutually exclusive of Luzon and the northern islands.
• BPO growth remains strong in the region and is expected to continue as the US economy heads into recession.
• Cebu is the most accessible place in the Philippines, with more domestic air and sea linkages than Manila
• It has one of the best records for peace and order within the country
• It is not in an earthquake zone or typhoon belt, nor are there volcanoes on the island
• Its labor force is oriented towards non-agricultural lines and is one of the most productive in the country
• The development of its infrastructure is balanced; it has all the ingredients necessary to be competitive and sustain investments

And, finally, my favorite tidbit about Cebu…

• Its warm hospitality, white sandy beaches and surrounding rich coral reefs, make it a favorite international tourism destination.

I am ready for some hard work ahead.

As large companies experience growth, especially by acquisition, there will always be opportunities to consolidate and streamline business operations for optimal efficiency and cost reduction. When individual business units are managing the same function, such as Customer Care Operations, there is an opportunity to consolidate the function so each unit and their unique requirements are met while placing a core group accountable for all the operational infrastructure, vendor procurement and relationship management that is necessary to ensure excellent service delivery. For this reason, I am a firm believer and proponent of a Global Operations governance model when managing customer care across multiple business units within large organizations.

The benefits for consolidating the global sourcing function are as follows:

• Responsibility and accountability falls within one group to manage the service and sourcing function for the business to meet the needs of both internal and external customers.
• Promote collaboration between business units and drive toward unified customer experience goals.
• Optimize costs by performing Work Force Management (WFM) to forecast and staff a balanced vendor portfolio.
• Enable an infrastructure to seamlessly transition vendors when better performance, terms or service levels are desired.
• Expand, grow and align the business with strategic partners that can deliver results.
• Build a diversified vendor portfolio for business continuity.
• Build and foster sound relationships to ensure the business is satisfied with performance, costs and customer experience.
• Balance the need for immediate cost savings with customer satisfaction
• Coordinating activities/projects across multiple providers and geographies

I developed this star diagram for a recent presentation on Global Operations. I feel it sums up the function well.

Here are my top ten predictions for the BPO industry in 2008:

1. Outsourcing will once again become a hot topic in Presidential debates as both Republicans and Democrats try and win votes from the masses; expect lots of ‘Keep the jobs in the USA’ propaganda – it should be noted that neither political party really knows what they are talking about.
2. Guatemala of 2008 is the Philippines of 2003. Lock in those highly competitive rates and snatch up the English speaking talent while you can.
3. Locations will be more difficult to identify as market saturation in existing BPO destinations drives increasing costs and emerging BPO destinations offer threatening political profiles.
4. Offshoring market trends for quality English speakers will drive the Philippines to the number one destination for English-based support. This is only true if government officials can agree to disagree and get past their issues. No more bombings and coups are necessary.
5. BPO 2.0 will emerge and become a competitive advantage for vendors as work-at-home platforms have the potential to offer higher quality talent at cheaper prices. The financial services industry has work to do for this model, but it will eventually work itself out. By 2025, owning real estate to house a call center will not even be an afterthought.
6. Opportunities for business development are prevalent in Brasil as the economy will continue to flourish driving demand for Portuguese based services. Latin America provides the best opportunity to provide these services with vendors already providing free language classes.
7. Companies will continue the trend of reintroducing domestic-based services for critical vertical functions that include inbound/outbound sales, customer retention and escalation services.
8. Launching offshore, captive centers within big companies will continue in developed BPO markets. Captive centers will continue to be a key strategy in driving down operational costs while acquiring and retaining experienced resources.
9. Companies will learn to use outsourcing tools to manage SLAs more effectively to drive new and better contract terms with their providers.
10. Eastern Europe was buzzing in 2006/7. The region will not flourish for American business, but will emerge as primarily a European outsourcing destination.

Cheers to a prosperous and healthy 2008!

In the BPO environment, a typical governance model will include a mechanism for managing key performance indicators (KPI) to ensure high levels of resource utilization and customer satisfaction (CSAT) while driving down operational costs. Most environments will define measurements that track KPI at an individual resource level, but will then average KPI by vendor, site location and/or line of business to measure success. The data is then traditionally used to identify opportunities for improvement and/or steer ‘spend’. Typically, enterprise-wide initiatives are developed for an entire program where only marginal benefit is achieved because the gaps are not enterprise-wide. What if you could monetize each resource in dollars and cents to understand impacts and/or benefits?

As ‘BPO 2.0’ moves forward, there is a need to measure individual resources with a metric of Earned Value (EV). This concept is founded on the principle that resources are variable; they perform at different and unique levels of efficiency and quality. The more adept a resource is at providing efficient and quality services, the less impact that resource will have on the overall operating cost of the organization. By measuring individual resources with earned value, this opens the door for aligning vendors more seamlessly to corporate objectives and goals.

Benefits of deploying an EV metric are as follows:

• Develop a performance monetization matrix that specifies impacts of resource specific operating costs within the organization
• Incorporate a framework for training development to promote resource grade classifications and drive towards higher quality, higher efficiency and lower costs.
• Develop value stream maps for process improvement and resource development
• Incorporate EV metrics into the scorecard to assess and target opportunities for improvement

Stop and think about the possibilities from both a negotiation and vendor management perspective as the model is developed. Vendor incentives could be negotiated where the best and most efficient resources are aligned to your account. Vendors have the potential to make higher margin; clients would be willing to pay slightly more for resources that are known to operate more efficiently with higher quality because earned value would quantify an actual cost reduction of lower FTE. By developing an earned-value metric, everyone has the opportunity to win. Let’s just hope my boss wants to play!

Within the last six weeks, there have been three serious events in Manila that cause concern for the Outsourcing community facilitating operations in The Philippines. While operating in Manila for two years, this is the first time that a series of dramatic events has occurred in such a short span of time.

On Friday, October 19^th, there was an explosion at the Glorietta mall that killed eight people. The Australian Federal Police, who assisted with the investigation, concluded that there was “no evidence to suggest that the explosion had been caused or initiated by an improvised explosive device.” However, after being in Manila a few weeks ago, the general consensus amongst the people was that it was more than likely a deliberate terrorist attack.

On Tuesday, November 13^th, I was having dinner on top of the Citi building in Makati when a blast went off at the Philippine House of Representatives. This explosion killed three people and wounded several others in the area. This was the first historical attack against the Philippine government building.

Today, November 29^th, there was a resistance movement staged at the Peninsula hotel in Makati (across the street from the Shangri-La where I stay), which was comprised of former government officials and a small military force. The renegade group was demanding the resignation of President Gloria Macapagal Arroyo and calling for a popular uprising against the President. Philippine military forces surrounded the hotel. Approximately 400 hotel guests were evacuated during the siege. Warning shots had finally been fired and tear gas was used to thwart and disrupt the uprising. While this ended with no casualties, it seems far from peaceful.

We have been extremely pleased with our Manila Operations, but it does make you think twice about business continuity and general sourcing strategy. Now, I just need to prevent my wife, or heaven forbid, my mom from seeing this post. The travel would be the least of my worries.