Conventional Metrics Motivate Continuing Progress


Supporting a transformational outsourcing initiative requires more than new metrics. Partners must also use conventional measures, but they use these in a way that is tailored to the objective of transformation. Importantly, the focus changes from hitting baseline targets to turning in the best possible performance. While many companies set stretch targets as well as minimum service levels in outsourcing deals, stretch goals take center stage in a transformational-outsourcing initiative. ‘‘Metrics tell you where to look to make things better,’’ says a veteran business process outsourcer. ‘‘We don’t treat them like positives or negatives; we treat them like information.’’

Transforming companies do continue to target basic service levels, but they hand off the responsibility for tracking these operational statistics to the outsourcing vendor itself. As part of taking on one telecommunications company’s legacy voice operations, the outsourcing provider collects detailed statistics in areas like customer satisfaction and dropped calls, assesses its own performance relative to targets, and reports failures and its plans for improvement to its partner. This structure gives operational metrics just the right emphasis—worth measuring, but not the central focus of executives’ attention. It also underscores the trust that this kind of relationship entails. One relationship manager explained, ‘‘People often ask me how I can let [my provider] report the performance statistics to us. What if they omit an error or lie about the data? Well, they report every single failure to me. If they didn’t, the relationship would be devastated. I know they wouldn’t do anything to spoil the trust we have.’’

Transforming executives are less interested in reaching some kind of operational steady state than they are in making continuing—even step- change—progress. A quick review of Thomas Cook’s balanced scorecard[4] shows this clear emphasis (see Exhibit 7.5). Executives take quarterly readings on these metrics to measure the provider’s overall performance. It has five components: service levels, process improvement, improvement in quality and standards, the provider’s cultural fit, and innovation. Only one of these factors is a conventional ‘‘state’’ measure—service level. Cultural fit sets a boundary condition for Thomas Cook’s provider. The outsourcing partner must be listening to business needs and responding collaboratively in the eyes of key process clients to score well on this metric. If this is not true, executives reason, it is a major obstacle to the high-performance partnership they want. The other three factors on the scorecard are not states, but rather ‘‘rates’’ of improvement. A Thomas Cook executive explains: ‘‘Service levels are almost a given. We expect our provider to meet them. We use the other metrics to make sure we are making progress on the transformational agenda.’’

click to expand
Exhibit 7.5: Thomas Cook measurement approach.

Companies that transform through outsourcing often use conventional metrics to diagnose issues and opportunities in their provider’s processes. Leaders also apply companion measures to their own side of the house. The most sophisticated organizations take a relationship physical each year that assesses how both partners are contributing to success. Why?

Frequently, the performance of the retained processes has a significant impact on the outsourcing provider’s ability to work effectively. For example, NS&I retained new product design, but outsourced development and operations. By designing a complex product that was difficult to administer, NS&I could inadvertently sabotage its provider’s ability to improve costs. The two organizations quickly learned to involve people from development and operations in the early product design discussions to head off these problems.

Results-oriented executives keep an external, competitive edge on their metrics through benchmarking with other organizations. By monitoring the external landscape, they learn how their own operation measures up to those of the leaders in the field and how to take advantage of innovations that others have pioneered. Peter Bareau of NS&I comments: ‘‘One fascinating thing we did was to benchmark retail debt financing around the world. We formed a ‘club’ with the US, UK, Canada, Ireland, and others to keep a broad perspective on what good performance looked like.’’

Benchmarking is not the only way these organizations stay tuned to the state of the practice. Many executives take regular field trips to other public- and private-sector operations to share insights and practices. They also welcome outside visitors in the same spirit.

[4]This performance measurement concept was first developed by the management of Analog Devices.




Outsourcing for Radical Change(c) A Bold Approach to Enterprise Transformation
Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation
ISBN: 0814472184
EAN: 2147483647
Year: 2006
Pages: 135

flylib.com © 2008-2017.
If you may any questions please contact us: flylib@qtcs.net