Managing-oursourcing-transition (1).ppt

Managing Outsourcing Transition Service Management Specialization SMFBPO1

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Changing Hats

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Course Norms & Rules Your are responsible for your own learning: •Come on time, all the time •Be participative – ask questions, share your thoughts and opinions, take notes •Be supportive – assist your peers as long as they are willing to assist themselves •Do all assigned tasks to the best of your ability •Be enthusiastic, energetic, and, fun •Keep all distractions away in your bag – mobile phones on silent mode, tablets, laptops Module 2: Fundamentals of Outsourcing

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Topical Overview • • • • • • • •

Transition Management and Strategies Transition Success Factors and Effectiveness Document Readiness Work Shadowing Readiness Assessment Hand-Offs Scale Time Tracking

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Module Learning Objectives • Define Transition management • Define the migration strategies and knowledge transfer frameworks • Define what are Transition Risks • List the critical success factors • Identify transition effectiveness • Outline the requirements for good transition documentation • Explain work-shadowing • Define the components of readiness assessment. • Define Hand-offs • Explain the concept of Scale • Explain Time Tracking

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Managing Outsourcing Transition The Transition Manager ~ Transition Strategies & Knowledge Transfer Framework

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Transition Management, Definition of

• Transition Management is the set of activities that

transpire after a BPO contract is signed that implements or executes the detailed movement or transfer of processes from the client to the service provider.

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Transition Management, The Manager

• A Transition Manager is responsible for migrating

the function or the process from the client location or organization to the service provider or outsourcing organization.

• The Transition Manager needs to be an effective communicator, as the role requires extensive interaction with the clients

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Transition Management, The Manager Because of the nature of the role, a Transition Manager needs to have a variety of skills and competencies: •Needs to have strong project management skills, as the migration process are complex projects that require expert management skills; •Needs to be comfortable in working in a crosscultural environment, as most often, the client teams are based overseas; •Needs to have a thorough understanding of the; existing business and legal processes, and, current as well as emerging technologies as these play a critical role in the off-shoring of a business function Module 4: Managing Outsourcing Transitions

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Transition Strategies & Knowledge Transfer Framework Generally, there are two common strategies followed in migrating a function, these are:

•Lift and Shift •Re-engineer and Migrate

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Transition Strategies & Knowledge Transfer Framework Lift and Shift

•Definition •Phases •Items to Consider •Advantages

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Transition Strategies & Knowledge Transfer Framework Lift and Shift •Definition - This is the most common methodology used. When the process is mature, the ’Lift and shift' approach is used for migrating.

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Transition Strategies & Knowledge Transfer Framework Lift and Shift

•Phases

1. Move the current process to the service provider without changes/ improvements 2. Stabilize 3. Re-engineer the process to achieve efficiency gain – produce same output, less FTEs − Modify the process − Add end-user type or strategic automation − Combine role with others − Move process into a production line − Negotiate elimination of unnecessary outputs

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Transition Strategies & Knowledge Transfer Framework Lift and Shift

•Items to Consider

1. Process change that will not affect process control points or output can be done by service provider independently − Onshore approval of process changes is good practice − Onshore review if the change impacts regulatory control points

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Transition Strategies & Knowledge Transfer Framework Lift and Shift

•Items to Consider

2. Major effort: post go-live reengineering − Transition phase can be easy especially if “people and processes” are moved; may take 3 to 4 months only − Risk that Onshore loses political will to reengineer processes after a while

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Transition Strategies & Knowledge Transfer Framework Lift and Shift

•Advantages – Advantages of an “as is” basis

process migration: − Training the new team is easier, as the process is well understood and documented − Existing employees at the donor location are available to support the process in case of disruptions or instability − A fresh set of eyes (the new team) look at the process from a fresh perspective, often resulting in process improvements and enhanced controls Module 4: Managing Outsourcing Transitions

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Transition Strategies & Knowledge Transfer Framework Re-engineer and Migrate

•Definition •Items to Consider

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Transition Strategies & Knowledge Transfer Framework Re-engineer and Migrate •Definition – Fundamental rethinking and radically redesigning of the business process so as achieve dramatic improvements in critical measures of performance such as cost, service, and, speed.

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Transition Strategies & Knowledge Transfer Framework Re-engineer and Migrate

•Items to Consider: − Useful when the process is either broken and

−

requires fixing, or is due to undergo significant change in the near future (systems change or process change) In such cases, it may be important to utilize the expertise of the existing team (which is built over several years) to drive the change, before it is handed over to the new team

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Transition Strategies & Knowledge Transfer Framework Re-engineer and Migrate

•Items to Consider: − Company that outsource industry common

processes to a market-leading service provider will generally follow service provider processes

− Company changes its processes as part of transition to service provider

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Transition Success & Effectiveness Transition Pitfalls & Risks ~ Critical Success Factors ~ Transition Effectiveness

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Transition Pitfalls and Risks Most of the issues with sub-par or failed outsourcing endeavors can be attributed to a few pitfalls. 1. Inadequate investment and Sponsorship 2. Unclear scope of work 3. Training shortcuts 4. Unclear roles and responsibilities 5. Not retaining the experts These can be avoided if the Transition Manager constantly re-focuses attention of all involved towards these Module 4: Managing Outsourcing Transitions

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Transition Critical Success Factors The success or failure of a transition project is fundamentally measured in two aspects:

1.Technology Readiness – state of readiness of

the enabling hardware and software to support the on-going operations

2.Manpower Readiness – state of the readiness of

the operating staff; hired, trained, and, skilled for the service processes

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Transition Effectiveness Transition Effectiveness can measured through:

1.Financial Benefits 2.Performance of the Team

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Transition Effectiveness 1.

Financial Benefits It is important to quantify the real cost of the function before off-shoring (baseline costs), and also to measure the cost of the off-shore team on an ongoing basis.

• Costs related to moving the function to the new team should be tracked separately as project costs.

• Capturing these cost elements enables comparison of baseline costs with current costs, and provides an accurate measurement of the saves.

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Transition Effectiveness 2. Performance of the Team • Primarily done by developing performance metrics • Usually subject to a testing phase to determine reasonability of the service measures – also known as the “baselining” period

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Document Readiness

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Document Readiness

• Inputs • Processes are documented to standards • Replication ready • Output • Communication • Supervision

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Document Readiness: Inputs 1. Inputs are documented • Source systems and dependencies • Timing of delivery quality assumptions, and work-around in case of failure in delivery of some inputs − Historical timeliness and accuracy statistics. Helps

size service provider resources need, helps identify likelihood of work-compression (rushing 3 hours work in 1 hour) or overtime (working late to keep to output delivery targets)

•

Format of inputs (structured or not)

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Document Readiness: Process 2. Process are documented in industry standard format and in complete detail • Hand-offs to other parties, internal and external, documented, including timing and format • Interim/flash reports, if required, are documented as deliverables. Delivery time, day-of-month, period targets are documented 3. Required tools, macros, workflow, application, shared directory access are listed in sufficient detail to allow replication in the service provider

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Document Readiness: Outputs

4. Interim/flash and final outputs are completely • • • •

documented Formats are completely defined Control steps and quality assurance checklists are defined Delivery time/day-of-period are defined; these are reviewed to ensure they are achievable/consistent with input timelines Service provider and transition project manager should validate that timelines are current and not “aspirational;” tendency to put in desired/unrealistic deadlines when outsourcing

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Document Readiness: Communication

5. Communication channels for output to be • •

explicitly defined Clarity here minimizes misunderstanding during early production period Especially if the output is an input to another process

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Document Readiness: Supervision

6. Onshore supervision points and what will be • • •

reviewed/checklist should be defined Some country regulations (US) require clear trail of supervisory control by an Onshore person Responsibility for output (e.g., financial statements) rests with an accountable Onshore officer For shared service centers particularly, clear documentation on areas of supervisory review paves the way for transition into “center of excellence” mode where supervisory control rests offshore

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Document Readiness: Summary

• I_____ • P________ are documented to standards • R__________ ready • O_____ • C____________ • S__________

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Work-Shadowing

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Work-Shadowing • Definition – is the term used for “learn-by-doing” activity of service provider personnel, generally done at the same location as current company performer

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Work-Shadowing Phases: 1. Onshore personnel doing activity

• Onshore personnel performs activity, conducts •

training; service provider personnel looks over/ on - observers May be done at Onshore location with service provider staff travelling; may be done at service provider location with Onshore staff travelling

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Work-Shadowing Phases: 1. Onshore personnel doing activity

• Service provider staff reviews documentation • •

provided against actual activity done by Onshore personnel Changes in documentation are done Re-sizing of required staffing may be negotiated at this point

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Work-Shadowing Phases: 2. Guided service provider network

• Service provider performs the activity; Onshore • • •

personnel looks over and gives close guidance May be done Onshore or at service provider site Completes 1 or 2 full cycles: if output is monthly, guidance is given for 2 month-ends; if output is daily, guidance is given for a few days Generally 1 to 2 months of guided work

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Work-Shadowing Phases: 3. Go-live

• Service provider performs the activity • • •

independently at service provider site Performance targets in place and required Changes in sizing or process (to correct erroneous training provided by onshore) now falls under change-request process and governance Need to closely monitor for a period of 3 months to ensure stable performance

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Activity: Readiness Checklist

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Readiness Assessment

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Readiness Assessment, Purpose of Readiness Assessment verifies if process to be outsourced is: 1. Adequately documented. Poorly documented current process will result in: a) Most current in-house processes operate on tribal knowledge, undocumented steps. b) Service providers adding “uncertainty” of process premium in their proposals—not very clear what will be delivered, how, and by when c) High probability of he-said-he-said misunderstanding during initial phase of production d) Long work shadowing period and high cost as service provider tries to document required process

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Readiness Assessment, Purpose of 2. Correctly-sized in generic resources a) Most current processes done in-house operate with long-experienced staff (veterans in role). 1 FTE with 20 years on-the-same-job experience is not equal to 1 FTE with general experience no matter how bright or expert or diligent b) Without readiness assessment, the company will estimate the current cost low. The receiving provider may incorrectly size the role, may have to initially use 2 performers (with very structured steps) to do the same 1-FTE job until knowledge is gained/documented

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Readiness Assessment, Purpose of 3. Resource sizing already includes the right level of quality assurance and supervisory control a) Most in-house processes rely on veteran performers with long-developed “business acumen” that allows unstructured sense-check for quality assurance. b) Most contracts (especially shared service center migrations) are under-configured because QA/supervisors are not included c) Why is incorrect (under) sizing a problem? Because service providers will inevitably use the “change request” process to add to the cost

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Adequate Documentation Adequate Documentation for: 1. 2. 3. 4. 5.

Input Process Output Communication Supervision

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Adequate Documentation Adequate Documentation for: 1. 2. 3. 4. 5.

Input Process Output Communication Supervision

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Considerations for Input 1. Properly described input 2. Method of acquisition 3. Language of input 4. Timing of the input 5. Dependencies

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Adequate Documentation: Input a) What are the inputs

– Is there documentation listing/describing the inputs

o Many onshore processes performed by longo

time staff would not have existing documentation Key to know where there are gaps to understand areas and cost of remediation

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Adequate Documentation: Input a) What are the inputs

– How are the inputs received o Are they in structured form (consistent) or are they in verbal, email or even spreadsheet freeform

o Structured input makes straight-through processing easier, requires less business acumen on part of performer

o Less training for processor to start, faster growth from new hire to productive performer

o Unstructured input data points to early area for

process improvement; efficiency gains from straightthrough processing

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Adequate Documentation: Input a) What are the inputs

– Are inputs in same language as that of provider o Can communication onshore be done in same language o

as that used by provider Different language adds cost in terms of language translator/specialist and “funnel” effect

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Adequate Documentation: Input b) Is there an input data timing condition (can be received only on Business Day x)

– Are the inputs received all throughout the month or do

−

they peak on a single day/period o Peaking inputs may require peak-basis staffing to keep delivery target o Extra cost of peak personnel o Challenge of work-scheduling to use staff during low periods Are inputs received only on defined days o Do those days coincide with month-ends o

Less opportunity to do work-scheduling of off-peak staff if work peaks are the same

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Adequate Documentation: Input c) What are the dependencies (what systems, external parties)

– Are dependencies documented—i.e., OO

output from another system/process must be received first before PP input can be delivered

– Which inputs are delivered by external

systems, which by internal systems o How stable are the systems (do they go down regularly)

− Are there work-arounds in case of input system failures

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Adequate Documentation: Input d) How accurate are the inputs (quality of input)

– Are there base/historical accuracy statistics. – –

Can be used to justify cost of measures to improve accuracy Input errors cost money in terms of re-work Poor quality of input means prior step to validate input must be added

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Adequate Documentation: Input d) How consistently delivered on time (timeliness)

– Are there historical timeliness statistics. Can – –

be used to justify investment in faster platforms, in process improvements Late inputs cost money in terms of overtime “Compressed work-day” burden on performers (doing 3 hours worth of process in 1 hour to deliver on time)

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Adequate Documentation Adequate Documentation for: 1. 2. 3. 4. 5.

Input Process Output Communication Supervision

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Adequate Documentation: Process Checklist a) Are the processes properly documented b) Are hand-offs to other parties (internal and external) shown in the documentation c) Are interim or “flash” reports documented d) Are delivery time/day-of-month/period targets documented

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Adequate Documentation: Process Checklist General rule of thumb:  If documentation length exceeds the output materially, that is too low a level  Lowest level documentation going beyond 2 to 3 pages is too much

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Adequate Documentation: Process Checklist a) Are the processes properly documented

– What documentation standard o Process maps (who performs, what are the o

hand-offs to other performers) are intuitive Using a specific standard is not important; it is important that a standard is consistently used

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Adequate Documentation: Process Checklist a) Are the processes properly documented

– How many levels are documented o Must go beyond high-level process o Must document actual outputs sufficiently to allow:  Qualified performer (with xx years experience in yy process, with aa academic training) to replicate output

o Must be simple and straight forward Module 4: Managing Outsourcing Transitions – Readiness Assessment

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Adequate Documentation: Process Checklist a) Are the processes properly documented

– Are workflow and other technology tools properly referred to in the document

o Ideal if workflow platform is used Onshore, but this is infrequent

o If specific spreadsheets, access, or other

end-user-developed programs are used (“macros”), it is important that the source code and technical documentation for the macro is shared

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Adequate Documentation: Process Checklist b) Are hand-offs to other parties (internal and external) shown in the documentation

– Clear documentation of hand-offs show areas of “process fragmentation”

– Hand-offs are transfers of the task to other people before continuing

– Aggregate items to review in a single-sign-off step at the end

– May be better to require enriched data prior to start of the process—i.e., intelligent input template Or train performer to do the data enrichment

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Adequate Documentation: Process Checklist c) Are interim or “flash” reports documented

– Flash reports allow Onshore supervisors to do

–

early process check. Regulatory submission deadlines are hard, hence critical outputs may need intermediate review Ideal that the process continues without waiting; only stop by exception

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Adequate Documentation: Process Checklist d) Are delivery time/day-of-month/period targets documented

– Indication of required delivery time/date – –

important in the process documentation Quick look at input receive and output delivery allows check of process ease and staffing requirements Tight processing times (late input, early month output) shout out opportunities for required technology/process improvement

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Adequate Documentation: Process How up-to-date is the documentation

– How often is document re-certified. Are the

“live”/modified immediately whenever process is changed o Documentation is valuable only if up-to-date; show binders are not useful o Easy to quickly assess live-status of documentation: Ask performer about his process, ask him to then point it in the documentation

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Adequate Documentation: Process

• What steps/procedures will Contracting of a

service provider for the delivery of a process or service

– Delivery targets: Following defined delivery objectives-defined timelines, accuracy, consistency

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Adequate Documentation: Process

• How: With description/documentation of how the

• •

service will be performed (key operating procedures, control points) (in many cases, requirements will include: performer qualifications and count, required tools--for clarity of expectations) Supervision: Stating the supervision process, periodic reviews, and how performance will be measured Cost: For a clearly defined cost (per input unit or outcome) and clearly defined bonus/penalty award and basis

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Adequate Documentation Adequate Documentation for: 1. 2. 3. 4. 5.

Input Process Output Communication Supervision

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Adequate Documentation: Output Considerations for Output: 1.Properly described output 2.Method of transmission 3.Language of output 4.Timing of the output 5.Dependencies

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Adequate Documentation: Output Are outputs completely documented

– Formats defined. In key management reports, down to the colors of certain data

– If output is an input to another process, best that structured template is followed

– Periodic changes in outputs (and in contents

/format within output) are normal—BUT the change requests should be documented, costjustified, and properly approved

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Adequate Documentation Adequate Documentation for: 1. 2. 3. 4. 5.

Input Process Output Communication Supervision

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Adequate Documentation: Communication How are the outputs to be communicated

– Transmission channel has to be clearly stated —e.g., email, file upload into MS Sharepoint

– As input to another process—in workflow or direct entry to another system

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Adequate Documentation Adequate Documentation for: 1. 2. 3. 4. 5.

Input Process Output Communication Supervision

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Adequate Documentation: Supervision Considerations for Supervision:

•Onshore •Offshore •Staffing, Equipment, Motivation •Country Regulations

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Adequate Documentation: Supervision Where are the “Onshore” supervision points

• Some country regulations (US) require supervisory control by an Onshore person—i.e., ownership of the output is with the Onshore person

• In Onshore exercises who has “supervisory control” • In shared services, next stage of evolution is true centers of excellence where work and supervision is done in another location

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Adequate Documentation: Summary

• Onshore processes with adequate documentation have greater readiness for offshoring

• Documentation on Inputs, Processes, Outputs,

Communication channels, and Supervision allow a service provider (Third-Part or Shared Service Center) to estimate cost of doing the service offshore with more certainty

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Hand-Offs

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Hand-Offs, Definition of • Definition – are transfers of the output to a different performer, an approver, for further action prior to continuation

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Hand-Offs, Reasons for

• Reasons for Hand-offs 1. Data enrichment. The other performer adds data to the transaction 2. Quality Assurance. The second performer is a checker 3. Control. Approval for materiality and substance is done by a separate person

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How you get paid… 1. Paymaster creates initial employee pay record 2. Timekeeper reviews overtime records to adds overtime pay 3. Payroll clerk reviews loan records for loan deductions 4. Payroll clerk looks at reimbursement records to add payments for expenses advanced by employee

5. Payroll clerk looks at enriched pay record and calculates right withholding tax

6. Payroll supervisor reviews the whole pay and approves 7. Paymaster submits net salary to bank for payment Module 4: Managing Outsourcing Transitions – Hand-Offs

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Scale Sufficiency ~ Tips to Optimize

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Scale Illustrated…

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Scale Number of employees (manning compliment, head count, full time requirement FTE) Sufficiency of scale depends on the following:

•Service provider •Requirement of the job •Client

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Scale in Relation to Workforce Sufficiency of scale depends on the service provider —for risk management

•A 15,000-FTE provider in a single location may

prefer engagements of at least 500 FTEs (5% is normal buffer of resources, can be ramped up easily or absorbed in other clients when contract ends)

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Scale in Relation to Workforce Right scale depends on client—percentage of outsourced roles to total staff, for risk management and control

•A 500-person Finance organization may want to limit initial outsourcing to say 10% or 15% •A large company with experience in outsourcing may opt to outsource the entire technology group (from data centers to application development to helpdesk) to a provider--especially if core business is non-IT

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Tips to Optimize Scale • If the process to be outsourced is done by only a few FTEs (Full time equivalent), it is not worth outsourcing

– Example: Create Letter of Credit. But the role is only done by one person who does everything, or 1 person full day plus a supervisor for 1 hour a day

• Near self-contained roles have good potential for outsourcing —because more FTEs covered

– Complete help-desk – Mortgage processing, from application form acceptance to

creditworthiness points calculation, to annotation of loan on deed, to title insurance submission, to recommendation for funds release

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Tips to Optimize Scale For Scale to work it must be considered to both sides client and service provider. In each instance, both parties have to consider the following:

•End-to-end roles are ideal (start from external contact, ends

with external contact, with only 1 or 2 intermediate hand-offs for review/approval)

•Product P&L (profit and loss) starts with transaction data

download and ends with submission to regional/senior management; intermediate activities (market price verification, calculation of mark-to-market value) are fully done by service provider

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Tips to Optimize Scale • Buyer needs sufficient FTEs in outsource project to justify risk and executive attention (sourcing management, finance/payments, legal)

• What is the amount saved. If it is too small, the cost of Onshore supervision eats up the benefit

• Service provider needs sufficient FTEs (margin) to justify a risk, supervisor (operations manager attention), and overhead (Finance, billing, legal)

• Large and small engagements have near same “overhead” in support—except for very large contracts

• Training • Improve Hardware and/ or Enhance Software Module 4: Managing Outsourcing Transitions – Scale

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Identifying Task Candidates for Outsourcing

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Identifying Task Candidates for Outsourcing

• Break down current Onshore roles into individual

tasks that have scale (high number of FTE hours)

• Tool for task analysis can be − Follow the performer: consultant follows a

performer and tracks time spent in each task; called “stop-watch” method because consultants carry timing devices

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Identifying Task Candidates for Outsourcing: Time Tracking

• Time-tracking into granular task buckets is good way to identify potential roles for outsourcing

• Record how much time is spent each day in specific task groups

• Helps managers assess whether the work can be simplified

• Challenge of simplify now or later

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Identifying Task Candidates for Outsourcing: Time Tracking • Some high-volume tasks may need further breaking up to identify specific roles

• Highlights tasks that occupy a lot of people’s hours • High FTE-hour numbers are directional pointers for outsourcing • Other “sub-filters:” (a) do not require complex market

knowledge, (b) do not have high financial or regulatory risk, (c) tasks which are self-contained (have minimal hand-offs)

• Tempting to wait and do more granular time tracking and further analysis. Be wary of analysis paralysis

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Identifying Task Candidates for Outsourcing: Candidates

• • •

Finite Documented Sufficient of Scale

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Identifying Task Candidates for Outsourcing: Considerations

• Readiness assessment • Level of documentation of onshore processes • Scale: sizing savings based on current performer • • • •

count Time-tracking or task-based FTE assessment Prioritize roles that are “more ready” Lift-and-Shift for less documented roles Cost of low outsourcing readiness

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Components of Readiness

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Activity: Service Provider -Readiness Checklist

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Learning Check/ Quiz 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Define transition management What skills are essential for a transition manager? What are the two (2) transition strategies? What are the transition pitfalls and risks. What are the critical success factors What are the measures of transition effectiveness? Explain the importance of proper documentation. Explain work-shadowing Define the components of readiness assessment. Define Hand-offs Explain the concept of Scale Explain Time Tracking

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