Monday, June 27, 2005

Offshore Outsourcing practices

As offshore outsourcing evolves beyond all the hue and cry about organizations adapting outsourcing seeking short-term benefits, there has been a steep learning curve associated with it's evolution. Some organization's have badly burnt their fingers by opting for short-term advantages at the cost of long-term benefits where as some have successfully managed to balance between the short and long-term benefits. Here are some of the best practices that have helped many of our customers build a robust outsourcing model over the years and practised by some of the world's leading companies who've successfully integrated outsourcing in their core business strategy.

a. Communicate openly about your outsourcing plans
Top management has to take the responsibility to explain the rationale behind it's decision to outsource. Apart from the obvious reasons to outsource like globalization, access to talent, reducing risks, reducing turnaround time, cost cutting etc., many companies have their raison d'ĂȘtre behind the outsourcing intiative that has to be clearly communicated to all the team members at appropriate time. It has been repeatedly seen that companies that encourage open communication within the organization about it's outsourcing plans are in a much better position to handle potential employee backlashing that could arise from the jobs moving offshore than it's less proactive counterparts. Today, many companies that intend to outsource are concerned about employee backlashing and the domino effect it produces. One of the most effective ways a company's top management can address this is by presenting a clear picture of the opportunities and challenges thrown open by globalization and technological advancements. Evolutionary forces act on businesses as they do on living beings and ultimately the fittest survive.

b. Involve the core front-line teams in the discussions
It is a good idea to involve the key front-line managers/ staff in the outsourcing discussions to give them a platform to express their feelings openly. Such discussions could bring out some of the previously unaddressed employee concerns and also helps management eliminate false rumours that could have evolved or possibly evolve during the initial stages of the outsourcing process. Further, core members of the organization want to be assured that outsourcing decisions will not have a negative impact on their goals.

c. Build a performance-driven culture
Performance driven companies usually have a policy of encouraging performance by eliminating non-performers on a periodic basis. Many companies that do not have a performance-driven culture can seize opportunity to build one by weeding out the non-performers and filling the void thus created by outsourcing those roles to an outsourcing service provider. There could be few more effective ways to emphasize the importance of performance within the organization and at the same time not taking any drastic measures that would destabilize the organization.

d. Maintain your brand equity in the talent/ business community. Do not underestimate the importance of sending the right message.
To avoid negative word of mouth within the talent/ business community, many companies have resorted to providing a well-balanced severance package for the key members whom they plan let go as a result of their outsourcing plans. This is very important for a company today as in this internet age, it takes only hours or minutes for a negative word-of-mouth to enter into the talent community, on which many organizations rely to build their core competence. This is especially critical for companies operating in niche areas where the talent pool is very limited and where most of the members are well connected.

e. Invest in intellectual capital
Today's smartest companies, inspite of all their outsourcing initiatives, continually invest in training and equipping their MIS/ IT staff. The core members of the MIS/ IT staff carry very valuable proprietary knowledge about the company's practices, personnel, and systems. These smart companies realize that success of their outsourcing initiative relies to a great extent on the intellectual capital of their existing employees. These companies liberally invest in building this intellectual capital through varied training programs ranging from core technical trainings to executive education programs.

f. Derisk
A well thought-out sourcing strategy is the best possible derisking model. A careful examination of the tangible and intangible benefits/ potential risks associated with outsourcing with respect to that organization's vision and business objectives cannot be overemphasized.
A long-term outlook is a prime requisite for the success of an organization's outsourcing initiative.