Here is the situation: the outsourcing contract is in place, it’s 18 months into it, and enormous efforts have been made, processes have been transitioned and simplified, new tools and technical upgrades have been implemented, the service management organization has been fully operational for some time, service levels are now being consistently achieved, and people issues have been dealt with sensitively and successfully. Everyone involved in the contractual relationship - vendor and client - breathes a sigh of relief and looks forward to business as usual over the remaining life of the contract.
Except that in a successful outsourcing relationship, there can be no such thing as business as usual.
Every survey of outsourcing performance that PA has conducted with clients shows that even when the agreed service levels are being consistently delivered, there is still a significant degree of customer dissatisfaction—the so-called 'hole in the middle of the contract' period. Clients cited initially over inflated expectations and, significantly, the lack of visible improvements as the key reasons for dissatisfaction. Therefore, the lesson that can be drawn is that managing for a steady state and business as usual will inevitably result in regression in performance and in client perceptions of service and value, which can ultimately undo the relationship and the contract.
It is a fundamental tenet of outsourcing success that anything less than a restless desire for continual innovation and improvement in service delivery will be unacceptable. Therefore, vendors and clients need to recognize that a steady-state approach is not tenable and plan for, and lead innovation and improvement over the life of the contract to avoid the “hole in the middle” syndrome.
While there are a number of factors that vendors and clients need to jointly address, fundamentally, innovation and continuous improvement initiatives can be grouped into four areas: service, process, technology and people.
Service: Vendors, with the active support of the service management organization (SMO), the interface between the vendor and the customer of the service, should focus on delivering perceived value to their clients through continuing dialogue to ascertain management’s information needs to supply focused, accurate people information for decision support and clear improvements in access, cycle times, and accuracy in the areas that really matter to customers of the service. To paraphrase Peter Drucker, there is no point in doing things efficiently which should not be done at all.
Process: Continuous process improvements are required to drive standardization and simplification and to roll out automation and self-service (migrating tier 1 activities [voice] and some tier 2 activities [subject expertise] into tier 0 activity [automated]), as well as rationalize service delivery locations to take advantage of labor arbitrage. This move lowers operating costs and produces gainsharing opportunities for the vendor and client.
Technology: Vendors must seek to introduce new software and build innovative tools and technologies that make their customers’ lives easier through simplified and improved access to information, enhanced functionality, better ESS and MSS (employee and manager self-service) and faster service where it is required.
People: From a vendor perspective, the ability to create and sustain a strong customer-service orientation in the vendor’s service centers and maintain motivation and enthusiasm is an essential element. Valuable lessons can be learned from the manufacturing sector, where “lean” initiatives have empowered and enabled staff to work more effectively, and where Six Sigma and other improvement methodologies are part and parcel of the way in which people work on a day-to-day basis. In this way, customers perceive the vendor’s employees as willing to go the extra mile on their behalf. In conclusion, business as usual and the steady state mentality are recipes for regression and failure.
To avoid the dip in performance and a customer perception of a 'hole in the middle' of the contract that has affected many of the early HR outsourcing deals, it is important to build and sustain the levels of enthusiasm, innovation, and improvement in service delivery, process, and technology and to ensure that vendor employees are totally customer-focused. Vendors and their clients both need to recognize that this performance uplift has to take place in a period in which people are tired and mentally looking for respite. Making it happen requires energy, leadership, and focus from both parties to engender and sustain the excitement and enthusiasm that enable continuous innovation and improvement to take place.
