Name the one person who’s never present in an outsourcing business case evaluation, provider down-selection or contract terms meeting, but has a real vested interested in the discussion? And no, it’s not your shrink.
Having the Chief Security Officer (CSO) show-up during your outsourcing meetings is akin to your inviting a cardiac specialist to a no-holds-barred steak dinner with all the trimmings. The CSO is the ultimate party-pooper, the much-derided control-freak who cares little for business outcomes, only the potential disasters that may arise along the way. Why bring them along to put a spanner in the works (unless that’s your agenda….)?
HfS Research Director, Jim Slaby, never shy to call out the inanities of today’s quirky corporate cultures, has been working under cover to find out how the CSO party-poopers were being engaged in the whole outsourcing experience….
Managing Security and Risk in BPO Engagements
The most overlooked, swept-aside and brushed-under-the-carpet issue in outsourcing is the lame effort most buyers make to manage their exposure to security risk in outsourcing engagements. As a self-styled security nerd, I’m frequently horrified by the lip service that many outsourcing buyers and providers give to security. Bring up the “S” word with buyers and their eyes glaze over; ask providers for a briefing on the security capabilities of their outsourcing offerings and they run a mile. Why is this topic so eagerly avoided in today’s global business environment? In an increasingly regulated world full of increasingly sophisticated security threats, aren’t buyers and providers alike courting disaster here?
If you work in the enterprise security space long enough, you come to understand Scott Adams’s Dilbert parody of an evil, sadistic Chief Security Officer (CSO), a pointy-eared fellow called Mordac, the Preventer of Information Services. Mordac embodies the stereotype of intrusive, overly arcane IT security regimes, the kind that seem designed to hinder useful business processes and add layers of complexity to simple tasks, to say nothing of inflating costs and frankly boring you to death.
For instance, why exactly does your password need to be at least eight characters and include a mix of uppercase, lowercase, numbers and special characters? (Actually, that’s not considered great password practice any more: eight characters are pretty easy to crack with brute force, and users have a tendency to scribble hard-to-remember passwords on Post-It notes.) Or, why won’t IT let you connect your iPad to the corporate network when it is less vulnerable to endpoint malware than your Windows laptop? What’s the point of this restrictive new company policy on employee use of social media?
Of course, you probably have an inkling that it’s a scary world out there, full of criminals who look at your databases of customer / patient / payment-card information like a pack of hungry wolves gazes at a flock of baby lambs. You may recognize that, despite the intricate defenses your CSO has erected around your company’s precious data assets, many breaches occur at the hands of malicious insiders — but as often through the garden-variety laziness and inattention of otherwise well-meaning employees. You may know rather less about emerging new threats, like the gangs of elite programmers whom the Chinese military is giving unlimited time and funds to discover new ways to penetrate and crash your systems, part of a new strategic front in the geopolitical struggle for world dominance.
And have you considered how many people are touching your critical data assets, with multiple providers comprising hundreds of thousands of employees around the globe managing many of your back office business and IT operations? Have you given any thought to what their subcontractors are doing, whether they present any data privacy or compliance risks that aren’t covered by your contract with your primary provider? Feeling any agita yet?
We have already demonstrated that some of the appeal of those endlessly-hyped cloud-based services is the ease with which line-of-business managers can go out and help themselves to cheap, on-demand virtual-server cycles: so easy, so fast, so flexible! Not to mention the appeal of not suffering the onerous requirements that IT security is likely to impose if they get involved.
Yes, addressing security concerns up front takes time and adds costs, making the business case for your outsourcing project more challenging. But unlike Mordac, CSOs and smart outsourcing executives are focusing on security for sound business reasons: weighing business risk against business advantage, performing a sober cost-benefit analysis on business processes and the technologies that underpin them. That’s what we’re about, or should be about — and if your industry is one that comes under regulatory scrutiny of any kind, the stakes get much higher for everybody in a hurry.
Fortunately for us, many of you veteran BPO buyers understand that security and risk management are not just annoying layers of overhead that must grudgingly be accommodated. You recognize that the security threat environment is getting more complicated and sophisticated with every passing quarter. Further, you realize that your management is increasingly aware what’s going on: in particular, compliance scrutiny has a way of tuning the antennae of your C-suite to the adverse effects of security breaches on company profitability, brand equity, and the trust of your partners and customers.
Finally, you grasp that effective security and risk management cannot be properly achieved as a bolt-on, a layer of spackle and paint slapped on after the deal is mostly done. Rather, it has to be imbued in the DNA of every member of the sourcing team, inculcated into the skulls of your legal staff via first-hand experience of the relevant security technologies, settled into the bones of the provider evaluation and contract negotiation processes, kept well-toned after the signing with diligent monitoring and auditing.
We spoke to a Fortune 200 company about its security experiences with BPO
HfS Research was fortunate to have the lead sourcing and security executives from one such security-savvy buyer talk with us at length (under NDA about the company’s identity) about exactly how they achieve these goals. It’s a frank and fascinating look inside the end-to-end BPO sourcing process as managed by a Fortune 200 company in a highly-regulated industry that has, knock wood, managed to avoid a headline-grabbing security breach so far. We believe that their exacting processes and relentless focus on working security into every aspect of their provider vetting, contracting, and auditing processes — like the long, slow application of low-temperature applewood smoke turns tough, stringy pork shoulder into tender, delicious barbecue – is directly responsible for that enviable security track record in BPO.
James R Slaby is Research Director, Sourcing Security and Risk Strategies (click for bio)
Entitled “Managing Security and Risk in BPO Engagements”, it’s a rare, detailed look at how one of the big boys works security and risk management into its BPO sourcing process programmatically, from top-to-bottom and start-to-finish, and thereby does it right. For providers, it offers insight into how to put on the kind of good security showing that wins the favor of such a buyer, gaining entrance to its “charmed circle” of preferred providers and winning a coveted invitation to compete for all that buyer’s future deals. Regardless of which side of the table you sit on, it’s six pages that are well worth your time.
So we’re now one election away from the biggest outsourcing opportunity ever… the healthcare insurance industry trying to figure out how to move from a B2B to a B2C model. Quite simply, the insurance companies ain’t gonna figure out how to send a nuclear warhead into their service and IT operations… they’ll turn to the outsourcers to do it for them. Tony Filippone, who actually managed much of Wellpoint’s operations for nine years (a $62 billion healthcare insurer) might know a thing or two about the implications healthcare reform will likely have…
In terms of politics, it’s not over. Today’s Supreme Court healthcare reform decision simply clarified two issues. First, that the individual mandate is a constitutional tax, not an unconstitutional act by Congress to regulate commerce. Second, if states choose not to expand Medicaid benefits, they can elect to not follow the law without losing all of their Federal funding. More legal detail can be found here.
Any hope by Republicans to overturn the law in the courts is now officially dead. This is largely due to former president George W. Bush’s nominee for Chief Justice, John Roberts (oh the irony). Chief Justice Roberts sided with the liberal side of the court on the interpretation of the individual mandate as a tax. Some legal scholars’ interpretation of the minority’s written dissent suggest that Roberts changed his position in the last few weeks, but we will never know, due to the Supreme Court’s tradition of privacy.
All Republican political hopes are now pinned on winning both a majority in the Senate and the presidential election. With 22 Democratic seats in the 33 contested in this election, political analysts suggest a Republican majority in the Senate isn’t far fetched. A majority is necessary to repeal the law using the same reconciliation tactics Democrats used to pass the law to avoid a filibuster. However, political analysts aren’t as sure who will win the presidential election.
One thing they are sure of: Mitt Romney’s election platform will feature accusations that President Obama’s major increase in taxes will kill jobs and that President Obama lied when he said healthcare reform was not a new tax. Frankly, the country would benefit from both parties collaborating on important changes that could benefit everyone, such as tort reform and creating more competition and consumer flexibility by allowing insurance to be sold across state lines.
While the healthcare insurance industry will likely contribute to the Republican presidential and senate election funds over the next four months, the health insurers have no choice but to address serious operational inefficiencies and develop strong market strategies for individual products. According to the AMA, one in 10 claims are still incorrectly paid.
If Obama wins the presidential election, healthcare reform will cause many companies to drop group coverage and individuals will be required to buy insurance through Federal or state exchanges. Overnight, the huge business-to-business group health insurance market will turn into a consumer market free-for-all. Insurers will need to compete on price, service quality, hospital and physician network quality, and their ability to improve the health of their customers. All in a market where services are regulated, profits capped, and products are sold on transparent public exchanges. Much of the healthcare insurance industry will finally have a burning platform to radically overhaul decades of inefficiencies, or risk declining profits, Clearly, healthcare reform does little to address the quality, cost, or accessibility of care. It particularly focuses on insurance while ignoring tort reform, poor medical practices, and providing sufficient quantity of practitioners to meet the growing demand. Any way you cut it, cost reform needs to follow and the outsourcing industry has a huge role to play in helping force this change.
The Three Major Operational Problems Facing Heath Insurers
The first major problem is that health insurers currently have weak individual product operations. Sales teams have relied heavily on brokers, whose future looks similar to the travel agency industry following the advent of online booking websites. Individual underwriting and enrollment processes currently take weeks (or months) with today’s relatively low volumes, while organizations like Geico can issue car insurance in hours or days. Unlike the credit card industry, customer profitability analytics are weak and risk-based marketing strategies are nascent. Health insurers need vastly improved capabilities.
The second major problem is outdated processes and service. With today’s technology, there is no excuse for inefficient offline batch processing of eligibility, claims adjudication, and pricing that takes weeks or months to resolve and is so prone to error it created a mini-market for retrospective claims overpayment and underpayment audit services. Customers must be able to swipe their card at point of purchase, know immediately what they are eligible to receive, and review prices. When they leave, they should settle their bill. However, few insurers process their medical claims and billing in real-time. If insurers really want to differentiate on service, they’ll need to dramatically improve their operational capability, not just their customer web portals.
The third major problem facing insurers is the viability of their claims to improve the health of their customers. Can they really do it? On a one-on-one basis and on the scale required in tomorrow’s larger individual market? Most insurers leverage third party wellness services that cater to commercial group accounts where messaging arrives in employee’s inboxes via human resources. Almost no third party care management companies have the scale to manage the health of millions of members in a meaningful way. Disease management companies face the same hurdle.
The Bottom Line: Open Enrollment Begins in 2013 and many Insurers will have no choice but to turn to the outsourcers
Moving from a B2B to a B2C model with insurance is a huge step and requires a very different delivery model. It’s like asking employees to select their own payroll provider individually to process their paychecks. The scale required in increasing their customer support is going to put unprecedented strain on their cost models. This may create an entirely new outsourcing model where the insurers simply outsource many of their services to other outsourcers who have much more discipline and experience in scalable service delivery. Enter the likes of Accenture, Cognizant, Dell, Genpact, IBM, Infosys, Wipro and Xerox.
Tony Filippone is Executive VP for Research (click for bio)
Up to this point, insurers have competed by reducing costs, largely by consolidating operations and systems and, where permitted by state insurance regulators, leveraging offshore labor arbitrage. While organizations may be able to survive healthcare reform by continuing these approaches, but they wont thrive. Significant investment is necessary to simply prepare for open enrollment that is months away, but an enormous amount of capital is necessary to decisively win market share over the three year rollout of the reforms which continues through 2017. To win a piece of this influx, services providers must flexibly support tactical backfill requests to overcome near-term shortcomings. Yet, strategic partnerships are necessary to bridge the bigger gaps, which means many of the service providers have to change their arbitrage-based approaches to focus on transformation and invest in capabilities their customers need.
Finally….a Blueprint for this outsourcing business (click to access)
Ever wondered what would happen if you locked 41 outsourcing buyer executives in a room for a couple of days, then brought in six of the leading providers to have an afternoon’s discussion? Well, now you can read for yourself, as today we unveil our first Blueprint report for this curious industry known as “outsourcing”.
Captured in the Blueprint are the four key challenges the buyers agreed are facing the outsourcing industry today:
1. Overcoming the singular focus on cost that strips the industry of value;
2. Leveraging outsourcing as one of a variety of vehicles to achieve business objectives;
3. The need for service providers to invest smarter in their account management teams; and
4. The need for buyers and providers to partner to foster innovations into business and IT process outcomes.
And we (eventually) agreed on 21 definitive recommendations to help ensure this industry (whatever we decide to call it) doesn’t slide into the trap of commoditization. So what are you waiting for… download your free Blueprint now!
I would like to personally thank all of you HfS 50 Executive Council Members who made such great contributions to the development of the report, the service providers who left the PowerPoint at home and dropped the sales speak for an afternoon, and the HfS research team for all their considerable efforts in making this happen.
However, this is only the start. This is just a report with facts and recommendations. The real work starts now in trying to action many of these recommendations and changing the way this business actually operates. I can’t wait to meet many of you again in Boston this October where we will start putting these plans into action,
Life been just dandy since you took 30% off your department’s fixed costs, that you’ll never need to do anything much again in your career… except stare at a spreadsheet? Just love keeping those lights on and squeezing penalty payments out of your provider? No need to improve anything, because the way your firm does things is simply perfect?
Then you won’t need to waste time with us and leading buy-side organizations from the HfS 50 Executive Council in Boston this October…
Yes, the Blueprint Sessions are back to add real momentum to the recommendations we discussed with 41 leading buyers executives and six of the top providers in New York City this past April. The key themes are as follows:
1.Overcoming the singular focus on cost that strips the industry of value;
2.Leveraging outsourcing as one of a variety of vehicles to achieve business objectives;
3.The need for service providers to invest smarter in their account management teams; and
4.The need for buyers and providers to partner to foster innovations into business and IT process outcomes.
So if none of this interests you, you won’t want to email us for more information to find out if this session’s right for you or your organization.
Phil Searle, Research Fellow, Shared Services Strategies (Click for bio)
In true HfS style, we’ve managed to persuade another industry legend, while he was propping up the bar at some event (again most likely in Orlando, but this one’s a little fuzzy) to contribute some of his life’s work to our charitable research service. And again, in true HfS style, what was discussed over a couple of single malts is translated word for word for public consumption shortly after said inebriated conversation.
So, without further ado, we’ve invited shared services kahuna, Phil Searle, to share with us all exactly why he was bemoaning the fact that so many enterprises today are moving at a glacial pace when it comes to shifting work into their expensively assembled shared services centers, let alone give it to their outsourcing partner to manage…
Failure to Launch
On the surface, it appears that most enterprises today are taking full advantage of both shared services and outsourcing – last year, HfS Research’s State of Outsourcing study revealed that 97% of large organizations greater than $1B in revenues outsource to a degree, and 90% have a shared service capability in place. However, HfS research’s latest survey data, conducted with accounting association ACCA, emphatically demonstrates that only a modest fraction of business process has actually been shifted to either the shared service center or the outsourcing partner. In most cases, over two-thirds of transactional process work is still, bewilderingly, sitting in the business units, despite the proven business benefits of centralizing processes.
According to various, widely published research, it seems that the vast majority of “large” companies today are making use of shared services, business process outsourcing (BPO), or both. Indeed, the implementation and operation of shared services and BPO has helped many organizations save millions of dollars/euros/pounds, improve internal service delivery and enhance the control environment. This is what we call the potential “triple benefit” of shared services and BPO). Yet, despite the obvious value, why do so many firms limit the scope of shared services, BPO and broader global business services programs?
The results show exactly how much scope organizations exclude from their shared services or outsourcing strategy. Frankly, the numbers are not that impressive. For example, 47 percent of respondents exclude accounts payable, generally regarded as one of the least “core” and strategic processes, from their shared servicing and outsourcing efforts. The figures are just slightly more impressive for payroll, with 36 percent of firms excluding it from their shared services or outsourcing strategies. More startling is fixed assets, one of the most frequently included processes in outsourcing and shared services programs. Nearly 56 percent of respondents still have no shared servicing or outsourcing in place. The amount of scope kept out of shared services and outsourcing strategies is quite staggering.
The same study also illustrates that while “moving up the value chain” has long been pointed to as being on the growth path for internal shared services and outsourcing, the reality is that few organizations have shifted higher value processes into their shared services and outsourcing programs. Perhaps for certain functions this is not surprising. For example, 75 percent of respondents have no shared servicing and/or outsourcing in place for financial planning and analysis while tax filing and tax analysis are largely outsourced or included in shared services performed (although only a slight majority, as 43 percent and 46 percent of respondents, respectively, stating that these are still performed in house).
While many organizations adopt shared services and outsourcing to some extent, their programs are still nowhere near as broad and comprehensive as they could be. While delivering accounts payable services from a shared service center may deliver some benefits to the organization, in the scheme of things and in the light of the potential scope, if this is all they have done, it is no big deal! Organizations today are still leaving so much opportunity on the table.
Looking forward, is this good news or bad news for shared services professionals and the outsourcing providers?
The answer probably is that it is both. As highlighted, opportunities abound. Practice and evidence strongly suggests that, where shared services or outsourcing is implemented in the right way (and there is definitely a wrong way to do this!), the benefits can be very compelling. So, organizations have plenty of runway left to deliver much more value to their “host” businesses. Furthermore, for small to medium sized companies and organizations in the public sector, the opportunity can only be described as massive! For example, shared services in the public sector is relatively new and broader outsourcing even newer.
The bad news is that there are real, embedded constraints that have meant that organizations have not moved forward with shared services or outsourcing as far and as fast as they really could or should have.
The “safer to do nothing” attitude needs to be overcome
We have all heard about the importance of change management to the successful implementation of shared services and outsourcing solutions. However, it is so poorly described and even more poorly actioned in practice. Change management is not just about “communication, communication, and communication” – it is far more than this. We cannot go into here our detailed views on the impact of poor understanding and approach to change management, except to say that we have seen both great and awful examples, and everything in between. Unfortunately, the ‘not so good-to-awful’ tends to predominate. This delays change, limits growth and constrains realization of the benefits. (Read more in our 2011 study Misunderstood and Poorly Handled: Change Management for Outsourcing).
This also links to the fact that, in the real world, organizations always exhibit a great deal of opposition, at least initially, to taking work and responsibilities out from the local business units/departments/countries and moving them to a new organizational service delivery structure. Why is this? It is pretty obvious really. Organizations are “downsizing” scope, responsibility and the size of local teams in favor of more “centralized” delivery structures. And often, many people are directly impacted in terms of their roles and responsibilities, and some of course may lose their jobs.
In addition, there is often great skepticism at the local level about centralization and a lack of trust in “Corporate”. This is sometimes quite well justified. This links to another great mistake sometimes made. While there is so much talk about “serving the internal customer”, the methodology to actually put this in place – what is called the customer relationship management framework – is rarely as robust or as comprehensive as it should be. It is “all about the customer.” but sometimes the reality does not reflect this. There are many components of a truly effective Customer Relationship Management (CRM) framework in support of shared services and outsourcing programs and all should be considered to ensure success and, critically, to develop broad, long-term buy-in. Centralization is not the same as shared services, and it certainly guarantees no success. And “your mess for less” outsourcing achieves labor arbitrage, but is not going to build any sort of internal desire for more of the same either.
The financial payback times can often be longer than desired, and therefore this can delay making the decision to actually do something. It is also much easier and “safer” to do nothing. We have seen many examples of what is sometimes described as “analysis paralysis”. We prefer to call it a lack of will. Linked to this is what we call “negative collaboration”.
There is definitely the need for positive collaboration as part of effective change management and CRM, but there is also the danger of too much collaboration. Consensus is important and any significant change program should encourage constructive criticism, but eventually stakeholders must make a decision and support it, even if they need to agree to disagree. After all, if everyone has to be happy before anything is done, then nothing will get done.
The Bottom-line: Organizations must avoid being railroaded from their ultimate goal
There will always be the “what’s in it for me” winners and losers. The key is how to identify who is in which bracket, be honest and clear and support the change, but not be railroaded from the ultimate goal, which will ultimately impact people, by design and necessity.
It is no surprise that there is still huge scope and opportunity for shared services and BPO. Our frustration is that the “practitioner and provider community” has not done a better job at selling the benefits, driving broader take-up, and implementing truly customer-focused solutions supported by real change management. There are for sure many excellent examples of success, but there have also been less well-publicized failures. There remains such a significant amount of untapped value. While shared services and outsourcing continues to grow and expand, it still does not grab as much attention in the C-Suite or in general business economics as it should. There is still a tremendous amount of work that needs to be done if this is to change.
Phil Searle, pictured above, is HfS Research Fellow covering Shared Services Strategies. You can view his full bio here and download a copy of his recent research article here.
Missed today’s revved-up BPO discussion? How could you? What else were you doing?
In any case, we recorded the track for you! Click here for a rare chance to hear how some organizations have evolved their BPO relationships from being merely “operationally efficient” through to being genuinely “transformative” for their businesses across finance, HR, customer management and other industry-specific processes. Or… as we put it today, going from low performance to high performance. Yes… it’s time to stop leaving the money on the table.
Remember the good old days, when sourcing advisors mercilessly roamed the earth in search of inexperienced enterprise executives in desperate need of experts to get them through their outsourcing transactions?
You’d a thought today’s prospective buyer of outsourcing would be able to crunch some numbers, do some research and make some difficult decisions themselves. Obviously, with deal sizes shrinking and growth slowing in today’s tentative market, more enterprises must surely be running their own deals? In this stinky economy, enterprises must be tightening the purse-strings and muddling through a lot of this stuff themselves.
Of course they’re not! Welcome to Corporate America and Corporate Whatever, where executives still want someone else to make their contentious decisions for them… oh, and do all the heavy-lifting too.
And without further ado, we can exclusively reveal that half of the competitive F&A engagements over the last year had an advisor stuck on them to get them to contract – double the proportion of two years’ ago:
So why, pray tell, are advisors in even greater demand in today’s maturing and cautious market?
Advisors are much cheaper than they used to be. We’ve seen advisors run deals as low as $30K for a quick “back of an envelope business case” and a three vendor negotiation bake-off. Compare this to the lowest price point of $300K just a couple of years’ ago. Even some of the management consultants have figured out how to wangle their internal fee structures to do this stuff for competitive project rates. On the flip-side, we’ve seen McKinsey sniffing around BPO with their clients, so some are still willing to pay top rates…
Much more data is available, which simplifies the consulting process. In the dino-sourcing days, some advisors would charge ridiculous sums of money to perform such tasks as drafting vendor profiles, averaging price benchmarks and crafting service levels. Not to mention the ridiculous science some of them developed around architecting business cases. Firstly, most of the research needed to support outsourcing down-selection and contracting is available off-the-shelf from analysts such as HfS (ahem). Secondly, most of today’s contracts (sadly) are too frequently copied and pasted from each other, and new buyers can enjoy the same insane manifestation of SLAs and clauses that make little business sense, but make them feel they are going to get incredible provider performance, once the ink has dried.
Most executives hate taking on onerous and resource intensive work-tasks. It never ceases to amaze me that the first thing every consultant has to do when he or she evaluates a BPO engagement, is to request the client documents their processes. And 90% of the time the consultant ends up doing it for the client (and bills another hundred grand for the privilege). And don’t even get me started on running operational analysis, mapping out the workflows etc.
External validation during an initial transaction can still be incredibly valuable. While people can claim that the whole outsourcing transaction process has become commodotized, there is still an enormous about of risk involved – and while less money needs be spent on many of the tasks mentioned above, having third party validation on selecting the right provider and getting a decent price can (and usually does) save millions – and a great deal of pain if a lousy service provider is selected. I recall a recent example where an advisor showed up at a client for two days and saved them $5m off the TCV of the contract and made sure they went with the best provider – and he only charged about $30K for the time and effort involved.
Providers continue to recommend advisors for a competitive deals. The average pursuit costs for a provider chasing a complex engagement can go well over the million-dollar mark in some instances (even though they are getting smart at slimming down their own sales pursuit resources). And an inexperienced client can make the provider jump through all sorts of hoops – and there isn’t much the provider can do… but jump through them. Plus, we’ve seen some buyers take providers all the way up the aisle and then get cold feet, with no warning. Providers have peace of mind that a decent advisor will rarely allow this to happen – and they also are comforted by the fact that if the buyer is paying for the advisor, they are actually serious about going through with the deal. Obviously, if the provider is in pole position for a sole source deal, the last thing they would want is an advisor who’d come in and recommend some competitive bidding…
The Bottom-line: Transactional advisory lives to see another day
While the combination of increasing commodization of basic BPO services and an ever-smartening buyer, seemed to signal the end of transactional advisory services, the consulting industry has found a way to adapt to keep itself relevant and much more price-friendly, while still being in a strong position to help clients deal with the sensitive and political task of outsourcing. However, as the deals get smaller and the role of BPO proliferates into one vehicle of many for business operations leaders, the consulting community will need to increases its broader sourcing skill-set to deal with blended shared services/BPO models, and have a great degree of process knowledge and consulting finesse to deal with complex corporate situations. There’s a reason why the likes of KMPG, McKinsey and PwC are in this space – they see the bigger picture that BPO transactional support is one arrow of many that they need in their quiver to help operations leaders with ever-increasing global needs to keep their companies competitive.
HfS Research Fellow, Pete Ackerson takes a break from gardening to pose for HfS
There’s been one dependable, consistent voice in the world of HR operations, quietly plying his trade leading the HR shared service center for a 325,000 employee retailer (Sears), as one of the first employees of the first end-to-end HR outsourcer (Exult), and, more recently, as one of the most respected and in-demand HR specialists for one of the big consulting shops (Deloitte). And he’s managed to do it always with an uncanny ability to speak his mind and never get in any trouble… so surely a poor fit with HfS then.
And when we got the news that “Pragmatic” Pete Ackerson was “retiring” we just couldn’t turn down the chance to have him spend a few hours each week sharing his lifetime of HR experiences with us – in-between tending to his rhododendrons and his vegetable patch (or whatever it is that retired people do). So… without further ado, here’s Pete Ackerson introducing himself as the newest HfS Research Fellow…
Reminders about the dark ages
Phil Fersht has asked me to join his band of analysts, pranksters, and pundits…with an emphasis on the Human Resources field. I thought I’d start off with a reminder of how far we have come and how far we have not moved ahead. As a resident gray hair…and happy to have it…I’ve been through most of the changes over the last X number of years.
Recordkeeping was a manila folder, payroll was calculated in pencil on ledgers and paid in cash, weekly (!), regulations were related to FLSA, policies were more local than national, being good at HR-stuff was how to get promoted, HR executives never made it out of HR. Some of that has changed, but some still remains as it was. If anything significant has changed (other than technologies and regulations), it has been the career path of HR executives. While few HR execs make it to the CEO-level, the competencies and contributions have changed…and for the better.
My experience has included senior HR generalist and specialist roles in a very large corporation, officer- level positions in a start-up HR outsourcing firm, and until recently, a consulting role in a Big-4 professional services firm. All have contributed to my knowledge and competencies…and to the fun I have had in these roles (well, not all the time).
I made a career choice early in my career…I opted to stay in HR roles in an organization that didn’t value HR except as an expeditor of stuff. My last role in the large corporation was being responsible for HR shared services, including payroll for 325,000 employees. I did many things right, but not everything. On the things that didn’t go well…and we all have our stories…I finally got to the point where I could not only learn from them, but also feel free to ensure that others do not go down that path. Teaching turned out to be what I loved to do best, and adding experiences (war stories) to knowledge makes the story more believable to those in your organization and to clients.
While most “HR-types” tend to drive to senior generalist roles (“I am a business partner”), what was of more interest to me was the value HR process and technology can bring to an organization. This interest caused me to focus on the administrative part of HR (back-office)…not to make HR better, but to enhance the value of people to the organization.
What I’m going to focus on with these epistles over the next months is the value, tools, and techniques of HR Shared Services and Business Process Outsourcing. In that I’m an operator at heart, we will not focus on the grand strategy of any of these, but instead look at pragmatic solutions. While I love elegant solutions, I place more value on solutions that work.
One thing we all need to learn about driving value through HR is there is no right answer; there is no single solution to anything. An example of this is tied to the question of internal vs. external delivery of services…which is better…the answer is “yes”. I will spend some time on this topic in the next installment (if Phil lets me continue).
If any of you have any subjects you would like dissected, please let me know. In the meantime, I have some weighty topics, some axes to grind, dragons to slay, and some knowledge to impart to what I hope will be an enthusiastic and kind audience.
Peter Ackerson (click for bio) is Research Fellow, HR Shared Services and Outsourcing, HfS Research. You can also email him here.
You know we'll deliver everything in those 80 slides…
One of the major gripes at the recent HfS 50 Executive Council summit was the issue sourcing executives have with their provider account managers – “they just don’t understand our business” was the common cry.
So who better to lament the woes of lost sales pursuits than HfS Research Fellow and industry agitator Deborah Kops…
Building a BPO sales team
Now that I have your attention, let’s talk about how buyers whether the current parlor game of stealing sales guys from competitors really moves the revenue dial very far in light of the way clients buy business process outsourcing. Seems to me everyone is out there desperately looking for sales superstars. Do they exist? Is it worth the time and effort to find them, only to be disappointed at least half the time? Shouldn’t the industry be more focused on attracting the right solutions team, rather than assembling a sales team that’s hit or miss?
If you’re like me, you get at least a call a week from a search consultant desperate to find a crackerjack sales guy. This paragon should have a great rolodex, deep domain knowledge (retail and media seem to be awfully popular these days), a W-2 that confirms his track record, happy to travel 90% of the time, a global point of view (read: can sell offshore delivery and be culturally sensitive to legacy ownership) and willing to take a low base, say $150,000 with “a lot of upside.” Nothing less will suffice. And if the search consultant is told to reach for the stars, the successful candidate should bring a decade or more of industry or white shoe consulting experience, have a book of business ready to sign, and be viewed as an industry thought leader.
Let’s get real; the industry has very few salespeople who come even close to this profile. And those who do are either very happy with, or so aligned (read: shackled by commission payouts) with their current employer that only frustration with management, or the enticement of a better brand in conjunction with the promise of megabucks will induce them to move.
Yet providers continue to play the get the sales guy game, creating a class of what one of my good search consultant friends terms ‘mercenaries,’ who have neither produced much tangible revenue (but talk a good game), nor have stayed in an organization long enough to make an indelible impact on the company’s fortunes. Failing to attract a superstar, or get their hands on a mercenary, providers seem to settle for candidates who need on-the-job training, or come from other business sectors, say ITO or software sales, hoping against hope that they’ll magically become business process super salesmen overnight.
Is the effort to build a sales team in light of the dearth available talent misguided? What do the buyers really think about being barraged by sales guys with the wrong skills? Have you ever met with a corporate sourcing leader who pulls out a pile of cards, representing almost every one of the outsourcing majors and minors, then grouses about the fact that he/she often wastes x hours watching a sales guy wend his way through an 80 page deck that looks very much like all the others? I’ve heard the whinging, and had the pleasure myself; I’ve unfortunately seen some very good providers mentally struck off a buyer’s list because someone with an excess of confidence but no problem solving skills–and carrying a quota— is playing the sales funnel game, making 100 calls to possibly get one deal.
But does a program based upon canvassing activities really result in sales? Let’s be honest—aren’t most sales based upon a potent platform combining brand, the right level of executive management attention, so-called “chemistry” and the right solution? Even if the sales guy is good, if he doesn’t have this platform behind him, he most likely won’t win the business. Conversely, if the sales guy is inexperienced, won’t he be a deterrent to a sale even backed by the right brand and delivery capability?
This is not to say that buyers don’t want to spend time with an experienced sales person. I don’t know a buyer who will say he’s wasting his time talking to someone who brings deep understanding of the client’s particular function or domain, and is expert at synthesizing what he knows to come up with a range of solutions. Sales in the BPO industry are not based on PowerPoints, golf, and fancy dinners, but real thought leadership and problem-solving skills.
I suspect provider executive management knows full well that only a few sales people are able to move the dial; in fact, I know they do. Over a few drinks, I’ve had more than a few senior leaders privately admit that building an effective BPO sales team is very much a hit-or-miss proposition, and that when it comes to closing the deal, it’s not the efforts of a few eager blokes; rather it comes down to factors such as brand, executive commitment, value for money, and track record that tip the opportunity into the closed column.
Is there an alternative to playing the build the sales team game? Certainly brand is critical to the sale, but like Rome it’s not built in a day, or even in a year, and can’t impact a quarterly reporting cycle or two. So it begs the question: in an industry where the differentiator is purportedly a superior solution, be it more technology-enabled, insight-rich, client-centric, or cost-effective, why aren’t the phones ringing off the hook searching for superlative solutions guys–folks who can walk, talk, figure out ways to smite cost and promote efficiencies, and create enterprise value at a single bound? Why does the typical BPO org chart segregate sales and solutions when the solution is the sale? Wouldn’t providers be better served if they lusted after solutions guys that have the same polish, consultative and relationship skills as the sales guys?
The Bottom-line: Put the solutions expert at the front of the sales pursuit, not the sales guys
Deborah Kops, Research Fellow, HfS Research
Shouldn’t the solutions guys be put front and center, making the first call to the clients? Why are they often left toiling in the proverbial back room, doing the heavy lifting, only to be put in front of the client when there’s the potential of a deal? Why does the sales guy get the glory—and the commission—when it is the solution that sells? Is there something wrong with this picture?
So the next time you award…or close…an outsourcing deal, think about who and what really got the deal done? Was it a “can’t go wrong brand?” Or the right level attention from the senior-most management? Was there a chemistry that radio’d “I can really work effectively with these guys”? Most likely, it was down to a solution that checked all the boxes? Chances are it was not the antics of an inexperienced sales guy.
So we’re now one election away from the biggest outsourcing opportunity ever… the healthcare insurance industry trying to figure out how to move from a B2B to a B2C model. Quite simply, the insurance companies ain’t gonna figure out how to send a nuclear warhead into their service and IT operations… they’ll turn to the outsourcers to do it for them. Tony Filippone, who actually managed much of Wellpoint’s operations for nine years (a $62 billion healthcare insurer) might know a thing or two about the implications healthcare reform will likely have…
