Chapter 3 - Managing Outsourcing Transition PDF

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Chapter 3: Managing Outsourcing TransitionsINTRODUCTIONEmployment is an intrinsic part of our human identity. Therefore, significantimprovements to our working conditions are improvement in our perception of oneself. Jobis also a position where we try to meet some of our most fundamental needs, such...

Description

Chapter 3: Managing Outsourcing Transitions INTRODUCTION Employment is an intrinsic part of our human identity. Therefore, significant improvements to our working conditions are improvement in our perception of oneself. Job is also a position where we try to meet some of our most fundamental needs, such as income needs, socialization, respect and more. So, it should not come as a surprise that any change in our work – or just the suggestion of a change – will have a significant impact on us. During outsourcing the process of transferring employees from one company to another is often referred to as a transition process. At the end, a transformation phase has three targets. The first is to ensure smooth transfer of responsibilities such that no interruption to the service happens to the customer. The second is handling the people side of the transition in such a way as to treat the employees fairly and with respect. Third, designing the workers to maximize the quality of employment. Research shows that most transformations do not at the same time achieve all three objectives. In this module, we will talk about managing outsourcing transition strategies, success factors and effectiveness. Readiness of documents and assessment as well as the hand-offs, scales and time tracking will also discussed. This module will let us know how to adjust and manage transition of outsourcing activities of IT-BPM industry.

LEARNING OUTCOMES At the end of this module, the students should be able to: • • • • • • • • • • •

define and explain Transition Management define the migration strategies and knowledge transfer frameworks define and explain the 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-off explain the concept of Scale explain time tracking

LEARNING CONTENT • • • • • • • •

Transition Strategies and Knowledge Transfer Framework Transition Success and Effectiveness Document Readiness Work-Shadowing Readiness Assessment Hand-offs Scale Identifying Task Candidates for Outsourcing Scale

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1. Transition Strategies and KnowledgeTransfer Framework Under this topic, we will discuss the transition manager, different transition strategies and knowledge transfer frameworks Transition Management- A collection of activities that accompany the signing of a BPO contract enforcing or executing the comprehensive movement or transition of processes from the customer to the service provider. Proper transitioning of tasks from a client to a service provider helps in achieving successful business relationships. A Transition Manager- responsible for migrating the function or process from the client location or organization to the service provider or outsourcing organization. He/she needs to be an effective communicator, as the role requires extensive interaction with the clients.

For discussion, HOW WOULD YOU DESCRIBE THE RESPONSIBILITIES OF A TRANSITION MANAGER? Transition Manager Skills and Competencies: • • •

Need to have strong project management skills, as the migration process are complex projects that require expert management skills Needs to be comfortable to work with multicultural environment, since most of the clients are from overseas Needs to have a thorough understanding of the existing business and legal processes, current and emerging technologies to be used for offshoring of business function

Two Common Transition Strategies a. Lift and Shift- common methodology used when the process is mature. The Lift and Shift approach is used for migrating. This means moving a matured process from its current organization to a service provider. 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 When we say “Move the current processes.”, we’re not just talking about a physical movement. It also involves transferring a process to another performer or provider. Example: Apple, Nokia and Samsung contracting Corning to produce variants of its Gorilla Glass to be fitted on their iPads, iPhones, Galaxy Notes, tablets and Nokia

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Lumia. These companies do not have the: hardware, software and people-ware to produce glass on its own that is as robust, durable, vibrant and elegant as Corning’s. Stabilize refers to a large concept involving numerous tasks that requires significant amount of time for proficiency or mastery. Example: If Corning decides to tap one of San Miguel Corporation’s glass manufacturing facilities to produce X thousands of Gorilla Glass. SMC will not get this process spot-on overnight. First, the capability of the hardware or machinery to produce glass for personal electronics. Second, the software- meaning the processes or technical expertise needed to operate that hardware is not in place. Third, the people ware/manpower – meaning the knowledge and competencies of the personnel is geared towards glass manufacturing as opposed to glass for personal electronics. This knowledge and competency still have to be trained. Not to mention, when SMC acquires the appropriate machinery, they will have to rethink its factory layout to conform with the standards required by Corning.

Items to Consider 1. Process change will not affect process control points or output can be done by service provider independently 2. Major effort: post go-live reengineering Transition phase can be easy especially if people and processes are moved. Onshore has the risk of losing political will to reengineer processes after a while. b. Re-engineer and Migrate- fundamental rethinking and radically redesigning of the business process to achieve dramatic improvements in critical measures of performance such as cost, service and speed. Items to Consider 1. 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) 2. It may be important to utilize the expertise of the existing team (which built over several years) to drive the change, before it is handed over to the new team. 3. Company that outsources industry common processes to a market-leading serviceprovider will generally follow service provider processes 4. Company changes its processes as part of the transition to service provider. Example: Jenny has been in laundry service for 10 years. When it comes to washing clothes, everyone knows that she is an expert however, she realized that the quality of her work can still be improved so she got her sister Tina to help her. Tina’s a bit inexperienced compared to Jenny. Before, Jenny tells Tina to help her out, she tried to modify some of the processes like adding more time soaking the dirty clothes, changing the detergent brand and putting a fabric conditioner before putting the clothes in the dryer. It would be difficult for her to do these changes alone, but with Tina’s help she was able to improve the quality of service.

Management of knowledge is an important factor during the design of the services to be offered. When designing a service offering, various objects such as plans, procedures, models, resources, and roles are described. Those can be tailored during the service transition according to the needs of the companies.

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a. Service transition- Knowledge transfer process Knowledge Transfer (KT) is a central process in any transitional service program- for a new service or service shift. New services may only commence after completion of the necessary information transfer process. a.1 Entry Criteria Knowledge transfer begins as soon as the customer is engaged during the service design phase but the service transfer phase begins with a comprehensive plan and formal beginning of knowledge transfer. a.2 Input The following table defines different Information Transfer Inputs and Mechanisms:

a.3 Process Service transition manager creates the knowledge transfer strategy in line with the needs of the service to be transferred. An effective knowledge transfer strategy should address the following key areas: • Creating a governance model • Establishing roles and responsibilities • Finding policies, processes, procedures, and methods for knowledge transfer • Identifying expertise and knowledge required to deliver a service effectively • Finding technological, administrative, and functional knowledge transfer requirements • Determining KPIs Based on the KT strategy, an appropriate KT plan is created. A knowledge transition plan contains the following: • List of documents (user manuals, deployment guides, ready reckoner for incidents, technical documents, process documents) • Target completion date • Plans for instructor-led training, web sessions, and any other training document (presentations, videos), if required • Details of the knowledge management tool (like SharePoint), and artefacts (repository/tool location, access, intended audience) After sign-off, the knowledge transition plan is executed and tracked. Regular feedback is a necessary part of tracking the plan and necessary changes are made to the plan, training material and methodology. Templates and checklists are developed to help in creating a knowledge transition plan, capturing the training requirements, and assessing the effectiveness of the trainings. Reverse

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knowledge transfer sessions/quizzes/tests which assess the efficacy of the activities, are a critical component of a robust knowledge transition plan.

b. Continuous knowledge management During service operations, an effective service knowledge management system allows managers to make better decisions, improve service availability, optimize capacity utilization, and fix problems. It is imperative that the process of gaining knowledge should not stop while moving from service transition to operations. It is the responsibility of the service manager to ensure a seamless transition.

c. Templates, checklists, and tools A well-established knowledge management tool and repository is necessary to effectively execute a knowledge transfer plan and knowledge management plan. Tools and repository should be identified at the time-of-service design. The methodology of how we use these tools can mature during service transition and operations.

2. Transition Success and Effectiveness In this topic, we will the risks and pitfalls of transitions, the critical success factors, and overall transition effectiveness. c.

Transition Pitfalls and Risks Any transition is in jeopardy if any of the following occurs: 1. Inadequate investment and sponsorship- Example here is a manufacturing company expecting volume sales from agency that provides manpower- the sales force, but fails to invest on proper equipment to allow product

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demonstrations so potential buyers can freely experience or try out the products. 2. Unclear scope of work- and unclear roles and responsibilities- These are doubt, serious concerns that can torpedo your efforts for successful transition. A good solution is through proper documentation and process mapping. 3. Training shortcuts- As future leaders expected to develop people, be mindful of the following training dimensions: • Timing and duration • Content and delivery • Skills practice and learning evaluation *Just imagine what is going to happen o your subordinates if we try to do shortcuts in these dimensions? 4. Not retaining the experts- Having subject matter experts in a company gives benefits. The breadth and depth of experience of your resident SME that is exactly what they leverage. With that experience comes perspective, discipline, temperance, analysis, decisiveness, rigor, and compassionmeaning maturity.

d. 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 ongoing operations The following questions may give us assurance to this aspect: - Do we have right type of computers? - Do we have the right number of computers? - Do we have generators in place just in case there is a power shortage? - Are we using the latest or most compatible applications? With these questions, managers and leaders can now have a guide as to how they picture the big perspective of transition in their company. Having enough resources depending on the needs is very important for the success of the transition.

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2. Manpower Readiness- state of the readiness of the operating staff- hired, trained and skilled for the service processes. In this aspect, we are looking at the knowledge and skill of the workforce. It would be a challenge getting things done if your operations have the most powerful desktop PCs for animation and rendering but have workforce with little experience using such equipment. A good example is, Efren “Bata” Reyes and Francisco “Django” Bustamante would beat an amateur at billiards even if they took turns using the same cue-stick. e. Transition Effectiveness 2 ways to measure transition effectiveness: 1. Financial Benefits- It is important to quantify the real cost of the function before off-shoring (baseline costs) and the cost of the offshore team on an ongoing basis. - Cost 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. 2. Performance of the Team- primarily done by developing performance metrics and usually subject to a testing phase to determine reasonability of the service measures- known as “baselining period”. Can you recall our example about Corning tapping San Miguel Corporation? This requires SMC to transform and migrate operations from beer bottle to manufacturing Gorilla Glass production for smartphones and tablets. With enough training and guidance from Corning, SMC is expected to produce outputs that are within the quality standards that Corning has.

3. Document Readiness Proper documentation helps us have a smooth and effectiveness transition. We should look the bigger picture in mind, like asking ourselves, “What should be documented?”. The following are guides for proper documentation: f.

Inputs- It is important to know where the inputs are coming from, how they are given and who uses the inputs, including when inputs are to be delivered and what to do when challenges arise to maintain its quality are to be carefully considered also. Source systems and dependencies are inputs to be documented. Timing of the delivery quality assumptions and work-around in case of failure in delivery of some inputs.

g. Processes- these are documented using the industry standard format and in complete detail. Hand-offs to other parties, internal and external are documented including timing and format. Internship/flash reports, if required, are also documented as deliverables. Delivery time, day-of-month, period targets are documented.

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With enough details and information based on the company’s standards, processes will be clear to everyone who needs it. Even on processes, updates and tasks endorsed with its deadlines should help the company have smooth and consistent process. If we are to outsource a task to internal or external partners, it would be helpful if our partners would be informed on what things are used and how it I used to perform a certain task in process. h. Outputs- A checklist or list of guidelines could be helpful to ensure that outputs are made on time and comply with the company’s standards before it is endorsed to next final steps. Interim/flash and final outputs are completely documented. Formats, control steps and quality assurance checklist are completely defined. Delivery time/day-of-period are reviewed to ensure they are achievable/consistent with input timelines. Service provider and transition project manager should validate that timeline are current and not “aspirational”. This could put in desired/unrealistic deadlines when outsourcing. i.

Communication- people inside the company know who to communicate with and how is very important. 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.

j.

Supervision- It is also important to document how we manage people who plays an important role in our business. Onshore supervision points and what will be reviewed/checklist should be defined. Supervisory review paves the way for transition into “center of excellence” mode where supervisory control rests offshore.

4. Work Shadowing Work Shadowing is the activity of spending time with someone who is doing a particular job so that you can learn how to do it (Cambridge Dictionary). Meaning, you need to get quality work experience or do some work shadowing. In IT-BPM Industry, work shadowing is a term usd for “learning-by-doing” activity of service provider personnel, generally done at the same location as current company performer. Phases: 1. Onshore personnel doing the activity- This is about performing activities and conducting trainings by the onshore personnel. Service provider staff reviews documentation provided against actual activity done by Onshore Personnel. Example: Our school decides to contract a security agency to install CCTV camera system. The school administration and the vendor (security agency) agreed to install 21 cameras feeding back to the servers the videos of all offices and classrooms. The vendor will be installing the proper software (meaning processes along with the applications). Peopleware – providing the school personnel proper training on how to

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use the system. All together, the entire process (installing hardware, software and peopleware) would take 144 hours with the cost of 280,000.00. During the installation process, the observed actual hours worked was only 102 hours. This discrepancy in work hours will be documented. On the second item; if addressing those discrepancies would improve the quality of the process, then a modification of the process documentation can be done. Thus, the third item suggests that it would be an advantage for the company to resize the staffing doing the training based on the modified documentation. 2. Guided service provider network- The service provider performs while being observed by the service provider. This may be done onshore or at service provider site. This phase complete 1 or 2 full cycles. If output is monthly, guidance is given for 2 month-end, if daily, guidance is given for few days. In general, 1 to 2 months of guided work. 3. Go-Live- Service provider performs on its own but is still closely monitored by the client company for a certain period of time to ensure good quality of the task being performed. Service provider performs the activity independently in the service provider site. This phase needs to closely monitored for a period of 3 months to ensure stable performance.

5. Readiness Assessment The purposes of readiness assessment is to verify if the process to be outsourced is adequately documented, correctly sized and with right level of quality assurance and supervisory control. Adequately documented means if documents are properly documented with sufficient information, the current process will result in ungroup knowledge. Service providers with sure certainty of process premium in their proposals will lead to very clear on what will be delivered, how and by when. Take note that unclear processes, misunderstandings and uncertainties are more likely to happen without adequate documentation. This results to poor quality of outputs and additional costs. Correctly Sized in generic resources, most current processes done in-house operate wi...