7 reasons to consider outsourcing the Process Excellence function

Amarpreet Bhamra 2017
Posted: 07/12/2013

Wishful thinking cartoon

"... something magical just happens!" If it were only so easy! Establishing better, stable processes is one thing. Applying the best of possible fixes to them is quite another. So, how is this best driven? Inhouse (through your team) or by a third party? Here, so reasons why you might consider giving providers a chance.


As maturity dawns on the outsourcing sector, a number of service providers have initiated the next step of outsourcing functions like facility management, payroll, administration, IT infrastructure etc. Saving costs and conserving bandwidth to focus on core deliverables appears to be the primary driver behind thesedecisions. However, the market has – to date – been coy about experimenting along similar lines with the process excellence function.

To begin with, we need to be clear about the benefits of engaging vendors or process excellence consultants to impact business outcomes, as opposed to using an inhouse team. These can include:

  1. savings pertaining to hiring, training, compensation, infrastructure and churn costs
  2. flexible model catering to just-in-time and dynamic business needs
  3. access to outside-in-perspective
  4. saving management bandwidth on maintaining a large in-house team
  5. avoiding turf wars and bureaucracy on ownership of improvement initiatives
  6. challenging the existing silos
  7. conserving the bandwidth required to groom internal talent pool

The business environment of today is shaped by fluctuating economic conditions, shorter product lifecycles, and internet-savvy young customers and social media forcing organizations to rapidly alter their business strategies. Many service providers are entering a phase where technology-enabled process automations have started to eliminate jobs, thereby further squeezing the opportunities for outsourcing. As a result, both providers and shared services centers have to face these kinds of questions:

  • does it make business sense to retain a large pool of in-house process excellence experts?
  • are internal process excellence resources able to adapt faster to new age business realities?
  • are process excellence professionals armed with new-age skills and tools to create business value?

difficulttask.jpg

In addition, process excellence functions have largely concentrated their efforts on executing projects to secure efficiency (FTE-oriented approach) and reduce defects, and are thus somewhat divorced from the emerging business realities. Another thing to consider is that, many of us having been briefed on DMAIC principles, the zeal to continue treading this path only widens the lead-time to execute projects in an environment where organizations are under pressure to deliver improvements at a fast pace. As a result, many internal process excellence teams operate with tunnel vision. The increasing adoption of project management methodologies like PMP (Project Management Professional) and PRINCE 2 isa positive attempt to lessen the complexity arising out of a rigid focus on leveraging statistical tools to manage improvement programs.

Another consideration is that Six Sigma improvement projects face rough weather when the aligned belts choose to pursue a role outside the organization. Process owners are compelled to either abandon projects or assign new resources to steer the improvement initiative, and thereby blunt process effectiveness. Dr. Satya S. Chakravorty, the Caraustar professor of operations management at Georgia’s Kennesaw State University, in a study on Six Sigma programs (www. online.wsj.com-Wall StreetJournal’s June 2012 edition), states that they typically start off well, generating excitement and great progress, but all too often fail to have a lasting impact as participants gradually lose motivation and fall back into old habits.Moreover, practitioners need to overcome the mindset that equates continuous improvement with Six Sigma programs and thereby avoid creating a parallel organization. Interestingly, according to the 2012 Process Excellence Week Europe Annual Report [The PEXNetwork.com is a sister organization of SSON], The Future of Process Excellence, 11.7% of survey respondents reported that their process excellence program was either at risk in 2013 or had already been dismantled – a relatively large increase since the 5.7% reported in the 2011 survey.

techproblems.jpg

For inhouse practitioners, vendors, or consultants, their ability to nurture meaningful relationships within the organizations while executing the improvement agenda may force them to maintain the status quo. The tag of an outsider (in the case f a provider) may limit their access to leverage internal networks and could lead to unforeseen roadblocks in the implementation of solutions. Most service providers, including their stakeholders, are likely to be wary of the perceived loss of knowledge if the ownership of improvement programs is vested in the hands of vendors or consultants. The "best practice" label may be an attractive incentive for shared services centers to outsource. However, the underlying risk that practices adopted from within the same, or other, industry may not yield the desired outcome is real. Furthermore, the debate on whether vendors or internal resources are best placed to embed and sustain a continuous improvement mindset remains unresolved. Many service providers may argue that internal employeesoutweigh the experience of vendors or consultants; however, the reverse is also applicable. The costs and potential misuse of internal data need to be critically evaluated by service providers to avoid heartache later.

To make a meaningful decision, service provider leaders have to carefully evaluate the pros and cons, and consider the changing customer habits. The traditional Six Sigma deployments of establishing baseline performance and measurement system analysis is challenged by present day volatile market conditions and advancements in capability to process and interpret large sets of data.

Hence, the decision to outsource or not depends on the extent to which processes can be rendered robust and competitive advantage can be sustained in an uncertain future.

Amarpreet Bhamra 2017
Posted: 07/12/2013

member

Join for Free

EVENTS OF INTEREST

United States
February 25 - 27, 2018
The Peninsula Manila, Makati City, Metro Manila, Philippines
March 18 - 21, 2018