Don’t outsource your processes! outsource your results!!
Don’t outsource your processes! outsource your results!!
You might consider outsourcing specific areas of your business if you’re looking to address a skills gap or your firm is fast growing. Contracting work outside of your company can free up time and resources, which can help your bottom line in the long run. However, not everything can or should be done by others, so you’ll need to think carefully about which duties you delegate. As it is said that ” An outcome-based pricing model is one in which the price is determined by the actual business outcomes provided,”. “The provider chooses
Just track the results.
The provider’s contribution to the real business outcomes achieved determines the pricing.”
What the Concept Says:
- Focus on Accomplishments
- Identify the Pain areas
- Determine Outcome based Pricing Models
- Track and Monitor Progress and Benefits
- Acquire Maximum Cost Effectiveness
Many outsourcing experts, however, believe that the future benefits of outsourcing will be more focused on quality and business value. The function of outsourcing in this equation will be to track vendor results in terms of service quality, employee happiness, and other business benefits.
Despite the fact that the new arithmetic of outsourcing is still developing, there are signs that more outsourcing customers and service providers desire to measure, monitor, and, in some circumstances, price services based on outcomes rather than simple process indicators like the number of transactions completed.
Yes! You need to control the data you collect …
Apparently outsourcing already places a premium on results. For example.
- Performance Measurement
- Hiring turnaround time
- Service level agreements
Outsourcers who provide training may be paid based on the number of employees they train or the courses they deliver. The goal for cost predictability and flexibility drives the usage of these process measurements.
The issue is that such approaches do not address quality directly. More than 100 outsourcing agreements relating to talent acquisition were recently studied, and it was shown that the majority of them depended on indicators that are very simple, such as filling a post. Only approximately a quarter of them, about 14, had some sort of outcome-based pricing aspect connected to service quality.
The following factors should be considered by professionals considering the use of qualitative outsourcing measurements and outcome-based pricing:
Rethink your approach to cost.
With the current outsourcing era there is a strong focus on cost reduction, and it’s difficult to modify that mindset. Cost criteria, according to others, are “addicted” to outsourced purchasers because they are simple to use. Qualitative measurements are more challenging to comprehend and maintain. The cost mindset is strongest in larger organizations’ procurement divisions, where managers who hire vendors have frequently awarded bonuses based on meeting monthly cost-reduction targets. Administrators might re-examine whether procurement professionals’ compensation structures encourage them to evaluate outsourcing providers only on cost-cutting criteria.
Consult with providers on the quality of the results
Although gainsharing is rarely utilized in outsourcing contracts, bringing it up can help start a conversation between outsourcing buyers and providers, fostering a better partnership approach that goes beyond the usual vendor-client relationship. “The present heavy emphasis on textual Q&A in the [request for proposal] process should be replaced with collaborative, meaningful discourse during client workshops to address outcome-based solutions,” says the report.
Establish a foundation of trust.
“Ask yourself, ‘Do I trust my partner?'” Brahma gives advice. However, keep in mind that trust is a two-way street. If a provider falls short on occasion, be willing to be flexible. “Not everything happens as planned… so don’t start screaming, ‘Penalty!'” he advises. “If your partner acknowledges an honest, unforeseeable mistake, you may need to reach a negotiated agreement.”
Vendors should be considered partners. According to studies, approximately 85 percent of high-performing outsourcing buyers—those that get the most out of their outsourcing relationships—view their BPO provider as a strategic partner. “The client must consider the provider as an integral part of their operations team, not a third party maintained at arm’s length, to be effective with outcome-based arrangements,”
Consider using a reverse service-level agreement.
A reverse service-level agreement binds the buyer to specific criteria, thus codifying the idea that the relationship must be reciprocal. In other words, if the outsourcer requires X, what does the partner need to provide in order for X to be delivered? For example, partner support could take the form of providing accurate and timely information.
“Don’t just look at the numbers,” says one expert. “Sometimes the numbers look good, but the service isn’t thought to be up to par.”
There is no magic formula for calculating results. However, carefully examining your goals and how you’re measuring progress, as well as collaborating with your supplier, is the greatest method to ensure that your outsourced operations succeed.
Outsourcing for results, not just for the sake of outsourcing the process, is not as straightforward as it may appear. Several forces conspire to sabotage the endeavor.
Buyers must be completely honest and trusting with bidders. If issues develop, suppliers must be willing to take on significant financial risk and share the pain with the buyer.
Compensation plans are a significant impediment. Procurement is frequently compensated based on how much cost can be extracted from the supplier in comparison to the current situation. A value-based contract, on the other hand, has numerous other components that go beyond a simple side-by-side comparison.