BPO Module 4-6: Managing Outsourcing Transition, Operations Management, and Business Continuity (copy)

Learning Outcomes and Agenda for Transition Management

• Learning Outcomes:
  • Discuss transition strategies and illustrate the knowledge transfer framework.
  • Explain the importance of readiness of both parties (client and service provider) during the transition period.
• Agenda Items:
  • Transition Strategies and Knowledge Transfer Framework.
  • Transition Success and Effectiveness.
  • Document Readiness.
  • Work-Shadowing.
  • Readiness Assessment.
  • Hand-Offs.
  • Scale and Identifying Task Candidates for Outsourcing Scale.

Overview of Transition Management

• Definition of Transition Management:
  • Transition Management is one of the most important roles in any organization performing outsourcing or off-shoring.
  • It is the process of migrating knowledge, systems, and operating capabilities between an outsourcing environment and an in-house staff, or vice versa.
  • It encompasses the set of activities that transpire after a BPO contract is signed, implementing the detailed movement or transfer of processes from the client to the service provider.

The Role of the Transition Manager

• Primary Responsibility: Migrating the function or process from the client location/organization to the service provider/outsourcing organization.
• Key Communication Requirement: The Transition Manager must be an effective communicator, requiring extensive interaction with clients.
• Necessary Skills and Competencies:
  • Strong Project Management Skills: Migration processes are complex projects requiring expert management.
  • Cross-Cultural Competence: Must be comfortable working in cross-cultural environments, as client teams are often based overseas.
  • Functional Understanding: Requires a thorough understanding of existing business and legal processes, as well as current and emerging technologies.

Transition Strategies and Knowledge Transfer Frameworks

• Strategy 1: Lift and Shift

  • Definition: The most common methodology used when a process is mature.
  • Phases:
    1. Move the current process to the service provider without changes or improvements.
    2. Stabilize the process.
    3. Re-engineer the process to achieve efficiency gains (producing the same output with fewer Full-Time Equivalents/FTEs). This includes:
       • Modifying the process.
       • Adding end-user type or strategic automation.
       • Combining roles with others.
       • Moving processes into a production line.
       • Negotiating the elimination of unnecessary outputs.
  • Items to Consider:
    • Process changes must not affect control points; output must be doable by the service provider independently.
    • Onshore approval of process changes and onshore review of regulatory control impacts is considered good practice.
    • Major effort involves post go-live re-engineering. The initial transition phase may only take $3$ to $4$ months if "people and processes" are moved.
    • The onshore team risks losing the political will to re-engineer processes after some time has passed.
  • Advantages of "As-Is" Migration:
    • Training is easier as the process is documented and well-understood.
    • Existing employees at the donor location remain available to support disruptions.
    • The new team provides a "fresh set of eyes," often resulting in enhanced controls and improvements.

• Strategy 2: Re-engineer and Migrate

  • Definition: Fundamental rethinking and radical redesigning of business processes to achieve dramatic improvements in performance measures such as cost, service, and speed.
  • Items to Consider:
    • Useful when a process is broken, requires fixing, or is due for significant systems/process changes in the near future.
    • Utilizes the expertise of the existing team (built over several years) to drive change before handover.
    • Companies outsourcing common processes to market-leading providers generally adopt the provider's processes as part of the transition.

Transition Success, Effectiveness, and Pitfalls

• Transition Pitfalls and Risks:
  1. Inadequate investment and sponsorship.
  2. Unclear scope of work.
  3. Training shortcuts.
  4. Unclear roles and responsibilities.
  5. Not retaining the experts.
• Critical Success Factors (Measurement Aspects):
  1. Technology Readiness: State of readiness of hardware and software to support operations.
  2. Manpower Readiness: State of readiness of operating staff (hired, trained, and skilled).
• Measuring Transition Effectiveness:
  • Financial Benefits:
    • Quantifying baseline costs (before off-shoring) versus ongoing offshore costs.
    • Moving costs should be tracked separately as project costs.
    • Enables accurate measurement of saves through cost element comparison.
  • Performance of the Team:
    • Developed through performance metrics.
    • Subject to a "baselining" testing period to determine the reasonability of service measures.

Document Readiness Components

• Inputs:
  • Documenting source systems and dependencies.
  • Timing of delivery, quality assumptions, and work-arounds for failures.
  • Historical timeliness and accuracy statistics to help size resources and identify risk of work-compression or overtime.
  • Format of inputs (structured or unstructured).
• Processes:
  • Documented in industry-standard formats with complete detail.
  • Identification of hand-offs to external or internal parties (timing and format).
  • Documentation of interim/flash reports and required tools (macros, workflow, applications, shared directory access).
• Outputs:
  • Complete documentation of interim/flash and final outputs including formats and delivery times.
  • Defined control steps and quality assurance checklists.
  • Validation that timelines are current and not merely "aspirational" or unrealistic deadlines.
• Communication:
  • Explicitly defined communication channels for output to minimize misunderstanding during early production.
• Supervision:
  • Defined onshore supervision points and review checklists.
  • Compliance with regulations (e.g., US) requiring clear trails of supervisory control.
  • Accountability for outputs (e.g., financial statements) rests with an onshore officer.
  • Shared service centers may transition into "center of excellence" mode where supervision moves offshore.

Work-Shadowing and Hand-Offs

• Work-Shadowing Definition: A "learn-by-doing" activity for service provider personnel, usually at the same location as the current performer.
• Work-Shadowing Phases:
  1. Onshore Personnel Doing Activity: Onshore performs while service provider observes. Documentation is reviewed against actual activity and updated; staffing sizes may be re-negotiated.
  2. Guided Service Provider Work: Service provider performs with onshore guidance for $1$ to $2$ full cycles ($1$ to $2$ months).
  3. Go-Live: Service provider performs independently. Performance targets are in place. Changes in sizing or process now require a formal change-request. Performance is monitored for $3$ months to ensure stability.
• Hand-Offs:
  • Definition: Transfers of output to a different performer or approver for further action.
  • Reasons for Hand-Offs: Data enrichment (adding data), Quality Assurance (checking), and Control (approval for materiality/substance).
  • Example Payroll Hand-Off Process:
    1. Paymaster creates record.
    2. Timekeeper adds overtime.
    3. Payroll clerk reviews loan deductions.
    4. Payroll clerk adds reimbursement expenses.
    5. Payroll clerk calculates withholding tax.
    6. Payroll supervisor reviews/approves.
    7. Paymaster submits net salary to bank.

Scale and Identifying Task Candidates

• Definition of Scale: The number of employees (manning compliment, headcount, or Full-Time Equivalent/FTE).
• Sufficiency Factors:
  • Service Provider Perspective: Large providers (e.g., $15,000$ FTE) may prefer engagements of at least $500$ FTE ($5\%$ buffer) for easier ramping/absorption.
  • Client Perspective: Initial outsourcing may be limited to $10\%$ or $15\%$ for risk management, though large companies may outsource entire departments (e.g., IT).
• Tips to Optimize Scale:
  • Avoid outsourcing if the process only requires a few FTEs (e.g., one person doing everything).
  • Near self-contained roles (e.g., help-desk, end-to-end mortgage processing) have high potential.
  • Ideal roles are end-to-end with minimal intermediate hand-offs (e.g., Product P&L from data download to senior management submission).
  • Savings must justify risk and executive attention; small savings may be eaten by onshore supervision costs.
• Identifying Candidates:
  • Break down onshore roles into tasks with high FTE hours.
  • Analysis Tools: "Stop-watch" method (consultant tracking time) or Time-tracking (performer tracking activities over $1$ to $3$ months).
  • Sub-filters for Outsourcing: Tasks not requiring complex market knowledge, low financial/regulatory risk, and self-containment.

IT-BPM Operations Management (Module 5)

• The Six Components of Operations Management:
  1. Performance Management: Systematic process involving employees to improve organizational effectiveness through planning, monitoring, developing, rating, and rewarding performance.
  2. Metrics and Reporting:
     • Operational Goals: Meeting budget (transaction volumes, Handle Time, cost per seat), reducing waiting time (Abandon Rate $\text{\%}$, Speed of Answer), reducing repeat transactions (First time resolution $\text{\%}$).
     • Responsiveness: Turnaround time and quality of service.
     • Lead Generation: Leads generated per hour for outbound processes.
     • Limitations of Service Level Agreements (SLA): Lack of focus on business objectives/end customers, over-emphasis on efficiency over effectiveness, and lack of sub-process metrics.
  3. Professional Development: Skills and knowledge for personal and career advancement. Approaches include Coaching, Mentoring, Communities of Practice, Case Studies, and Reflective Supervision.
  4. Quality Monitoring and Analyzing:
     • Total Quality Management (TQM): Focus on customer satisfaction, employee involvement, and continuous improvement.
     • Total Quality Circles: Organized Kaizen involving everyone to satisfy goals like quality, cost, and scheduling.
     • ISO 9001: International standard for quality systems in design, development, and production.
     • Six Sigma: Statistical techniques to eliminate defects and process variation. Founded on data-driven decision making and organizational commitment.
  5. Productivity Monitoring and Control: Measuring the amount of output produced per period. Guidelines include Measuring, Comparison, Identification, and Feedback.
  6. Continuous Improvement Initiatives:
     • 5S Process (Japan):
       • Seiri (Tidiness): Rubbish removal.
       • Seiton (Orderliness): Proper place for everything.
       • Seiso (Cleanliness): Cleaning the workplace.
       • Seiketsu (Standardize): Maintaining cleanliness.
       • Shitsuke (Discipline): Practicing 5S daily.
     • Kaizen: Gradual, continuous improvement ($\text{Kai}$ = Change, $\text{Zen}$ = Good).
     • Lean: Derived from Toyota Production System (TPS); aims to optimize flow by removing "8 deadly wastes."
     • 8 Deadly Wastes: Overproduction, Transportation, Motion, Correction, Over-processing, Inventory, Waiting, and Unused Employee Ideas/Talent.

Business Process Mapping and Notation (BPMN)

• Definition: Standard notation understandable by all business stakeholders, crafted by analysts and reviewed by managers.
• Basic Shapes:
  • Event (Circle): Start, intermediate, or end events. "Something that happens" (e.g., month-end date).
  • Activity (Rectangle): Tasks or sub-processes. "Something that is done" using action verbs.
  • Gateway (Diamond): Forking or merging paths. An "X" denotes exclusive (One or the other); a "+" denotes parallel (Both occur).
  • Flow (Arrow): Indicates sequence and direction.
  • Data: Input or output data (reports, emails, invoices).
  • Group of Tasks: Visually designates logical groupings.
  • Annotation: Text box for comments or explanations.
  • Pool or Lane (Swimlanes): Designates the scope of the performer's role and identifies hand-offs.

Business Continuity Management (Module 6)

• Definition: Capability of an organization to continue delivery of products/services at acceptable levels following a disruptive incident (ISO 22301:2012).
• Goals: Uninterrupted availability of key business resources and essential activities.
• Interruption Events: Triggered when process interruptions exceed the maximum allowable time.
• Triggering Event Characteristics: Extraordinary events (beyond normal downtime) and High Impact (risk of significant loss).
• Reducing Probability: Developing prevention measures or reducing likelihood (e.g., multiple generators, smoke alarms) if prevention is not cost-effective.
• BCM Process Steps:
  1. Initiate Project: Document objectives, establish committee and budget.
  2. Identify Key Business Processes: Align processes with objectives and outputs.
  3. Undertake Business Impact Analysis (BIA): Determine Maximum Acceptable Outage (MAO).
  4. Design Continuity Treatments: Identify alternative activities and evaluate options.
  5. Implement Continuity Treatments: Mitigate adverse effects and plan for redundant resources.
  6. Test and Maintain Plan: Includes paper tests, structured walkthroughs, and unannounced assemblies.

Critical Situations (Critsit) in IT-BPM

• Definition: A state where service quality and operations management degradation is apparent, compromising the ability to render excellent service.
• Tell-Tale Signs/Symptoms:
  1. Prolonged period of missing SLAs.
  2. Business controls/financial posture assessed as high risk.
  3. Lingering IT infrastructure issues (e.g., payroll processing delays).
  4. Recurring data privacy incidents or fraud.
  5. Downward trend in customer satisfaction or spiraling escalations.
  6. Unexpected increase in costs/resources.
• Declaration: Must be jointly declared by the Delivery Center Leader/GM, Competency/Process Leader, and Process Quality Leader.
• Case Study Examples:
  • Situation 1 (Heavy Flooding - Habagat 2012): Resulted in massive absenteeism and non-attainment of SLAs. Mitigating actions included asking for support from other Asian centers (India, China), overtime, work-from-home, and providing food/lodging/shuttles for staff at the center.
  • Situation 2 (Metro Manila Blackout + Broken Generator): Caused total downtime. Response involved declaring an emergency, coordinating with other centers, and establishing a future Disaster Recovery Plan through building admin meetings and monthly power system audits.
  • Situation 3 (High Absenteeism - Widespread Influenza): Resulted in long call queues and delayed Turn Around Time. Actions included overtime, revoking vacation leaves, and multi-skilling agents for cross-program flexibility.

Problem Solving and Issue Management

• Critical Situation Management Method: Prepare -> Assess -> Develop Recovery Plan -> Gain Commitment -> Execute the Plan -> Close the Recovery.
• The 8D Approach (Ford Motor Company Method):
  • D0: Awareness.
  • D1: Team Approach.
  • D2: Describe Problem.
  • D3: Interim Containment.
  • D4: Root Cause Definition/Verification.
  • D5: Choose Corrective Actions.
  • D6: Implement Permanent Actions.
  • D7: Prevent Recurrence.
  • D8: Congratulate Team.
• Managing Issues and Changes:
  • Interaction Levels: Transactional (performer level), Operational Manager (individual process), Account/Relationship Manager (cross-process), Executive Committee (strategic directions/escalated issues).
  • Issue Management System Benefits: Facilitates clear documentation (scope, root cause, cost), accountability (assigned owners), approvals (client/provider authority), and process improvement (trend analysis).

Questions and Discussion

• FCR Case Study: If First Call Resolution (FCR) target is $85\%$ and actual performance is $75\%$, $70\%$, $78\%$, $80\%$, and $75\%$ over five months, and penalty bearings ($15,000$ per month) started in month 3, should management call for a Critsit? Yes, because of non-achievement of SLA and recurring financial penalties.
• Administrative Details: Prepared by Dr. Michelle Lasundin Salazar for the HRMA 203 course at the Polytechnic University of the Philippines.