Outsourcing used to be something that only larger companies did. A call center or software development center for Dell or IBM was considered the norm Today mid-sized companies are taking advantage of outsourcing. By being selective on what they outsource and to what partner they select these smaller companies are expanding into the outsource world.
Successfully outsourcing is not as simple as negotiating a contract and letting the service run. The success of an outsourcing project is highly dependent on the relationship developed between the the company outsourcing and their partner.
A recent report I read stated that over 65% of outsourcing relationships fail partially or totally. the primary reason these deals fail is due to a lack of understanding between the outsourcing company and they partner, as well as poor management.
the cultural differences that cause these relationships to fail are not simply because “they” are different than “us”. Each company has its own culture and these company cultural ideas and beliefs have to be taught to the partners just like they are taught to new employees. And just like with new employees these values have to be continually reinforced.
If you have a company that believes working 9 to 5 is enough you will have one type expectation of your partners. If your company believes that working on a problem until it is resolved regardless of the hours, then you have to make sure that your partner will accept to work in the same manner.
When Culture Collide
To make sure that work culture don’t collide (or collide with a smaller impact) there are several steps that you can take.
First, do a formal Request For Proposal (RFP) for any service that you are outsourcing. In addition to defining the services that you want supplied, include a detailed section on the reporting details that you require. Some cultures want to avoid confrontation and place a high vlue on “saving face:. Make sure that the reporting you receive will include reference to the results from clients that were not satisfied with the service that they received.
Second, in the RFP, include a section that describes your company culture and your values. An outsource partner must adapt to your values because the client who speaks to your partner will only associate good or bad results with your company – not the partner. To a client, a partner does not exist, the client is dealing with your company.
Third, when you have a shortlist of potential partners, go to their site. You need to get a real feeling for the company and how they operate. If you are considering 3 potential partners in India a service, send at least on person to India for at least 2 weeks so one employee can spend at least 3 days on each site to get a real feel for how the partner does business.
Interview employees from the partner sites.
Finally, consider bringing the potential managers of the service that you are outsourcing to one of your team building exercises. There is probably no better way for these manager to see your company culture than to share a team building exercise with you.
Mind The Gap
Cultural gaps exist.
To lessen the impact of the culture gaps, make sure your contract clearly states that changes in service managers require hiring company approval. Having completed the vetting process will serve no purpose if the people you hire change the key personnel. Important changes could be equivalent to never having done the prior steps.
If you are outsourcing a service to your own country, assign an experienced employee from your company as a site Account Manager (AM). this AM would be in site during normal working hours and report only to the hiring company.
If you are outsourcing to distant shores, have the AM present full time if possible. If you can’t, or choose to not, do this have your AM on site for at least one full week each quarter.
Only with a person from the hiring company present on site can yo have a real understanding of your partner and how they do YOUR business.
Meet Client Expectations
In all cases your partner must supply ongoing training related to the products and services they are supplying and supporting. If the partner is in a country where they don’t speak the same language as your client, language courses are also a requirement. If the language level is sufficient, language courses may still benefit to work on accents.
Every service provider must have a clear understanding of your client expectations.
Realistic expectations must be defined in the original RFP and measured against the Service Level Agreements (SLA). An SLA can include any form of measurement that you decide is required. This can include the maximum time a client can be on hold, the maximum time to complete a call or service, the maximum level of clients that define themselves as dissatisfied with the level of service that they received. This last is often recorded by asking the client to complete a survey after the service has been delivered.
This is just a beginning on how to overcome some of the cultural differences in the outsourcing process. More information will be posted soon.
{ 12 comments… read them below or add one }
Right, making an agreement is not just starting to work together the other day. It presupposes a thoroughful investigation of company characteristics. Even if an individual chooses a partner for himself, he has to consider the points mentioned.
I have outsourced so much of my work. Its amazing how times change business. Your right it used to be only big companies but I am a two man show with about 15 men who I never even met once in my life who are great employees. Gotta love the internet.
Outsourcing is still in its infancy for us Americans we are going to continue to outsource until labor can be cheaper here which I think it will never be.
Nice post! GA is also my biggest earner. However, it
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If you outsource or offshore your services, cultural differences is a factor, one which can spell success or disaster. However, if you hire highly qualified professionals who do their jobs well, then you have nothing to worry about.
You may have missed the line that “over 65% of outsourcing relationships fail partially or totally. the primary reason these deals fail is due to a lack of understanding between the outsourcing company and they partner, as well as poor management.”
If you want the best service, you don’t outsource except to the best people available. Usually when people outsource they are looking for lower cost, so there is a cost/quality ratio that has to be considered.
Cultural Differences are always effect outsourcing companies and with the fact that 65% of outsourcing relationships fail partially or totally because of understanding between the outsourcing company and their partners and i don’t think that only large companies like IBM and DELL are able to outsourcing. Today many mid size companies outsourcing the employees from different countries in lower cost. finally nice thought and great work.
Most failures can be attributed to poor scoping of work. Cheap isn’t always the best and expensive doesn’t also mean quality work either. The proper expectations should be set.
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Cultural differences should not be underestimated. Sometimes they are hard to detect.
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Yes, they are. Follow Cindy King to get a good idea on how to understand cultural differences.
I agree that cultural gaps exist. It is always advisable to check the contract and have a constant communication to the project manager. Thank you for sharing this article.