Tuesday, May 16, 2006

Relationship Management II - Managing Expectations

Last week I wrote, in part, about outsourced service providers’ client satisfaction programs which monitor how satisfied clients are with performance. At any given point in time, there are a number of clients who don’t believe their service providers are meeting, let alone exceeding, expectations.
What causes dissatisfaction? Of course, it’s easy to say that poor service will create dissatisfaction, but is that all it takes? By definition, dissatisfaction comes from unmet expectations. So a critical piece is what are those expectations, and how are they managed?

Essentially, outsource providers are responsible for managing client expectations. And after over 20 years in the business, I can truthfully say that many outsource providers fail miserably at effectively managing client expectations. Too often, expectations are set during the sales process, and are never addressed again. That’s right: the sales process when salespeople say what is needed to close the sale and buyers hear what they want in order to make it happen.

Too often the sales process itself dooms a relationship to failure, or at least significant problems. Promises are made to provide services that aren’t even offered by the provider. Unrealistic timelines are agreed to. Bad data from the current environment isn’t recognized or discussed. Ultimately it is all handed over to an implementation team that is caught between a rock and a hard place. They can’t push back because contracts were already signed and agreed to.

At times, externally engaged search consultants can help a company to avoid this pitfall, but not all companies engage this assistance. At times, even with this assistance, outsource providers insist on their ability to deliver in order to close the sale. The fact is, many companies want to believe that once a function is in the hands of an outsourcer their job is finished.

After implementation, the ongoing processing team picks up the ball and runs with it. Scrambling to correct the errors that resulted from an ineffective and late implementation, the processing team struggles to catch up while continuing day to day operations. Resetting client expectations falls far down the list.

This doesn’t sound too pretty, does it? What can be done about this expectation gap? I am happy to say that it isn’t a lost cause. There are tools and methodologies that can cast a bright light on the expectation gaps. A good place to start is in complete identification of responsibility for specific processes. Following is a case study example:

A fortune 500 company outsourced group benefits administration to a well known third party outsourcing provider. Both the plan sponsor and the outsourcing provider were asked to independently complete responsibility matrices identifying the responsible organization/department for specific process steps. What resulted was startling. There was disagreement on responsibility for over 35% of the process steps. Gaps, redundancies and ambiguities in process were clearly seen. Some of the combinations of disagreement were as follows:
  • Company “A” and Outsourcer “Z” each thought the other was performing a particular function. In essence, this resulted in the function not being performed. This greatly increased risk, but also resulted in “Z” consistently falling short of expectations. After all, how could they ever meet expectations for a function they weren’t providing?
  • Company “A” and Outsourcer “Z” each thought they were responsible for performing a particular function. This resulted in information being corrupted from overwriting, inefficiencies as multiple parties were doing the same thing, and reduced quality of service as employees were confused about how to complete certain transactions.
  • Company “A” didn’t know who was responsible. Somehow, many of these functions were completed, but company A never fully appreciated the scope of the work performed by the outsource provider. It became easy for “A” to become dissatisfied and look for reduced fees.
As a result of this exercise, the two parties conducted a series of half day meetings to resolve and reconcile the gaps. Responsibilities were clearly identified, and ownership was affixed.

Other work was performed as part of the review as well, and as a result of all the activity, today client satisfaction is nearly 200% greater than it was before the process began. And importantly, the client has a much better and realistic expectation of services.

Don’t underestimate the power of effectively managing client expectations!
Next week, we will explore the culture of accommodation.
About the authorDonald Glade is President and Founder of Sourcing Analytics, Inc., an independent consulting firm specializing in helping companies optimize their HR / benefits / payroll service partnerships through relationship management, financial analysis, and process improvement.

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