So you’ve outsourced HRIS, or payroll, or H&W benefits administration, or applicant tracking, or any one of numerous HR functions and now your job is finished, right? Well most of you know the answer to that is no.
You still have plenty to do as work through data scrubbing, conversion, or ongoing vendor relationship management. The one function you probably have not given much thought to, unfortunately, is project management. Reasonably, you figure that is in the hands of the experts now. Your outsource provider that promised best practices certainly has project management down to a science as they have performed this function hundreds if not thousands of times before.
Well, you are in for a surprise. Based on my experience, the dirty little secret in the world of outsourcing is that effective project management is in short supply. Providers don’t seem to have standard project management approaches to implementation, ongoing administration or special projects. Despite what you have assumed based on the SAS70 you so carefully studied, you are, to put it simply, lucky or unlucky based upon who has been assigned to your account.
Just last week a client asked me: “who is responsible for managing all these special projects we have waiting to be completed? Because it seems we just don’t make the progress I think we should!”
There isn’t an easy answer to this. If I asked you who in a marriage is responsible for paying the bills, you might say traditionally the man. And yet in many households the woman pays the bills (after all, anyone who has worked with 401(k) plans will tell you women are much more responsible savers).
Traditionally, the outsource provider is expected to provide the project management in an administrative relationship. You would think the client is paying for it. But I will tell you that the client has the most to lose if administration goes bad. If projects don’t get completed, the employees suffer. To my thinking, the answer to the question of who is: “whoever is best suited.”
Every relationship, whether personal or buyer/supplier, comes to an equilibrium based on the specifics of the situation. Clearly, clients cannot abrogate responsibility simply because they have outsourced a function. At a minimum, closely monitored project management is called for. Joint management is reasonable, and if necessary, take over the project management yourself.
You’d be surprised how fast a provider finds the right people to manage your account once you have determined that you need to take project management into your own hands.
Regardless of where there equilibrium ends up in your relationship, make sure you budget for project managment as you build your business case for outsourcing. No one likes big cost surprises after the decision has been made.
Oh, and by the way, if you are lucky enough to have a gem of a project manager on your vendor team, please tell your outsource provider loudly and often. They need to know!
About the author – Donald 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.
Tuesday, May 30, 2006
Tuesday, May 23, 2006
Relationship Management III – The Culture of Accommodation
Last week we saw what happens when service providers fail to actively manage client expectations. Client satisfaction suffers, and ultimately the relationship can become at risk.We explored the notion that client expectations are frequently mishandled during the sales cycle, but this week I’d like to talk about how the ongoing relationship is often set up for failure due to what I call the culture of accommodation.
In any administrative environment there is always plenty to be done. Almost daily, individuals can think of better ways to do things, can find problems that need fixing, can see technology they want deployed. It is a constant source of projects which can provide a handsome revenue stream for the service provider.
Clients barrage their service providers with constant requests for change. So many times without regard for the reasonableness, appropriateness or utility of the request, vendors will agree to provide the changes; often agreeing to things they have no capability or capacity to provide. To make matters worse, the vendors themselves provide the timeline in which the changes will be completed, and miss the deadlines. (We will talk about project management next week).
In the world of administrative services, it often seems the guiding principle is the retail-oriented “the customer is always right.” Any professional consultant will tell you that the customer is most assuredly not always right. In reality, the reason they hired you is because they frequently don’t know, and don’t have a hope of getting it right on their own. A consultant will tell you that their first job is to protect the client, and make them look great!
How has this gone so terribly wrong in the administrative services area? How have vendors moved to the model in which the “customer is always right?” Why do they have the “yes” mentality, the desire to please, and the “culture of accommodation?”
I would submit that it is a result of the commoditization of administrative services. Vendor or client – whose fault is it? Both are at fault for this. Clients say they look to the service provider to provide knowledge, advice, best practices, risk management etc., and yet balk when service providers push back against a service request.
Service providers boast about providing specialized expertise, yet become order takers to the requests, outlandish as they might be without asking the simple question – “Why?”
As in why do you want to make this change? What are your goals? Is there a better way to accomplish this?
Service providers believe that the more they give to the clients, the more complicated the administrative environment becomes and the harder it will become for the clients to make a change. They believe that the clients become, in essence, “captive.” The reality differs, of course. The very act of agreeing to everything heightens the risk of failure and undermines effective risk management. It provides reason for the churning of service providers from one to the next in search of quality service (all the while, pounding on fees.)
Recognize this cycle, and you can become a more effective partner. You can break the commodity mentality and the culture of accommodation. Service levels will improve, satisfaction will increase, and everyone will benefit.
Believe it or not, it can happen!
About the author – Donald 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.
In any administrative environment there is always plenty to be done. Almost daily, individuals can think of better ways to do things, can find problems that need fixing, can see technology they want deployed. It is a constant source of projects which can provide a handsome revenue stream for the service provider.
Clients barrage their service providers with constant requests for change. So many times without regard for the reasonableness, appropriateness or utility of the request, vendors will agree to provide the changes; often agreeing to things they have no capability or capacity to provide. To make matters worse, the vendors themselves provide the timeline in which the changes will be completed, and miss the deadlines. (We will talk about project management next week).
In the world of administrative services, it often seems the guiding principle is the retail-oriented “the customer is always right.” Any professional consultant will tell you that the customer is most assuredly not always right. In reality, the reason they hired you is because they frequently don’t know, and don’t have a hope of getting it right on their own. A consultant will tell you that their first job is to protect the client, and make them look great!
How has this gone so terribly wrong in the administrative services area? How have vendors moved to the model in which the “customer is always right?” Why do they have the “yes” mentality, the desire to please, and the “culture of accommodation?”
I would submit that it is a result of the commoditization of administrative services. Vendor or client – whose fault is it? Both are at fault for this. Clients say they look to the service provider to provide knowledge, advice, best practices, risk management etc., and yet balk when service providers push back against a service request.
Service providers boast about providing specialized expertise, yet become order takers to the requests, outlandish as they might be without asking the simple question – “Why?”
As in why do you want to make this change? What are your goals? Is there a better way to accomplish this?
Service providers believe that the more they give to the clients, the more complicated the administrative environment becomes and the harder it will become for the clients to make a change. They believe that the clients become, in essence, “captive.” The reality differs, of course. The very act of agreeing to everything heightens the risk of failure and undermines effective risk management. It provides reason for the churning of service providers from one to the next in search of quality service (all the while, pounding on fees.)
Recognize this cycle, and you can become a more effective partner. You can break the commodity mentality and the culture of accommodation. Service levels will improve, satisfaction will increase, and everyone will benefit.
Believe it or not, it can happen!
About the author – Donald 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.
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:
CASE STUDY
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:
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:
CASE STUDY
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 author – Donald 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.
Tuesday, May 9, 2006
Relationship Management - Part I
Back in January, Double Dubs posted an article titled Vendor or Client - Who’s Fault Is It?
The question is not an academic one, as companies spend a combined fortune greater than the GDP of many countries in search of the seemingly elusive quality service they and their employees so richly deserve. What is really going on here?
The outsourcing industry seems to ride successive waves for any given service area:
The question is not an academic one, as companies spend a combined fortune greater than the GDP of many countries in search of the seemingly elusive quality service they and their employees so richly deserve. What is really going on here?
The outsourcing industry seems to ride successive waves for any given service area:
- Wave I – Move from in-house to outsourced administration primarily for cost reasons (head count reduction, lower total cost, fixed and determinable costs, cost avoidance from technology implementation or upgrade)
- Wave II – Change service providers primarily for reasons of service. If cost can be reduced, great, but a cost neutral migration for better service is acceptable. (Wave II can experience multiple iterations)
- Wave III – Determine that administration can be accomplished more cost effectively and with better quality in an in-house environment, and bring administration back in house.
- Wave IV – Repeat I – III.
Now of course, companies will probably never bring certain functions back in-house: defined contribution recordkeeping is an obvious example. But it is surprising to me to see many companies in-source payroll, health & welfare administration, HRIS, and other HR functions after having outsourced them for years. Even more prevalent, however, is the segment of the market mired in Wave II. These are companies changing from one provider to another multiple times for quality issues.
When a company changes providers, only one thing is certain: the cost to both the client and the provider will be significant. It may or may not result in a lower annual cost that can justify the change costs. It may or may not be accomplished without service disruption or disruption to the business. Most importantly, changing providers will not guarantee enhanced service.
If a company is currently with a Tier II provider, and can move to a Tier I provider, chances are better for enhanced service. Changing from one Tier II provider to another doesn’t portend well, however. But let’s face it, Tier I national providers in this space service scores of happy clients at any given point in time. The quoted retention rates sound, at times, unbelievable. At the same time, however, most don’t rate their providers as meeting or exceeding expectations on a consistent basis.
Most reputable providers have extremely active client satisfaction programs that help to identify a consistent percentage of clients as “at risk”. The clients identified as such change from quarter to quarter and from year to year, but are a constant background of “white noise” to the provider. These are the clients that warrant significant amount of attention, often at the expense of the “safe” clients: thus the constant movement from safe to at risk and back again.
And thus, validation of the old adage “The squeaky wheel gets the grease”.
But at what cost does that grease come for the provider? And what damage to the wheel does all that squeaking cause for the employer / client?
Notice that this article has not begun to answer the original question: “Vendor or Client - Who’s Fault Is It?” This is for good reason. The answer isn’t always apparent, and definitely never a 100% one or the other answer. The fact is, responsibility is always shared, and always for unique reasons.
Over the next few weeks we will explore some of the root causes of problem service that experience has taught us. We will welcome hearing the experience of you the reader through this exploration.
We will also discuss very real techniques and actions both providers and employers can employ in and effort to enhance quality of service, cost containment and ultimately risk management as part of an overall relationship management program. We will look at specific no-name case studies to help us understand the real world dynamics of relationship management.
Let the exploration begin!
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