Session 162 The Great Divide: Managing in an Off-Shored World Catherine Honey Sr Director, Global HRIS PAREXEL International
About the Presenter: Catherine Honey is a long-standing practitioner and consultant in HR systems, processes and service delivery. She is a veteran of numerous system deployments, shared services and service delivery design and implementations, and strategic sourcing and process optimization initiatives. She is also a veteran of two ex-pat assignments and has worked with (and for!) off-shore service providers. A longstanding member of IHRIM and former President of the NE Chapter, Cathy was the recipient of IHRIM s Summit Award in 2009. Catherine currently works for PAREXEL International, where she is the Senior Director, Global HRIS.
Today s Agenda What s in a word? Rumor has it What lies beneath Charting the waters Do you believe in fairy tales? Wrap up discussion
Some Definitions Outsourcing: the process of contracting an existing business process which an organization previously performed internally to an independent organization, where the process is purchased as a service. In other words, paying someone else to do the work on your behalf Offshoring: the relocation by a company of a business process from one country to another typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually implies moving the work to a lower-cost geography Near-shore is similar, but implies moving to work to a location in close proximity to its origins to take advantage of some commonalities Technically these two terms are mutually exclusive A company s strategy may include one, the other, both or neither From Wikipedia, the free encyclopedia
Some Definitions Outsourcing Offshoring What it is What it isn t Why it s done moving work to external provider for a fee integration of processes and services between client & provider moving the work to another, usually lowercost geography taking advantage of labor arbitrage and/or expanded work hour coverage abdication of responsibility giving away the whole enchilada definitively moving work to India/China/Mexico/etc definitively moving work outside your company ( captive offshoring is common) automatic reduction in quality and service allows focus on core, strategic processes moves work to specialized teams for economies of scale facilitates regulatory compliance reduces cost of labor allows more coverage across time zones provides greater access to specialized resource pool Most companies today utilize some combination of the two; while the challenges can be similar, today we re focusing on Offshoring
What We ve Heard: Why Companies Look to Offshoring When asked, most people think of Offshoring as a means to achieve two ends: Cost savings: by moving to a lower cost country or region and taking advantage of the Labor Arbitrage Around the clock availability: by moving to another geography to provide follow the sun coverage The reality is often more complex than that
Offshoring Redefined The potential for cost reduction alone is no longer enough to justify moving operations, said Ton Heijmen, senior advisor to The Conference Board. One survey respondent noted it has taken his company several years to discover the impact of labor arbitrage disappears in fewer than three years. Companies are now shifting from cost-driven offshoring to a multidimensional value proposition in creating a global footprint. Here s The TRUE Reason US Companies Offshore Jobs Duke University s Fuqua School of Business January 25, 2011
What We ve Heard: What They ve Achieved The common perceptions of Offshoring can be less than favorable: Poor quality: lack of commitment to delivering output that is up to standards Heavy accents/inability to communicate Lack of flexibility/creativity Follow the script approach But the underlying challenges may be more telling
The Whole Truth: Offshoring Uncovered The most commonly offshored functions are: Call/contact center, application development, application maintenance, back office forms processing and other project work While exact statistics vary across industries, more than a third of jobs in HR, finance, IT and purchasing will be offshored by 2016 Various functions in the legal sector are the next big push Most firms begin by offshoring lower level positions but higher level positions are now being moved offshore with greater frequency
The Whole Truth: Offshoring Uncovered The most predominant location remains India, with other jobs going to Eastern Europe, the Philippines, Mexico and China With the notable exception of call center jobs, most service jobs remain offshore once they are moved
The Whole Truth: The Top Reasons Companies Offshore Most commonly cited reasons to offshore include: Lower cost Follow the sun coverage Leverage competitive advantage of other nations Gain access to additional resources not internally or locally available Tap into a global knowledge base Focus on core business processes Mitigate risk
Offshoring Can Help Achieve Business Results The achievement of optimal functional performance requires service delivery to be highly efficient & aligned with business objectives Business Alignment Delivery Efficiency Delivery Efficiency Services must be delivered efficiently and effectively Apply best-in-class business processes Leverage technology investments Improve quality of service delivery Minimize operational cost of delivery Business Alignment Delivery must be aligned with business objectives and the attainment of business results Ensure strategic value and relevance Support unique business requirements Leverage core competencies Contribute to desired culture
The Whole Truth: Issues and Challenges In addition to the issues noted previously: Poor quality Heavy accents/inability to communicate Lack of flexibility/creativity Follow the script approach Other challenges include: Lack of consistency and sense of urgency False expectations High turnover Location difficulties Project problems Operational issues
The Whole Truth: What Lies Underneath Cultural Differences and Nuances Lack of proper/adequate documentation Communication miscues Little accountability and ownership Minimal knowledge of full lifecycle & process No project team integration Uncertain career development, advancement
Successful Offshoring: Yes, Virginia, It Is Possible First and foremost, choose the right processes and activities! Define a structure methodology to evaluate and select processes to consider for offshoring Then evaluate the specific activities to further refine the tasks, hand-offs and interactions
Activity Level Activity Level Sub process level Process level Data Gathering Requirements Business Impact / Risk Compliance, Regulatory, Data Sensitivity Score Card Components and Weighting Process score for potential to be outsourced Client / Third Party Facing Process Dependency Analysis Complexity / Specialization Fitness score Physical Presence / Process Footprint Complexity, Specialized Skills / Licensing Process Maturity Sub process score Process score Readiness to Change / Automation Organization Impact / Ease in transition Readiness score Good-to- Go Analyzeand-Go No Go 16 Offshore- Ability Status
Activity Level Activity Level Assessment Assessment 17
Successful Offshoring: Yes, Virginia, It Is Possible Manage the process Ask the right question(s) Provide thorough and accurate documentation Establish ground rules: process management, communications, what s acceptable, what s not Ensure process visibility (end to end) Make sure there is accountability onshore AND offshore
Successful Offshoring: Yes, Virginia, It Is Possible Stay involved and committed Ensure some face to face contact Delegate, but don t abdicate Provide career paths and progression opportunities Facilitate regular and meaningful communications and interactions Manage the team
Successful Offshoring: Yes, Virginia, It Is Possible Finally, set clear and realistic expectations! It is not a 1:1 trade-off for costs/resources Establish clear requirements for work output (timing and quality) Provide honest and accurate status updates and performance measures Be prepared for BUMPS but don t let them dissuade you!
Closing the Divide Be clear (& realistic!) about what you re trying to accomplish with offshoring Offshore with intelligence don t just throw stuff out there Understand there will be challenges Strive to understand the underlying issues and proactively address them Provide a positive environment for success: Appropriate process and activity flows Robust process management, accountability and ownership Active involvement and commitment Realistic expectations and ongoing measurement
As We Close
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