Mastering High Performance BPO

Keys to the KingdomProfessor Leslie Willcocks, The Outsourcing Unit at The London School of EconomicsProfessor Mary Lacity, University of Missouri-St. Louis

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IntroductionAs the business process outsourcing (BPO) market matures, clients are expecting BPO outcomes beyond cost savings and meeting service level agreements. Next generation BPO clients want their service partners to transform their back offices, to improve business performance, to support the client’s shifting business directions, and to deliver business outcomes that were not initially expected. We call relationships that are achieving these exceptional results high-performing BPO relationships.

What practices distinguish high-performing BPO relationships from “typical” BPO relationships? Our latest research from the London School of Economics and Accenture uncovers the “keys to the kingdom” practices that contribute to high performance. These practices emerge from analysis of four research streams: a comprehensive survey of 263 senior client BPO executives by The Everest Group,i in-depth interviews with client-provider executive pairs in 20 organizations,ii our prior BPO case study researchiii and a review of 1,356 BPO and ITO findings from 254 academic research studies identified as robust.iv Across all these research streams, change management—managing the effects during transition and beyond— was one of the most important practices associated with high-performance BPO outcomes.

The gap between high performance businesses and typical performers is large—not just in terms of attitudes toward change management, but especially around executing a robust change management program. Eighty-eight percent of companies working within a high-performance BPO relationship regard change management as important; compared with 62 percent of typical performers—a significant difference. However, the execution gap was much wider—77 percent of high performers successfully executed their change management programs, compared with just 34 percent of typical performers. Change management needs to be considered in terms of two different perspectives: first, the immediate issues that an organization is facing while transitioning from its previous mode of operations to the new outsourcing environment; second, the organization’s ability to adapt to change in the long run.

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Table 1. Keys to transformational change management capabilities

Practices Actions

Execution of change management plans High supplier capabilities and joint ownership

Importance assigned to changemanagement

Adoption across all key stakeholders

Transformation Transformational leadership Implemented across both client and supplier

Proactive refinement of objectives with relationship maturity

Focus on relationships, leverage existing structures, look for ‘small t’ transformations, and evolve to business and strategic outcomes

Stakeholder alignment Manage communications and internal dynamics for progress

Beyond the transition period, change management is important for driving the outsourcing relationship toward greater levels of value, which was evident in the research data. For example, nearly 85 percent of high performance businesses proactively refine their objectives as the relationship matures compared to just 40 percent of typical performers. But this is not just change for the sake of change—it becomes an imperative for high performance BPO because it is a living relationship that is evolving to meet a client’s ongoing business needs and opportunities in an ever-changing market environment. Our research statistics indicate that the corporate strategy team has a high degree of influence in setting the direction of the BPO relationship among 61 percent of high performance businesses, while that happens with only 37 percent of typical performers.

High performance businesses, in other words, create organizations that are “change capable.” Change management is an internal and ever-present capability that enables the client to achieve more organizational and strategic agility. However, it is important to embed this capability in the supplier as well in order to be able to successfully identify and drive the modifications needed to gain and sustain high performance. This need for bi-directional transformational leadership is also a strong finding from our high performance case studies: both parties need transformational leadership in place to pinpoint and drive the changes needed for gaining and sustaining high performance.

Flexible contractual structure and adoption of dynamic objectives are important enablers of long-term change management. Table 1 summarizes our research findings on change and transformation capabilities amongst high performers.

Transition: Executing change management plans

Transformational leadership

Managing dynamic objectives

Change management for the long run

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Transition: Executing change management plans

In the area of transition, our research and interviews revealed that the ability of a provider to come to the table with experience backed by proven transition methodologies is critically important to effective execution of change management programs.

A global procurement process manager for a fragrance and flavors company made this point directly: “During implementation, the first element we have really benefited from is our service provider’s methodology for doing the transfer. We have people from our provider participating here who had experience with this type of project before. They came with a solid methodology for managing the project and the planning, all these elements that we would not necessarily have done as well without them.” He also emphasized the importance of the provider’s developing deep knowledge of the client’s processes before kicking off the transition process, through “the exercise of preparation, and the in-depth description of each process.” This activity enabled both parties to understand clearly “how the operations are running from from requisitions to purchase order and even after that on a step-by-step basis,” he noted.

These principles are confirmed and extended in the finance and accounting outsourcing (FAO) deal at a global manufacturing company. According to the company’s European corporate finance director, the credibility of the entire transition process depended on delivering to the pre-announced timelines. It required senior, experienced managers driving it who were actually involved in running the outsourcing, who could take rapid decisions and bulldoze obstacles out of the way when required. Also, because it was the company’s first outsourcing exercise, it was being watched closely. Therefore the client over-resourced the retained organization at the beginning, knowing that they could ramp it down later. The key success factors, he summarized, were, “effective expectation management and communication across all levels, an over-resourced retained organization at the outset, sustained management focus, and having somebody with big boots accountable and responsible for the engagement.”

The importance of a service provider with a proven methodology and experienced people on the project was corroborated across multiple high-performance deals. In addition, the provider’s ability to infuse domain knowledge and understanding of the area outsourced was cited as a critical element of success. “They won over a lot of people that were initially reluctant in our purchasing organization by showing what they were doing with other clients. Visiting the BPOs and showing how they were processing clients with similar processes or scope showing how they were doing it was a big plus,” said the global procurement manager of a fragrance and flavors manufacturer.

Large geographies also require continuous, on-the-ground information about the diverse business needs across regions. This acts as business input into the outsourced process and helps develop a better understanding of the dynamic business requirements. As described by an executive at a supplier for a learning academy for a major telecoms company: “We did a lot of joint visits to the area in the business throughout the course of the transition process and continued the visits after the contract went into effect. My counterpart and I would travel around the country every six months and visit key leaders in the business in those different regional areas. We operate in a vast country, so there are a lot of different needs in parts of that geography. That is a very important understanding to have in terms of different needs of the business. I have found that extremely useful to understand the business and then being able to provide feedback to the BPO team.”

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Transformational leadership

Change Management requires specific leadership attitudes and behaviors—companies must have dedicated programs and incentives in place to develop the right leadership behaviors, and then provide the appropriate incentives. Transformational leadership is especially important in keeping a BPO relationship energized and creating higher levels of value. This has been a distinctive feature of the FAO relationship between BP and Accenture.v

In 2009, BP sought to create an Americas Business Service Center (BSC), which was a new endeavor for the company. The company hired a proven transformational leader who had previously created a world-class, global financial services organization for another company. BP took the initiative on providing transformational leadership, but it also sought a partner in this program from the service provider. This collaborative approach helped BP make the BSC a success. “She pushes back and can challenge us in the right way. That’s the difference I think in terms of making it a more strategic approach rather than sitting back and accepting business as usual,” said the head of the Americas BSC on the role of the provider leader.

On the other hand, a large, national grocery retailer appointed a transformational leader at its end to create the conditions in which the service provider could deliver top-notch performance. He recognized that the supplier could not deliver optimum results if they were not fully integrated with the client company. His first step was to identify the roadblocks and people that could not adapt to changed, leading practice environment and ease them off the engagement. He also ensured that the provider team had access to the technology, data and applications required for the job, and positioned the outsourced group like any other internal functional group to garner support and mindshare for the engagement. This included regular visits to the supplier operations team that was based offshore in India.

A supplier executive in this high-performing logistics BPO engagement described the difference a client transformational leader made. “He, along with the new lead are the two people that made this program successful. We initially had a stakeholder that was not bought in and now we have a stakeholder that is bought in. This has made a drastic difference in our output and the amount of maneuver we have within the company. It is also now a give-and-take relationship—we got a lot of coaching and input from them both, and we innovate. We have to bring

something new to the table constantly in order to help him to deliver to his vision. He also brought trust—I cannot stress enough how a trusting relationship drives success,” she said.

Apart from these two examples, our research indicates that all high-performance BPO deals possess transformational leaders. While some leaders were identified and out in place in the beginning of the process where they provided the much-needed stability through a period of rapid changes, others were introduced to deal with problems, reinvigorate performance, or rethink the relationship and move it towards business and strategic outcomes. In these BPO contexts, transformational leaders held the following attitudes and behaviors in common:

• Focus on the future: Focused on where they wanted to be, not where they are

• Spirit of togetherness: Seamless service presented to the broader client user community

• Transparency: Open and honest about all operational issues

• Problem-solving: Diagnosed and fixed problems rather than assign blame

• Outcomes first: Did what is best for the client organization and then settled a commercially equitable agreement

• Action-oriented: Acted swiftly to remove or work around obstructions stemming from people, processes, or contracts

• Trust: Felt secure and confident in the other partner’s goodwill and intentions

In high performing BPO deals, client and provider leaders have the right chemistry to leverage their relationship. To make a difference, both leaders—specifically client leaders—need to have the credibility, clout, and power within their own organizations.vi

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Managing dynamic objectives

High-performing BPO arrangements are restless and progressive arenas—they constantly seek to align with the wider needs and aspirations of the client’s business in its dynamic, global operating context. For high performance organizations, an outsourcing contract is often considered out-of-date not long after the ink dries. Their leaders have dynamic objectives for their outsourcing relationships, and find ways to leverage their management structures, processes, and relationships to deal with this dynamism.

Some illustrative examples. A global manufacturer and its service provider used the existing governance structure creatively to drive changes. Said the supplier executive: “When you go into a governance meeting, you need to clearly split the meeting into an operations focus and a continuous improvement/innovation focus. How much time you spend on the two areas is dependent on where you are on your operational maturity scale. When you initially go live, there are usually more operational issues and thus the client is very much focused on SLAs—i.e. how do we get them to go green and how can we hit consistent performance. After a period of time, when the SLAs go green, you then spend less time on the day-to-day operations focus but instead focus the majority of the meeting time on innovation and continuous improvement i.e. this becomes the main event. We cover continuous improvement and innovation very formally with the client (i.e. we clearly cover how we are progressing process standardization activities and how we are improving processes). This all means we can report in the functional committee clear status on continuous improvement.”

The vice president of operations for a hi-tech manufacturer that has outsourced its procurement function described an emerging practice that adds value. ”One of the practices is that they (the supplier) have sent up their category managers to interview our major stakeholders at the vice president level. The stakeholders talk about projects coming up for the year ahead and what commodities and services they are going to be spending money on. That ‘heads–up’ allows the supplier’s team to go back and say, ‘Alright, we have a big project as they are going to be expanding their

Bangalore facility. We need to have a facilities expert to go out and talk to the client VP of facilities and make sure exactly what we need to bid on, what sort of suppliers they like to use, and so on, to get in the heads of client leader initiatives.’ If we are going to buy a bunch of servers, they can discuss whether a reverse auction is the right way for it and they can get on board someone who actually understands that. We never had any of these planning meetings before (at the beginning of a fiscal year) and they are a huge value-add,” he said.

In the Microsoft Global FAO arrangement, as in all our high performing cases, we found dynamic objectives being produced and supported by key partnering behaviors.vii This not only involved creating mirrored governance, but also treating the provider as a strategic partner.

According to the supplier account executive on the BP FAO deal, there was a willingness on the client’s side to focus on some of the gaps in the joint operating model. “It is all about the commitment and openness—looking to create a strategic plan together and having transparency as to where they are going with their business and how we can help in those types of discussions. This has also helped us get a better business perspective from BP,” he said.

We could multiply these examples many times. What they have in common is seeing governance, structures and processes as flexible and changeable means in the face of dynamic business ends, facilitated by strong partnering relationships that never lose sight of more long-term and increasingly strategic outcomes to be pursued by both parties.

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Change management for the long run

In their FAO transformation deals, Microsoft and BP included change management programs not just for transition, but for the long run. Microsoft and its supplier created a dedicated change management program to ensure that their 230 “go-live” events were successful. A combined client-supplier team created global, functional, and subsidiary-specific communication plans to engage with the various impacted audiences.

Each transition event had five major milestones, starting with a country-level launch event to a formal hands-off to operations. Communication was critical; Microsoft held two-day face-to-face meetings with financial controllers of its subsidiaries where they introduced them to the new operating model for finance.viii “We collectively made sure people bought into the change; that made a big difference,” said an Accenture senior executive.ix Local leaders were assigned the responsibility of managing client readiness, which signaled to the subsidiary that change was “close to home”.x Assigning subsidiary leaders to the transition team gave subsidiaries confidence that “one of their own” from the region was providing input and direction to the solution, rather than someone from corporate. Notably, Microsoft put in their best people to makes the outsourcing program successful. ”They put in as many hours as we did to get this right,” said the supplier account executive.xi

In the FAO deal at BP (refining and marketing), the period from 2009 to 2012 was particularly eventful. During this period, BP set out to transform its business services globally, beyond finance and accounting services alone. The Americas Business Service Center (BSC), was formed in 2009, underwent transformation in 2010-11 through optimized, end-to-end processes and outsourcing service provider (OSP) ownership and management. Subsequently, the OSP business model with the supplier was updated to facilitate identification of joint strategies on Procure to Pay, Record to Report, Order to Cash and Finance operation services that would enable a joint operating model.

The objectives were to raise the level of customer experience, expand BSC/Accenture business scope, reduce BP operating costs, and raise productivity levels. BP and Accenture identified top joint priority initiatives for 2011:

organization structure, process approach, continuous improvement, transition and resources.xii The change process involved BP working with Accenture to jointly own the process, teaming and engaging with the Accenture teams, increased acknowledgement and recognition of improvements, and greater transparency. BP was also made as part of the effort. A high degree of collaborative engagement between the parties drove key business changes for BP, while Accenture expanded its scope of services, achieved top-tier employee satisfaction, and increased performance levels. More strategic goals, tight deadlines for change, new transformational leadership and a practical change management tool set the context for supporting further change.

The Stabilization, Standardization, Optimization and Sourcing (SSOS) methodology introduced by the client was a powerful change management vehicle that provided a controlled, logical route for creating world-class shared services. In the BP-Accenture relationship, the centralization and standardization were both facilitated by outsourcing. As a very decentralized organization, BP was missing opportunities to standardize the way they did things across the organization. The provider now supports some key activities across many business units and has an overview of where BP could be doing things inefficiently, and the capabilities to remedy these. According to a client senior executive: ”One of the things we should be looking for from them in terms of value is that sort of insight and some suggestions of ways to continuously improve and standardize the things we do,” said the client senior executive.

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Breakthrough Performance: Taking Action

Leaders from high-performing BPO relationships understand that enthusiasm at the top is key in shaping the engagement, but does not trickle down automatically to the operational ranks.

Therefore, partners from high-performing BPO relationships couple ambitious transformational projects with aggressive change management programs. It is also important for the client’s business users—who may be scattered worldwide—to understand and embrace the outsourcing objectives. High performing BPO clients communicate clearly and frequently to their business users and they and deploy their best people for transition and project teams. High-performance BPOs not only place greater emphasis on change management, they are also vastly more successful in executing change management plans as compared to typical BPOs. These propositions—transformational leadership at all levels, change management design and execution capabilities—emerged forcefully from our research.

High-performance organizations appoint suppliers with strong change management capabilities, but clients jointly own the change process. As described in our companion paper, these organizations also recognize that service objectives are constantly evolving towards business and strategic outcomesxiii and they manage the relationship and achieve stakeholder alignment through frequent communication, effective resourcing, and political processes. The role of transformational leadership in all this is critical, and is therefore the subject of a detailed companion theme paper.xiv

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i The survey was conducted by The Everest Group with support from Accenture in late 2011 and is reported in Accenture (2012) Achieving High Performance in BPO Accenture, London. The survey identified 20 percent of respondents as “best-in-class” scoring strongly on at least three must-have attributes, and in the top quartile on seven additional attributes. A further 20 percent were potential “best-in-class” performers meeting one or other of these two criteria; 60 percent were “normal” BPO performers meeting neither criteria. Note that “normal” here covers a wide spectrum of performance from normal to poor. The research found that levels of performance were independent of industry, geography, size of deal, tenure of BPO relationship and business function outsourced. “Best-in-class” performance was twice as frequent when two functions were outsourced as a bundle (as opposed to one function or three or more functions). Three further sources of research, described below, are used in this series of papers to enrich and extend these survey findings.

ii The interviews were carried out in the October 2011-September 2012 period. They were typically 45-60 minutes in length and used a pre-designed questionnaire aimed at eliciting performance outcomes and effective and unsuccessful practices. The sample was drawn from across sectors and countries, with outsourcing deals ranging in size from small to very large. Nearly 50 percent could be identified as high performers on the criteria detailed above.

iii We have been conducting BPO case studies since 2000. Some of our first BPO case studies are published in Willcocks, L., and Lacity, M. (2006), Global Sourcing of Business and IT Services, Palgrave, United Kingdom. Our most recent BPO work is found in: Lacity, M., and Willcocks, L. (2012), Advanced Outsourcing Practice: Rethinking ITO, BPO, and Cloud Services, Palgrave, London, (forthcoming). Papers which specifically address client retained capabilities include: Feeny, D. and Willcocks, L. (1998), “Core IS Capabilities for exploiting Information Technology, Sloan Management Review, Vol. 39, 3, pp. 9-21. And Willcocks, L., and Feeny, D. (2006), “The Core Capabilities Framework for Achieving High Performing Back Offices,” in Global Sourcing of Business and IT Services, Palgrave, London, 67-96.

iv Lacity, M., Solomon, S., Yan, A., and Willcocks, L. (2011), “Business Process Outsourcing Studies: A Critical Review and Research Directions,” Journal of Information Technology, Vol. 26, 4, pp. 221-258.

v For a detailed study, see Willcocks, L. and Lacity, M. (2012) Strategic F&A Partnering at BP. Accenture/LSE London

vi For more details see Lacity, M. And Willcocks, L. (2012) Mastering High Performance Theme Paper – Transformational Leadership. LSE/Accenture, London. Also Lacity, M. And Willcocks, L. (2012) Transformational Leadership: Microsoft’s One Finance Initiative. LSE/Accenture London.

vii See Lacity, M. And Willcocks, L. (2012) Transformational Leadership: Microsoft’s One Finance Initiative. LSE/Accenture London

viii Hawes, T. Strategic Outsourcing: One Finance: Microsoft and Accenture SLIDE DECK

ix Rosenthal, B. (2008), “Growing the Business to Drive Value,” http://www.outsourcing-center.com/2008-08-growing-the-business-to-drive-value-article-37343.html.

x Hawes, T. Strategic Outsourcing: One Finance: Microsoft and Accenture SLIDE DECK

xi Rosenthal, B. (2008), “Growing the Business to Drive Value,” http://www.outsourcing-center.com/2008-08-growing-the-business-to-drive-value-article-37343.html.

xii Medium priority was also assigned to performance metrics, technology, scope, governance, and contracting.

xiii See Willcocks, L. and Lacity, M. (2012) Mastering High Performance BPO: Keys To The Kingdom – Strategic Business Outcomes. Accenture/LSE, London.

xiv See Lacity, M. And Willcocks, L. (2012) Mastering High-Performance BPO Theme Paper: Improving BPO performance: The Role of Transformational Leaders. Accenture/LSE, London.

ReferenceAbout Accenture

Accenture is a global management consulting, technology services and outsourcing company, with 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

For further information about this research, please visit www.accenture.com/highperformancebpo

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