About Business Process Outsourcing

Simply put, Business Process Outsourcing is getting another company to handle some of your activities for a payment. The concept made its way into the corporate world in the 1980s. Initially, payroll functions were handed out for outsourcing. Then companies included the management of employee benefits for outsourcing. It is now common place for Call Center operations, Finance and Administration functions, Accounting, Customer Service related activities and Human Resources related activities to be outsourced. Presently, activities of a company which are considered as 'non-core' to the running of the business come under the gamut of activities which can be outsourced.

Business Process Outsourcing allows companies to invest their surplus manpower, time and money, freed by the process of outsourcing, in carrying out core business functions. This helps companies to grow fast, as precious resources are not tied up in non-productive activities. It is easier to identify jobs which can be outsourced. In the process of outsourcing non-core activities, a business becomes efficient and productive. It is seen that Business Process Outsourcing frees up capital of a business, which otherwise is tied up in carrying out non-core activities. This capital can be redeployed in the business.

At this juncture, it should be understood that Business Process Outsourcing and IT Outsourcing are different. The former involves outsourcing of activities which are not the core activities of the business. Development and management of applications, Data Center Management, quality control and testing are some of the activities which come under the umbrella of IT Outsourcing. These IT related activities can be handled by service providers or IT companies.

Outsourcing contracts normally run for a long period of time and involve huge amounts of money as contractual payment. Transfers of persons working in the company on the outsourced activities to the service provider can also happen. Some of the companies which have made a name for themselves in Business Process Outsourcing are Cap Gemini, Indian companies like Wipro, TCS and Infosys, and Companies like Accenture and IBM in the USA.

A number of the Business Process Outsourcing companies are based offshore. This means that the company doing the outsourced jobs for you, carries out these jobs in another country. India, China, Russian and Malaysia are some such offshore countries where Business Process Outsourcing companies are facing boom time. Business Processing Outsourcing companies are also synonymous with Information Technology enabled services or ITES. Knowledge Process Outsourcing (KPO) is the latest concept in the business world. Those jobs which need education, knowledge and skill to be handled can be handed over to KPOs.

Some of the problems in the field of Business Process Outsourcing are the increasing reports of information on customers and internal processes of companies being sold in the open market by employees of the service providers. This creates security risks and has detrimental effects on the company which has outsourced.

With the growth in outsourcing activities, there is also a growing resentment in the USA and UK (countries which have done the maximum outsourcing) against the loss of white-collar jobs in these countries. These issues have to be sorted out along with the risks associated with Business Process Outsourcing.

What is Business Processes Management

A lot of people may know about business processes management, including those people who are running a business of their own. A business process management is often simple when you know what to do and when to do and meeting all ends in an effective manner. Thus making your client happy this will eventually create more business opportunities for you. Therefore, when we talk about business processes management you should take it lightly because even if you don't know about it, you are doing it to some extent and that is why it is important for you to know more about it so that you are able to make your business more successful.

Now, when you start a business your top priority is to get orders and deliver them as soon as possible. This does sounds a lot easier in saying as compared to actually doing it. In order to make all of this possible you have to make a lot of struggle so that you can get things done before the deadline. If you are unable to satisfy your clients you will not be to make your business successful in that case. Therefore, it is important that you must know about business processes management and to properly manage your business so that you are able to make your business successful by taking the right steps at the right time to make your client happy by delivering the right product at the right time. The business processes management is not only essential for satisfying the client but it is equally important to keep your costs and profit under control.

The whole business process should be properly managed otherwise you will not have a clue about expenses or losses. If you think that you are earning profits and at the same time your balance sheet is saying otherwise. This basically means that you forgot a lot of things that you did to get things done in time and you were not able to manage the whole situation which eventually led to the loss in your business. Things like this happen all the time in any business but with the help of proper business processes management you can control and even eliminate such cases in your business.

The easiest way to do effective business processes management is to plan all of your business efficiently so that you can have control over the minute details of your business which will help you to increase your profits.

Business Process Management

I am working as Executive Management Advisor for many years and many clients and assisted them to restructure their organisations and to develop or restructure Business Process Models (BPM). There are many typically used methods which a Business Analyst may use when facilitating business transformations and they have all got fancy, if not scary names:

. CATWOE: Customers, Actors, Transformation Process, World View, Owner, Environmental (and Regulatory) Constraints; . Five Why's; . HEPTALYSIS: Market Opportunity, Product/Solution, Execution Plan, Financial Engine, Human Capital, Potential Return, Margin of Safety; . MOST: Mission, Objectives, Strategies, Tactics; . MoSCoW: Must have, Should have, Could have, Would like to have in the future; . PESTLE: Political, Economic, Sociological, Technological, Legal, Environmental; . The famous SWOT: Strength, Weaknesses, Opportunities, Threats; . Six Thinking Hats; . Six Sigma; . VPEC-T: Values, Policies, Events, Content.

All these impressive acronyms help to describe an individual approach; the aim, however remains the same: business process engineering, which is regarded to be the backbone and most important foundation for every well managed organisation - regardless of size by the way. The optimization process requires human intervention and skilled, insightful, ideally experienced professionals.

Interestingly enough though: according to my experience the perfect analyst should not be a specialist in the actual technical or scientific process. I was once asked what I did know about food technology and I replied "basics only", but that I hoped my counterpart who was a Professor with a PHD, would be the expert in our team, as I knew nobody could beat his expertise. I am convinced that a consultant claiming to be an expert on the subject matter not only limits, it actually disturbs the project. A successful business analyst needs be able to understand each organisation, seeing the whole process flow with a neutral bird's eye view.

It is helpful to comprehend a business process as an on-going living cycle which pictures how work gets done. By identifying the particular sequence of work events across time and place, with a beginning, an end and with clearly defined inputs and outputs the analyst identifies shortcomings and saving potentials. Critically reflecting how a business works typically goes hand-in-hand with a re-organisation and can - in my experience - achieve conservatively between 10 % and 20 % savings - without hurting anybody too much.

So this is the ideal set-up: a willing, supportive client, a (group of) skilled business process analyst(s) together with internal process experts forming the project team.

But despite perfect arrangements why do Business Process Management (BPM) projects ever so often fail or at least do not achieve the expected end result? We analyse problems, suggest solutions, accompany the transformation, manage the change and when it fails we feel pointing the finger at the client: "internal politics, nepotism, ignorance, the good people left, incompetence of implementing team, resistance to change."

I won't play the whistle blower. Of course I had similar projects. I had clients who only implemented the processes they dared to change and left out the rest - no wonder the project failed. I was asked to leave prematurely and then the client made all sorts of peculiar alterations. I learned my lesson: if my name is at stake, it is of utmost importance to see the implementation phase through.

My 25-odd years' experience illustrates a more reasonable explanation for failing like this: once we leave, we barely get the chance to see our recommendations life over a period of time. Hardly ever we are hired to act as a permanent advisor; we are kept uncertain about the short, much less the long term success. Pretty much like the tax payers association; they write fancy reports where the tax payers' money is wasted and by next year nothing's really changed. The same with us: we actually do not leave an ultimate and tangible legacy behind.

What is needed? Currently I am evaluating a solution which might fix the problem, which I will share publicly, once done: a simple, reasonably inexpensive but workable solution which ensures that the processes are implemented as defined or if altered remain functioning.

How to Implement New Business Processes Without Affecting Productivity Levels

A business process is basically a collection of related tasks aimed at product or service delivery. It comprises a set of activities with specific goals and objectives targeted at value-addition in an organization. I believe you sometimes implement new business processes in your entity so as to produce more, cheaper, better, quicker and generally offer more service, don't you? At the same time, you desire to implement these new processes without retarding productivity. Isn't it so? Sometimes these two appear to be conflicting. What must you do to reconcile the two? How do you implement new business processes without affecting productivity level? Let's consider some options.

- As a starting point, good people management approaches are vital. You should understand that implementing new business processes is part of change and hence change management guidelines should be considered. Don't you think so? For example, you should ensure that there is effective communication of the new processes and various implementation aspects. Psychological readiness and buy-in by the people are important. Additionally you need to empower, involve, engage and motivate your people.

- Training your people in advance is another powerful approach to implement new business processes without adversely affecting workplace productivity. Do you appreciate the value of this approach? Without advance training and orientation you will have an uphill task. But when your people learn the new approaches before their implementation, your chance of success is very high. Won't you be glad to achieve this?

- It is said that practice makes perfect. In fact perfect practice makes perfect. Practical learning methods such as work simulation, test runs, parallel runs etc help prepare people and the organization at large. Following such methods will ensure that productivity will not lag behind once you start implementing the new business processes.

- Project management approaches such as the critical path approach can additionally guide you in focusing on the critical aspects of implementing the new processes. This approach enables you to identify and place emphasis on the critical areas of change. If these critical areas are adequately handled, your process implementation most likely will not adversely affect productivity.

- The gradual and incremental approach to new processes implementation also avoids negative impact on productivity. Don't you think so? While speedy execution is desired in organizational change processes, the gradual alternative has its advantages also. Surely you don't desire speed to totally disrupt productivity and hence business continuity while implementing change. Now, why not try a slower approach?

- What about the aspect of leadership? You need strong leaders to ensure sustenance of organizational productivity while implementing change. You need capable and good leadership to monitor the change process so that productivity does not drop. Don't you agree with me on this? Just try effecting change in an organization without competent leadership, then you will appreciate the point I'm making here. Can your leaders and managers reconcile change management and high productivity?

In conclusion, productivity is extremely vital in your organization. It affects your strategic and tactical plans, staff motivation, pricing, investment analysis etc. While implementing change in your entity, you need not forget productivity. Of course your organization will keep on changing over time. The smart approach is this - you should change for the better and without destroying the good in the past. Why not consider this in your next change assignment? You can certainly improve your business processes without reducing productivity.

Think Business Processes Not Departments

1. Process Thinking follows the natural flow of the business

A business process is a collection of interrelated work tasks triggered by an event and geared towards providing results or outcomes valued by the "customer". The adoption of process thinking causes an organisation to align its activities and systems with the natural flow of materials and information from the start to the end of the value chain.

Functional thinking creates silos with boundaries across which information and other resource flows are not seamless, leading to the absence of a shared understanding of what the business is about, what factors are critical to the achievement of objectives and how efforts can be coordinated to best attain those objectives.

Carry out an experiment in your organisation. Take any core process: ask five managers in different departments involved in the process the following questions.

• Describe this process
• Who are the customers to the process?
• What valued outcomes do they expect?
• Who are the suppliers to the process?
• What inputs do they provide?
• What is the cycle time for this process?

If yours is a functionally oriented organisation, their answers, where they understand your questions at all, are likely to be all different. Some processes you might consider are order processing, product development, recruitment etc.

2. Business Process Thinking focuses the organisation on customer needs

Because of the insistence on definite identifiable outcomes valued by the customer, process thinking helps the organisation focus on correctly identifying and satisfactorily meeting and exceeding their expectations. Measures of performance are tied to current customer satisfaction levels as well as the enhancement of capacity to satisfy the customer in the future.

Departmental or functional thinking is, on the other hand, focused on internal measures of no value to the customer. Examples of the different kinds of measures are input measures (e.g. items delivered by suppliers), process measures (e.g. cost, time, involvement, efficiency) and output (e.g. timeliness, quality, ease of use, returns on investment) measures. Decisions on appropriate measures must meet the dual requirements of value to the customer and improvability.

3. Business Process Thinking Encourages Focus on Value Addition

Organisations that have adopted a business process mentality constantly strive to ensure that certainly all their processes, and as much as possible, all activities within those processes contribute towards the final outcome paid for by the customer. All non-value adding processes and activities are eliminated or minimised.

Many functionally oriented organisations for example have lengthy approval requirements that serve no purpose. A company drastically collapsed its approval chain after an experiment in which unsuspecting approvers failed to detect that the documents they had just endorsed only had the usual cover sheet followed by a sheaf of blank sheets. This meant they were approving requests without reading the contents! Talk about non-value addition!

Consider also that in many processes the actual contact time between a process document or work piece and the workers or process operators is usually a ridiculously small fraction of the process cycle time. The balance of the time is wasted on such non-value activities as waiting, unnecessary movement, locating misplaced items or documents etc.

4. Business Process Thinking Encourages a Focus on Quality

The bane of good quality products or services in majority of organisations is the variation or inconsistency of process outcomes. Organisations with a process mentality continuously ferret out and eliminate sources of variation to achieve consistent results. This is almost impossible to achieve within functionally oriented organisations as their narrow focus prevents awareness of the causes of problems that span functional boundaries.

While a functional organisation might call for an arbitrary amount of improvement in quality (e.g. 10% reduction in defects) process oriented organisations apply a fact-based understanding of the relationship between results and the processes that drive them. Statistical tools are used to study what factors have the most significant impact and effort is focused on influencing these factors.

5. Business Process Thinking Institutionalises High Performance and Guarantees Execution of Organisational Priorities

A focus on business processes institutionalises high performance in the following ways.

• Uses measures of performance that are meaningful to the customer and other stakeholders. This is very important in view of the axiom that what gets measured gets done. Rewards are aligned to measures, which in turn support valued customer and organisational outcomes.
• Standardises processes by minimising waste and variation, drastically reducing defects and improving speed of delivery.

Measuring Performance From the Business Process Perspective

Small business needs to continually grow and evolve. Every business needs to look at its internal business processes and determine a strategy that includes continuous improvement and development. It also needs to determine how to measure that improved process performance.

Typically, businesses using the balanced scorecard, determine their goals and objectives from both the customer and financial perspectives before they determine their intent from the business process perspective. Determining the objectives in this sequence provides the advantage of aligning their business process improvement and process capacity building to support their customer and financial objectives.

So how/what do you measure when it comes to business processes?

First, take a look at the cues your customers are providing. By looking at the types of things that your customers are complaining about, or are shopping for but not finding, you can determine where your focus needs to be in terms of measuring performance. Examples are:

* Product Cost

* Perceived Value

* Quality of Product

* Quality of Service

* Cycle times

* Fulfillment and Delivery Cycle Time

Next, take a look at your financial cues. Examine your financial measures and break them down to measure the performance of each of your business processes, and in so doing, expose the role they play in your overall profitability.

* Manufacture Costs

* Process Yield

* Process Time

* Fulfillment Process and Delivery Cycle

Using the Business Process Value Chain as a Guide

While each business has its own unique set of processes for creating value for customers, Kaplan and Norton, have identified a generic model that businesses can customise. This value chain is an excellent way to break down your business process model into manageable, measurable chunks.

The value chain is broken down into three main areas of concern.

1. Innovation

2. Operations

3. Post Sale Service

The Innovation Process

The innovation component of the value chain, includes the research of the emerging needs of your customers and the subsequent development of products and services to meet these needs.

Research and development is not usually considered 'important' by small business owners. But those businesses who embrace being efficient, effective and timely, at this stage, often find competitive advantage early in their life stages and go on to survive and thrive.

Possible measures include:

* Percentage of Sales from New Products

* Improved manufacturing process capabilities

* Time to develop next generation of products

* Break Even Point

The Operations Process

The operations process is the next step in the value chain. This is, traditionally, where organisations have focussed their performance measurement activities. This process focusses on efficient, consistent, and timely delivery of existing products and services.

Traditional measures include:

* Standard Costs

* Budgets

* Budget Variations

* Labour Efficiency

* Machine Efficiency

* Purchase Price Variations

* Product Quality

* Cycle Time

* Waste Management

* Energy efficiency

Post Sales Service

The post sales service process concentrates on those activities that occur after the sale or delivery of the product and service and usually include support, service and warranty processes.

Possible measures include:

* Number of complaints

* Speed of response

* Cost of Post Sales Services

In measuring your business's performance you need to ensure that you have a balanced set of measures. Focussing on the traditional financial measures can skew your results and dramatically alter your business's direction. The balanced scorecard approach, by Kaplan and Norton, is just one way to ensure that your business performance is a well balanced, well thought out, aligned approach which will put the reins of business firmly in your hands.

Examine your business today to determine how you start to effectively measure your performance from the business process perspective!