Outsourcing Success: Getting the Right Start
by Debbie Friedman
6:00 A.M.
Jan awoke to a story which confirmed the rumors. Her company was acquiring a competitor and would double in size. Newly promoted to training director, she felt panicky. She had been thinking about the massive on-boarding and training efforts that would be required. There were literally thousands of employees that would need to learn the company’s priorities, business processes and systems. Having a small staff, she would need to rely on external consultants. Somehow engaging consultants felt particularly risky given the complexity of the situation. In the past, she had gotten mixed results when outsourcing.
When she got to the office, she called Pat, a colleague who had mentored her over the years. She needed advice. Pat would be helpful, having had over 20 years of experience working with vendors and consultants. They met for lunch. After some small talk and a discussion of the acquisition, Jan launched into her concerns about outsourcing.
Jan: (Speaking rapidly) Pat, I’m really worried about resources. I know I’ll need to hire consultants to get the work done. Frankly, I haven’t always been successful with outsourced projects. There’s so much at stake – budget, reputations—mine, the department’s. Now that I’m in this new job, the pressure feels even greater. I’m not sure who to hire, what to pay, whether to stick with local consultants to avoid travel expenses. I need your advice.
Pat (Smiling): Slow down. Getting off to the right start is important. When you outsource, how you get started is a pretty strong indicator of how things will end up.
Jan (Leaning back and looking confused): What do you mean?
Pat: Outsourcing is challenging. You have to be strategic, make wise choices about what to outsource and what to retain. Then it takes really strong partnerships.
Jan: What do you mean about being strategic?
Pat: Well, your sourcing decisions should be in sync with your organization’s priorities. They should also help position you and your team as strategic partners with management.
Jan: Have to admit, I haven’t spent much time deciding whether or not to outsource. I’ve just done it when the workload gets too heavy. By that time, I’m so overwhelmed, I’m just looking for relief that’s within my budget.
Pat: You need to look at every initiative and use the best resources you can, whether internal or external. Decisions should be based on careful consideration, not gut feelings or pressures from a heightened sense of urgency. Your goal should be to focus your energies on the most strategic activities. That doesn’t mean it’s as simple as you do the strategic work and outsource the tactical. Sometimes, you’ll have the skills to do the strategic work, and you’ll take on the assignment yourself. Other times, to get the quality you need, you may have to outsource.
Jan: (Looking more confident and starting to take notes) I know what you mean. Sometimes I’ve split a course development project with consultants. I’ve done the strategic aspects, like clarifying the need, positioning it with management, and then I’ve turned over the detailed development to a consultant.
Pat: That can be a good idea, especially when you have limited resources. Course development can be time-consuming.
Jan: What if I wanted to be more strategic when deciding whether or not to outsource, how would I approach it?
Pat: There’s really no right or wrong answer about what to outsource and what to retain. You have to explore the trade-offs. I usually think about four factors: expertise, timing, cost and the context.
Jan: I’m not sure I understand. Can you give me an example?
Pat: (Pausing): When I took my current job, I wanted to build competency models for key jobs. I had to decide whether or not to outsource. First I thought about the importance of the initiative. I rated it high because I knew the competencies would serve as the basis for succession planning, performance reviews and future curriculum development. Then I thought about the four factors.
Jan: What were they again?
Pat: Expertise, timing, cost and context. From an expertise standpoint, I felt the skills to do the competency study required more expertise than I had, so I was leaning toward outsourcing. I also felt from a timing perspective, it was better to outsource since an external provider could do it faster. I had the budget, and there didn’t seem to be any issues with the context.
Jan: (Looking confused) What do you mean by context?
Pat: Cultural or political reasons that dictate whether to use internal or external resources. I usually ask myself a couple of questions. Is there some cultural or political sensitivity that would require me to outsource or do the work internally, or does the nature of the project require the objectivity of an external perspective?
Jan: (Smiling) I’ve been in that situation. I’ve often hired externals to run teambuilding sessions for senior executives. There’s no way I would do that type of work myself. On the other hand, I remember you taking on a sensitive executive teambuilding session a few years ago.
Pat: Exactly. You’ve nailed the essence of the context factor right there. There’s never one solution. It all depends. (Pausing for a moment) On the competency work, there didn’t seem to be cultural or political reasons to do it internally, so I hired a consulting firm.
Jan: Sounds pretty straightforward.
Pat: It’s not always that easy. Sometimes there are conflicts. For example, I might have needed the expertise of an external provider, but I might not have had the budget. Then you have to explore the trade-offs.
Jan: (Taking more notes) Hmm….good point. What would you have done?
Pat: For the competency work, I would have gone to my boss for more funding. It was that important. If I couldn’t get an increase to the budget, I would have done the project myself. But I don’t think the quality would have been the same. Sometimes, you have to compromise.
Jan: There’s a lot to consider when outsourcing projects related to the acquisition.
Pat: What are you thinking?
Jan: Well, clearly the on-boarding work is going to be critical. I’ve been doing some reading about mergers and acquisitions. Often success hinges more on the cultural or people issues than it does on the business side of things. So the work is definitely important. I suspect that budget won’t be much of a problem. The company is definitely going to make additional funding available for training.
Pat: Where do you think you’re going to run into challenges?
Jan: Not sure about expertise at this point, because I’m not clear about what we’re going to need. Timing is definitely an issue. The workload will be enormous, and my staff is small. I think there will be political and cultural issues. I’m not sure how training was perceived at the company we’re acquiring. Credibility is important, so I want to be careful how I position the training department. Also, I hear that the cultures between the two companies are vastly different. I’m not sure how they’ll view consultants. I’m also not sure how my management will view outsourcing. There may be a feeling that we have to do everything ourselves since the issues are going to be sensitive.
Pat: Sounds like you’re considering the right things. You’ll need to build your plan first, get clear at least at a high level what the process and deliverables will be, and then consider the best resources. I’d be happy to review your plans as they evolve. It’s been awhile, but I was involved in a merger in the eighties.
Jan: When we started this conversation, you talked about getting off to the right start. I didn’t think you were talking about making the decision about whether or not to outsource. I thought you were talking about how to get an outsourced project started.
Pat: Good catch. I’ve found that people often skip the question about whether or not to outsource and jump right to selecting a consultant. I’m glad you made the distinction. So with that said, once you’ve decided to outsource, it’s important to get off to the right start.
Jan: What’s most important?
Pat: You may have to write an RFP (request for proposal). You have to analyze proposals, select the consultants or vendors and negotiate contracts.
Jan: I’ve never done an RFP before. Can you give me some tips?
Pat: (Laughing) Jan, I’m not sure I can tell you everything you need to know about an RFP in this conversation. Maybe I could show you some samples from projects I’ve outsourced. Then you’ll see the elements that need to be included.
Jan: Great. But off the top of your head, what’s most important?
Pat: This might sound odd, but even during the RFP process; you should think about the partnership you want to establish with the consultants or vendors you ultimately select. Establishing strong partnerships is the key to success. Share as much information as possible. Be clear about the objectives. Describe the constraints. Be available to potential providers to answer their questions. The greater the clarity of the RFP, the better the proposals. On the other hand, don’t be so prescriptive that you limit the possibility for the provider to be creative.
Jan: I’d really like to see RFPs you’ve written. What about selecting consultants and negotiating contracts?
Pat: That’s another big conversation.
Jan: How about some initial thoughts?
Pat: There’s so much to consider. Expertise, pricing, their recommended approach. Are they a cultural fit for your organization? Do they have a strong customer orientation? Do you have chemistry with them? And back to the issue of partnership. I want to be sure they will be good partners. So do they demonstrate generosity of spirit? Do they share ideas? Seem open? Do you learn something from them in your very first meeting?
Jan: (Looking a bit embarrassed) Well, one thing I learned the hard way was the importance of auditioning trainers. I once hired a consultant to do some training. He was a really poor match for our company. I had to let him go. It was very unpleasant.
Pat: I always audition trainers too. Jan, you wanted to know about contracts. I’ll bring samples next time. But you really ought to work with your in-house legal counsel. Believe me, they’ll have a perspective. The most important thing I’ve learned about contracts is to avoid negotiating the price down so low that your consultants can’t do a good job for you. Once again it’s a partnership. You deserve to pay a reasonable fee, and they deserve to make a profit. Jan, I’ve only got about 20 minutes before I have to get back to the office. What else is on your mind?
Jan: Well, once you select consultants, how do you get the project started on the right foot?
Pat: Great question. I always launch a project with a comprehensive kick-off meeting. I make sure to hold the meeting face-to-face and have the important players present. Once again, I try to give the message that we need a strong partnership.
Jan: How do you do that?
Pat: I start by involving the consultants in planning the agenda. Make sure we are covering all the issues that are important. Once we’re at the meeting, we spend time getting to know each other, sharing our backgrounds, strengths, weaknesses, and maybe even outside interests. The goal is to feel comfortable with each other and understand how we can best work together. We spend significant time on the objectives even though we have talked about them during the RFP process. I find that consultants can help strengthen objectives. It’s also the time we begin to talk about how we’ll evaluate the project.
Jan: (With skepticism) That seems pretty early to focus on the evaluation.
Pat: If you wait until the end to figure out how to evaluate a program, you’re too late. Often your plan for evaluation influences the design. We don’t do a detailed evaluation plan at this point, but we start talking about it. Basically, we’re trying to answer the question, “When the project is complete, how will we know if we have been successful?” This kind of thinking raises the quality of what we are doing and puts everyone on notice that we’re going to measure results. We expect an improvement in performance.
Jan: What else do you discuss up front?
Pat: Political and cultural issues that impact the project. I explain the players, the level of support, obstacles we may face, related projects – anything that will help with the context.
Jan: Makes sense. Can you imagine doing our jobs without that kind of information?
Pat: That’s exactly how I see it. The more consultants know about the organization, the greater their impact. Another area that is crucial is a discussion of roles and responsibilities and how we’ll work together. Things like how frequently to meet, how we’ll communicate, and how we’ll address conflict if it surfaces.
Jan: You know over the years, I’ve learned how important project management can be on our internal projects, so I’ve made project management a priority on the few outsourced projects I’ve done. Some people think project management is just reviewing a time and action calendar and checking off tasks. I feel strongly that you have to meet regularly, talk about where you are on the project, how things are going. You have to anticipate obstacles and make sure resources, like the budget, are adequate.
Pat: You’re right. On complex outsourced projects, I’ve found that it usually works best when there is a project manager from the consulting firm and one from our company. You want a partnership, two people working closely together making sure the project stays on track and meets objectives. In the last few years, I’ve introduced something new. I call it a partnership update. After every significant phase of a project, I call a meeting to discuss how things are going – what’s working and what’s not. If it’s a small project, it’s informal. If it’s more complex, it’s more formal. We establish criteria in the beginning for how we’re going to work together. Then at every partnership update, we actually rate each other. We document each update and review our commitments.
Jan: When do you start the updates?
Pat: I do the first partnership update at the end of the kick-off meeting. It reinforces the message that I want to establish a strong partnership right from the beginning. Jan, I really need to run. I’m late for a meeting.
Jan: Thanks so much. Can we get together again after I’ve worked with my team on the training plan for the acquisition?
Pat: (Smiling) I know you’re worried. On the one hand, outsourcing can be very challenging with significant risk. On the other hand, I’ve found outsourced projects some of the most rewarding projects of my career. I’ve learned so much from consultants, and the partnerships have been very meaningful. So try not to worry too much. You’ll do fine, and don’t hesitate to call before we meet again. I’m happy to serve as a sounding board.
Debbie Friedman is operating vice president at Federated Department Stores, where she heads up Federated Leadership Institute. Federated has been named by Training Magazine as one of the Top 100 Companies for training and development in the United States. Debbie is the author of Demystifying Outsourcing: The Trainer's Guide to Working with Vendors and Consultants (Pfeiffer/Wiley, October, 2006).
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Copyright 2006 Debbie Friedman. All rights reserved. While you may copy this publication, its content may not be modified. You may, and are encouraged to, share the publication with others who may benefit from receiving it.
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