Change management, which appeals to the emotional side of business-to-people, was a popular theme for consultants and companies alike during the 1990s. Now it is often considered outdated.

When outsourcing relationships, the first inclination is to look at the contract and focus on processes, tools, technology and service level agreements (SLAs) before turning to more emotional topics. However, these emotional factors are the ones that could jeopardise the intended outcome of a relationship; it is human nature to dislike change.

John Kotter of Harvard Business School, a leading change management expert, has written several books that have become classics on the subject. In Leading Change, he writes: “Whenever human communities are forced to adjust to shifting conditions, pain is ever present. But a significant amount of the waste and anguish we’ve witnessed in the past is avoidable” (Harvard Business School Press, 1996). Nearly a decade later, how can successful change management principles be applied to outsourcing?

Outsourcing affects individuals, whether the activity in question moves next door or across the world, and individuals have concerns and emotions. By taking a professional change management approach, a company can minimise disruptions to its business and build a culture that embraces innovation and change.

Utilising a pragmatic and sustainable approach, the following methodology applies discipline and focus throughout the outsourcing life cycle. Urgency is an ideal motivator and a great opportunity for positive change. The methodology kills two birds with one stone: at the same time as rolling out a new outsourcing initiative, a company is creating a culture of openness to change. Managers can leverage outsourcing as an opportunity to build a healthy basis for future change in their organisation.

STEP ONE:

Visionary leadership

• Be clear. Clarify the vision of the outsourcing initiative and its rationale. Everybody involved on both sides (outsourcing organisation and service provider) needs to know how the project was initiated, who stands behind it and what the goals are. Project sponsors have to be very clear about their outsourcing vision, the scope of each project, the details of budget, resources, milestones, governance and so on; they then need a forceful communication strategy. There are metrics and surveys to measure the clarity and the success of outsourcing communication. These look at each stakeholder group and ensure their understanding of the initiative, their commitment to it and their readiness for action.

• Be visible. Allow for as many face-to-face meetings as possible. The outsourcing project leader should regularly visit the remote delivery centres. It is hard enough to get mindshare, clarity and commitment from people with whom we meet face to face but the difficulties multiply when the process is located offshore. The problem of getting attention, mindshare, clarity and commitment increases dramatically when working in a ‘virtual’ team. The need for project management discipline in a virtual project set-up cannot be overstated.

• Be pragmatic. The less talk about the contract, the better. It is important to know the contract but, at the same time, managers must prepare their teams to respond effectively to ambiguity and today’s dynamically changing environment. The contract offers important guideposts; however, if it is not complemented with strong relationships on each level of the outsourcing alliance, the initiative will be in trouble. Relationships have to be nurtured by ongoing, open and clear communication.

• Make technical professionals leaders. Although normally employed for highly technical functions, due to the nature of many outsourcing projects, an increasing number of technical professionals act as project leaders for outsourcing initiatives. A number of studies have illustrated that certain characteristic similarities exist among technical professionals. For example, they often have less managerial experience and communication skills than marketing people. They usually excel by focusing narrowly on a technical problem, with little concern for communication and management. When they become project leaders, they are faced with new challenges that require new skill sets.

  Numerous courses that target technical professionals foster management and communication skills. If there is no time for staff to take such a course or if there is a need to reinforce what may have been learned earlier, we recommend engaging a project leader coach.

STEP TWO:

Differentiated stakeholder analysis

• Know your critical success partners. Get to know the critical stakeholders at the inception of the outsourcing project. Understand what is driving them and devise a plan to incorporate their assistance and make them visible champions of the outsourcing initiative. Involving critical stakeholders at the outset can help them develop a personal relationship with the approach. Offering them unique retention initiatives, compensation and bonus packages will make them feel as if they are an integral part of the project. Their input to the project is an added bonus, and their hesitations or resistance are good indicators of what to expect later from the organisation, providing important information for your communication strategy.

  The critical stakeholders will need to have a separate retention initiative, separate compensation, stay bonuses, etc. If the reliability of a critical resource is in doubt, plan for alternative strategies: immediate knowledge transfer to the outsourcing partner, knowledge transfer to a peer or knowledge transfer to a third party (consultant). Never depend on single individuals without having a back-up plan.

• Align performance management, rewards and compensation. The outsourcing goals have to be in line with the organisation’s compensation model. All too often, people are assigned to outsourcing projects as add-ons while their daily deliverables and workloads stay the same. Worse, the bonus plan defined at the beginning of the performance cycle only covers the ‘daily’ work, not the outsourcing project. Under such circumstances, who can blame the worker for treating the project as a second priority

   

   

• Train, train and retrain. Invest time, ideas and resources into the kick-off of the alliance. The idea is to create mutual trust and respect. Everyone has to be absolutely clear about the visions and goals of the outsourcing alliance. Think governance: How is the alliance organised? What are the roles and responsibilities? Who can you turn to if you need help? How are problems mediated or escalated? How do you define common terminology, tools and processes? What are other means of sharing information and learning from feedback (and mistakes)?

• Coach project leaders. The outsourcing project leaders are a key success factor for every project. The task of the project leader coach is to serve as a sounding board to the project leader, keep them on track, ensure the project gets enough attention (particularly if the leader is only part-time), keep in touch with the project team so that potential problems can be recognised early, suggest alternative ideas and resources, and help escalate issues if necessary.

STEP THREE:

Continuous and open communication

• Address fears. Highlight the win/win situation for both sides of the alliance. Define and communicate the make-or-break factors of the deal. This process generates an awareness of the critical success factors. Build strong relationships with the key people needed as allies and introduce them as champions of the project. Regularly and proactively survey customers and continuously track their satisfaction. In special cases, encourage customers to make an inventory of their fears and address these appropriately.

• Do not hide the truth. In situations where there is no win/win, address the truth head on. It is very important for a company’s leadership culture to communicate objectively the impact on jobs. Who may lose their jobs, what other options are available, what the transition process is and how people affected by the change are going to be compensated are just a few of the questions to be answered.

  Communicating the truth will not change the fact that it is a difficult situation. However, open communication will stop the speculation and rumours. It will also show that the executive team is willing to take bold steps yet lives up to its responsibility and treats appropriately people who are negatively affected. Such an approach will yield returns in many ways. It is the basis for future successful change in the organisation.

• Do not rely on technology. We have all heard the promise of the brave new world, which is supposed to become a global village. Mushrooming virtual collaboration tools and inexpensive telecommunications allow us to collaborate in new multifaceted ways.

  Here is the bad news: most of the time they do not work. Many inefficiencies are due to miscommunication and misunderstandings. Shortcomings in the interpersonal area are intensified by the new tools. This does not mean that state-of-the-art communication tools should not be used – quite the opposite. Use them with diligence, but do not underestimate the risks.

  If done professionally, good business relationships can be maintained through virtual means. But, unfortunately, building good relationships through the use of technology is virtually (in both meanings of the word) impossible.

STEP FOUR:

Detailed planning and tracking

• Measure and track metrics. An outsourcing initiative requires a detailed plan; clarity about the deliverables; a solid budget; a clear decision-making process; accountability; defined approvals and sign-offs; formal documentation; and procedures for when and how to trigger corrective actions.

  Once everything has been triggered and the tracking measures are in place, leadership communication becomes key. Experience shows that in companies with no full-time outsourcing relationship manager, team members often have a hard time answering questions about outsourcing progress and individual productivity. Without proper metrics in place and progress communicated regularly, senior management will never know how successful the initiative is and the organisation will suffer from ambiguity.

• Create a realistic and detailed transition plan. This plan covers the transition of both people and processes, and includes a timeline and milestones. Plan for at least twice as much time as is usual, because an outsourcing project requires time for establishing the relationship, adjusting to different business cultures, introducing details of the collaboration and overcoming potential language barriers. Also, it might be a good idea to allow dedicated time to address emotions, concerns and fears.

  Later, it will become second nature. A new outsourcing relationship can be compared with starting a new business. Many of the steps are completed for the first time and there are a lot of (often small) decisions to be taken collectively during the start-up phase.

• Plan for turnover. Many outsourcing projects have a great kick-off meeting. Consequently, everybody is excited, on board and fully up to speed. However, a few months later, part of the initial team may have left.

  How can new people be brought up to speed? Many project leaders do not pay enough attention to the acclimation process when hiring new team members on both sides of the alliance.

• Celebrate success and learn from mistakes. Break the project down into as many milestones as possible and celebrate the achievement of each milestone. This gives the team a sense of progress and allows new colleagues to bond. Openly discuss mistakes but do not blame anybody. Learn from what went wrong.

Act early

Outsourcing initiatives affect many different parts of an organisation. Properly incorporating a change management programme early on to help manage fears and emotions will significantly decrease organisational resistance and minimise the risk that revenues will be negatively affected.

In many ways, managing the outsourcing relationship is like starting a new business. The foundation for many years of an outsourcing collaboration is established during the first few months. It is worth building a strong foundation. Short cuts in the beginning of the collaboration may haunt the success of the relationship in the long run.

Remember, the emotional aspects of outsourcing engagements are part of the business case. If the organisation buys in upfront, it will save money (and many headaches) in the future.

Resistance to change is natural. But another human characteristic is the satisfaction of being a member of the winning team. Outsourcing is part of today’s business reality and one that no winning team can do without.

Trestle Group Research worked with Antoine Gerschel of consulting firm Gerschel Global Partners for this report