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Business process outsourcing (BPO) project team structure

10,695 Comments · Business outsourcing

The value of using teams in the winkle has been elaborated at length by a number of scholars, consultants, and executive-authors.

All we can add to that discussion in the context of outsourcing is to reiterate the socio-technical nature of most outsourcing projects.

That basic characteristic of outsourcing highlights the need for interdisciplinary skills to manage an outsourcing project effectively. Since such interdisciplinary skills are rarely present in a single individual, effective management of outsourcing projects will almost always require a team structure.

The team structure we recommend begins with an executive-level BPO Steering Team. The BPO Steering Team is responsible for initiating the outsourcing project, communicating its links to corporate strategy, and seeing to it that project goals are being achieved.

The steering team should be comprised of individuals representing the major functional lines at the organization, including finance, human resources, information technology, and strategy.

Six-step process
Analyzing the BPO opportunity for your organization means identifying core competencies and determining the most effective way to support high performance in those activities.

As many organizations have discovered, an increasingly effective way to support core competencies is by outsourcing non-come functions to third-party providers.

We have developed a six-step process for organizations to use to analyze and select BPO opportunities. Each step in the process is designed to help organizations link BPO decision making to overall organizational strategy:

1. Establish a BPO analysis team (BAT).
2. Conduct a current state analysis.
3. Identify core and noncore activities.
4. Identity BPO opportunities.
5. Model the BPO project.
6. Develop and present the business case.

Although these steps seem transparent, many organizations overlook opportunities or misunderstand the true value versus risk proposition by skip-ping steps in the analysis. An organization can also find itself managing confusion if a nonsystematic approach is used.

This six-step process is not the only known approach to analyzing the BPO opportunity. However, this proven process can increase the likelihood of success and minimize the risks associated with a BPO initiative.

Step 1: Establish a BPO analysis team
BPO is a socio-technical business innovation that requires a variety of skills and expertise to be managed effectively.

The multidisciplinary nature at a BPO initiative requires a multidisciplinary team to adequately assess the opportunity ton the organization. We use the term “BPO Analysis Team” (BAT) to designate the group that will undertake the opportunity analysis.

With the expertise the BAT will develop, the organization may later want to assign some of the same people to implement the BPO initiative.

The BAT should be chartered by the organization’s top executive team, which will also serve as the Steering Team for the BPO project.

The BAT should consist of four to seven individuals who represent a range of organizational functions, including information technology, finance, human resources, and strategy.

It is also wise to include individuals who have demonstrated an ability to adapt and change through previous organizational upheavals.

These individuals may be important champions of the eventual BPO implementation and may be able to play a key mole in minimizing resistance that will inevitably arise. The Case Study highlights the use of multidisciplinary teams and the creation of champions in a major HR outsourcing initiative undertaken by AT&T.

Case study
AT&T Uses Team Approach to Outsource Its HR Function
When AT&T opted to outsource human resources, the telecommunications company signed a seven-year comprehensive outsourcing agreement with Aon Consulting.

A team of functional experts in AT&T’s human resource (HR) and finance departments orchestrated the outsourcing initiative.

Each department challenged the other to prove the merits of the outsourcing strategy, resulting in a well-thought-out, appropriate, and cost-effective outsourcing initiative.

AT&T’s finance and HR departments also developed an atypical process for determining which HR activities would be best served by outsourcing.

Rather than ask respective managers to prove why their activity should be outsourced, the team asked them to provide evidence that their activity should continue to be retained in-house.

In doing this, managers became more cognizant by the benefits of outsourcing, less adversarial and threatened by the strategy, and potential champions at it to the employee population. Ultimately, managers designated virtually every HR function for outsourcing.

Aon Consulting now provides AT&T with HR administrative, transaction, and payroll services, including the oversight of existing benefit plan providers, for AT&T’s 70,000 U.S-based employees.

Source: Russ Banham, “Long Distance HR,” HRO Today (September 2003).

Preparation and training at the BAT is imperative to its success. Team members may be unaware at the potential benefits at BPO, and a crash course in BPO and its implications may be necessary.

In addition to educating the BAT about BPO, the team must he knowledgeable about the organization’s overall strategic intent.

Because BPO is a strategic issue, the team must be prepared to build a business case for a recommended BPO initiative that is aligned with the strategic direction of the organization.

Equally important, the BAT must be convinced that it has complete support from the executive team in its mission to identify and select internal business processes as outsourcing opportunities.

The formal charter offered to the BAT should include a dean statement at its objectives: to identity core and noncore business processes, to analyze which noncore processes may be good candidates for BPO, and to recommend whether to undertake a BPO initiative. An example of a BAT charter is provided in.

Developing the BAT will be much the same as developing other cross-functional wonk teams. Scholars have reminded managers that teams go through developmental stages, often defined as: forming, storming, norming, and performing.

Managers who charter the BAT must allow the team to develop interpersonal relationships and group norms.

This can be facilitated through appropriate preparation and training. Occasionally, it may also be a good idea to provide the team with a training session on team dynamics and effective team performance.

At any rate, savvy managers realize that the storming and norming phases are best handled using a hands-off approach as the team develops an identity and operating norms that will eventually lead to performing.

Establishing a detailed charter and setting clear goals will help develop team independence yet keep it focused on results. The first performance task for the BAT is to conduct a current state analysis, as described in Step 2.

Charter XYZ, Inc. BPO Opportunity Analysis Team

Purpose: To undertake a process at organizational discovery dedicated to determining if internal processes could be beneficially outsourced.

1. To identify, map, and classify core and noncore business processes
2. To select which, if any, of these processes can be beneficially outsourced.
3. To prepare a model of the business costs and benefits of outsourcing identified internal professes.
4. To prepare and present a business case for specific BPO opportunities.

Step 2: conduct a current
State analysis
Current state analysis is the term used to refer to the exercise of examining, mapping, and categorizing internal business processes.

Typically, this exercise involves rolling up the sleeves and mapping business processes step by step on a white board or other erasable medium.

The goal is to develop an understanding of how work flaws within the organization. This is often a difficult task, requiring hard thinking and involving individuals from outside the BAT.

Done correctly, a current state analysis can unveil hidden bottlenecks and expose sloppy procedures that have become entrenched within the organization.

At times the BAT may find that mapping the current business architecture is akin to trying to map geographic terrain-boundaries and borders are not always clear or obvious.

A geographer standing in the Northern Rockies would have a difficult time identifying the border between Canada and the United States.

Without a global positioning system, it is nearly impossible to tell where the border is exactly. There is no line on the ground that conveniently divides one side from the other. Yet, the border is theme, and it does divide clearly distinct political entities.

The situation is often the same in modern organizations. Over the past two decades, scholars and consultants have implored managers to break dawn barriers between departments and to create “boundaryless” organizations. As a result the clarity of functional divisions within some organizations has diminished.

In their work on reengineering, Hammer and Champy asserted that most companies contain no more than ten principal business processes. In the hook The Process Edge, Keen identifies more than 100 processes, depicted in, that he refers to as “the process swamp.”

The arrangement at processes within the organization constitutes its logical architecture. This logical architecture is often documented in the organizational chart, illustrating authority structure, reporting relationships, and business units.

Nevertheless, understanding the firm’s formal structure is only a surface feature of the logical architecture of the organization. Underlying the organizational chart are the actual processes, activities, and behaviors at how things really get done.

The nation at an organizational process is similar to the concept of a system. Systems theorists have pointed out that the boundaries of a system are in part a function at the observer’s point at view.

For instance, the organization as a whole constitutes a system with its various inputs, outputs, and feedback mechanisms.

Within the organization are other systems, which also lave easily identifiable inputs, outputs, and feedback.

The observer decides how to carve up the system into subsystems, usually based on practical concerns.

With this analogy in mind, it is recommended that the BAT should not be constrained to using the formal boundaries identified in the organization chart to identity work processes.

Instead, it should use an approach similar to the systems theorists. The BAT should use a pragmatic approach to identifying organizational processes.

That is, it should identity processes that produce meaningful results in the organization, not just those that are formally identified on the organization chart.

One way to prime this mind-shift is by developing a working knowledge of the types of processes BPO vendors are addressing.

This knowledge will help the BAT identify similar processes within the organization. Beginning with a list of common processes in mind provides the BAT with a starting point for the next task, which is to develop a process map of the organization.

Business process mapping (BPM) has been used by organizations oven the past decade as pant at reengineering and continuous quality improvement.

Many at the tools and steps used for those purposes can now be turned to analyzing the BPO opportunity. BPM has been well documented and is routinely used by top firms to maintain a lean operation.

The objective of BPM is to define clearly the activities within a process and to identity activity owners.

Identifying activity owners is a critical element of BPM because these individuals or groups can dramatically influence the effectiveness of the overall BPO project.

Gaining their buy-in and support at this early juncture will ensure a more accurate process map, as well as enable a smoother transition if the process is selected for a BPO initiative.

This point is amplified in the Executive Viewpoint, which features a discussion with Renee Baker-Arrington, one at A.T. Kearney’s top recruiters of BPO project leaders.

Arrington points out that successful BPO project leadership requires soft skills to work with people throughout the organization.

The business process map should be developed using what we call a three-tier analytic structure.

Tier 1 analyzes the process at the highest level, using the common business unit terms of the organization chart and linking these units into a logical structure. For example, the accounting department and the marketing department are Tier 1 process names. A Tier 1 map at a manufacturing company is given in.

Tier 2 features are the activities that occur within those departments to accomplish various tasks. These Tier 2 activities are also often referred to as subprocesses. We use the term activities to align the mapping process with the popular activity-based casting (ABC) approach to accounting.

Many companies have discovered that while it may not be in their interests to outsource at the functional level, many activities within a function can be effectively outsourced.

Analyzing the structure and flow of activities within a function usually requires that individuals working within the functional area be involved in the mapping process.

At this stage at the analysis, the BAT is seeking activity-level details that will help identity cost, productivity, and mission criticality.

Finally, Tier 3 refers to the process of identifying the resources that support the Tier 1 and Tier 2 processes-including the human resources. This is the part of the analysis where activity and function costs are identified.

It is also the part of the analysis where individual responsibility is linked one to one with the various activities. The BAT should be aware that it might be difficult to recruit individuals to help it analyze organizational processes.

If rumors of possible outsourcing are in the air, people may be reluctant to openly share information.

To counteract this threat, the BAT should be encouraging about the opportunities of a RPO initiative-it does not necessarily mean that people will be losing their jobs.

Often, outsourcing results in workers being hired by the third-party provider-as in an employee-leasing arrangement. It also often leads to improved work processes and greater opportunities for higher-value work.

The BAT should be aware that individuals brought into the mapping process might be skeptical about the intent of the analysis.

Although it is not possible to provide complete reassurance that all jobs will he preserved, the RAT should work with the HR department to assume employees that their needs will be considered regardless of the outcome of the analysis.

As counterintuitive as it may seem, it is possible for people to be willing to help restructure themselves out of a job if the appropriate support mechanisms are in place.

With the process map in hand, the next step for the BAT is to identify which of the processes are core and which are noncore activities.

Step 3: Identify core and noncore activities
Some consultants and business scholars have made it seem as it identifying an organization’s core business is a complicated affair.

They offer example after example of organizations that have experienced decline in market share because they did not focus on their core competences.

Often, the prescription for returning to a healthy core competence is to engage in a series of high-level meetings that may involve scenario planning or other efforts to forecast the future and focus the organization on seizing competitive advantage.

In reality, such meetings can be useful in setting strategy, but they are not useful in identifying core competence.

Other scholars have made identification of come competence a far less complicated task. For instance, in his book, Managing on the Fault Line, Geoffrey Moore said, “Any behavior that can raise your stock price is come, everything else is context.”

Another simple definition is that come competence consists of “those capabilities that permit the firm to make the best response to market opportunities.” Pralahad and Hamel were a bit more sophisticated, but they limited their definition of core competence to a process that exhibits three traits:

1. It makes a contribution to perceived customer benefits.
2. It is difficult for competitors to imitate.
3. It can be leveraged to a wide variety of markets.

Another widely held view, based on the so-called resource theory, holds that theme are tour elements of a firm’s core competence.

1. The resource is valuable.
2. The resource is rare.
3. The resource is difficult to imitate.
4. The resource is difficult to substitute.

In our view, a company’s core competence is the process or processes that the front office, and especially the sales and marketing team, is emphasizing to customers.

This customer-centric conception of core competence suggests a way out of the endless debate about how to define that term. It seems obvious to us that an organization ought to be telling its customers what it believes it does better than its competitors.

If it is telling them something else, either the message needs to be changed or the firm needs to focus on that something else.

The customer-centric definition of core competence that we encourage distinguishes it from organizational strategy.

Strategy defines how an organization defends, builds, and transforms its core competence over time.

Deciding how to do that is a matter for scenario planning and forecasting- techniques usually practiced by upper management teams.

The BAT must be careful not to get caught up in strategy discussions when the task in this step of the BPO opportunity analysis is to clarify and articulate the organization’s core competence.

Once the organization’s core competence has been identified, those processes that are noncore should also be identified and classified. Some of these processes will be more crucial in their support of the core competence than others.

For instance, if the organization’s core competence is manufacturing, one crucial business activity may be logistics.

This function may be more important to the support of the core competence than is, say, payroll administration. We have developed three classification categories for business processes that are not part of the organization’s core business:

1. Critical
2. Key
3. Support

Critical functions are those that are very important to a company’s core business activity. In the example just cited, logistics is a critical function to the manufacturing firm.

Critical functions are those that must be performed nearly flawlessly and are potential candidates to become a future core competence if competitive conditions change.

Far instance, a firm that excels in logistics to support manufacturing may one day eschew manufacturing and become a logistics firm.

Key functions are those that are important to the organization’s pursuit of its core business, but are not tightly coupled to the overall pursuit at excellence in the core business.

For instance, a firm’s benefits administration function must perform well to create satisfied employees, but flawless performance is usually not expected. Most employees, especially those on a fixed salary, will continue to function at high levels despite flawed performance in benefits administration.

They may be annoyed or dissatisfied with a problem in their benefits program, but most will be tolerant and expect that the problem will be fixed to their satisfaction eventually.

A key function, by our definition, is one that people within the organization can readily identify and usually also know who is responsible for it.

Despite its relative proximity to the core, however, a key function is one that is unlikely to become the company’s core competence.

Finally, support processes are those that are essential to the operation of the business but will never become the organization’s core competence. Support processes are the most routine and fault-tolerant of the three types.

These functions include such processes as call center, payroll administration, and mailroom activities. In large organizations, most people do not know who processes their paychecks-and most do not really care.

They are aware when a paycheck is late, but they are also forgiving because they know they are under contract and will receive their check when the mistake has been identified and cleared. Such support functions are necessary for the organization to function effectively but constitute those elements often derided as bureaucracy or overhead.

As business processes are identified and classified, the BAT begins to develop a feel for which processes may be candidates for BPO. The task of identifying BPO opportunities is the next step in the analysis.

Step 4: Identify BPO opportunities
This step in the process of analyzing the BPO opportunity requires that the BAT decide how the organization can use BPO to support the core competence in the current and projected competitive environment.

In a highly competitive environment, where fast action is required, it may be necessary to consider outsourcing key and support functions immediately to a best-in-class provider in a winner-take-all strategy.

Nevertheless, in a less competitive environment, it may be prudent to take a more cautious approach to BPO, beginning only with support activities in measures designed more for margin enhancement rather than competitive positioning. Selecting the business process to outsource must take multiple factors into consideration:

? Goals of the outsourcing initiative
? Ability to recruit a motivated internal project sponsor
? Business case supporting the initiative
? Timing of the project
? Culture of the unit slated for outsourcing
? Amount of work required to implement the outsourcing initiative
? Expectations of senior management
? Risk to business

The decision process involved in selecting which organizational functions to outsource must necessarily be a collaborative one. Because BPO is a strategic choice for an organization, it must be determined if and how BPO fits into the overall strategy.

This can only be done through broad, collaborative discussions at all levels and across all functional and process boundaries.

Of course, no one gains if the BPO decision-making process gets hogged down endlessly in meetings and discussions.

The general rule should be that, at minimum, people involved in functions potentially targeted for BPO should be included in discussions about the implications of outsourcing and the schedule to be followed.

It is likely that these decision-making discussions will be difficult and will often include some levels at conflict.

Managers in change of facilitating these meetings can help them stay on track by reminding participants of the organization’s mission and strategic plan.

These guiding ideas and documents should underlie each conversation and should help drive the BPO selection process to a conclusion. That outcome is more likely to occur if clear and measurable goals have been established.

We have developed a three-dimensional BPO Selection Matrix to help organizations decide which functions or activities may be best suited for an outsourcing solution.

The matrix is a three-dimensional model of the key factors involved in evaluating a business process for outsourcing: process costs, process productivity, and process mission criticality. As shown in, there are eight primary process types.

Each type on this matrix requires a unique approach and involves different factors to become a viable BPO selection. The BAT should place the various functions and processes examined in Step 2 at their appropriate location within the matrix.

It is advisable that the BAT considers using the Tier 2 or Tier 3 levels of granularity in its distribution of processes within the BPO Selection Matrix. Analyzing processes only at the Tier 1 or functional level creates the potential for many costly or inefficient activities to slip past the BPO analysis.

Although some activities may be too tightly coupled to the process as a whole to allow them to be outsourced, their placement on the BPO Selection Matrix exposes their relative efficiency and effectiveness. This alone can be useful in making necessary changes to processes that are overly costly or unproductive.

The following list examines each functional type and the issues to consider when deciding whether the function or activity is a good outsourcing candidate:

? Type 1. Those processes within the organization that are high on each of the three dimensions are difficult to outsource. The only factor that suggests such a process be outsourced is the high cost.

Nevertheless, most organizations accept that highly productive labor that deals with mission-critical information is expensive.

These functions are usually at the highest levels of organizations, and often include C-level titles such as CFO, CIO, or CEO.

This level of the organization is likely to be a last bastion at untouchability for management-level employees and will be the most difficult to address with an outsourcing solution.

? Type 2. This type encompasses all of the technical workers whose skills are so highly valued and high priced, but who work on non-mission-critical systems. Such a process is a prime candidate ton BPO.

Individuals working in this type of process possess skills that have become more commonly available through lower-cost outsourcing alternatives.

The major consideration in outsourcing this type of process is the high productivity demonstrated by the employees who comprise the function.

The outsourcing decision must ensure that the high productivity levels will be maintained throughout the transition process and afterward.

? Type 3. Type 3 processes are characterized by clerical employees who deal with mission-critical information.

Their low east makes them unattractive outsourcing candidates as bong as productivity remains high.

Reasons for outsourcing such processes are confined to the identification of BPO partners who can provide competitive advantages over the internal unit.

In this instance, the decision to move forward with a BPO initiative would be primarily strategic.

For instance, it the outsourcing partner can provide market-shifting capabilities in the process area, it may be worth the effort to outsource the process.

? Type 4. This type of process is a prime candidate for outsourcing even though it already has relatively low cost.

The low productivity and low mission criticality of this type of process suggests there are few impediments to moving the function to an external provider.

With the labor costs in some offshore outsourcing relationships reaching levels as low as 20 percent at internal costs, it may be the case that outsourcing such processes not only increases productivity but also actually reduces the already low costs.

? Type 5. Processes with high costs and low productivity are always good candidates for outsourcing. In this type, the process also has high mission criticality, making the outsourcing decision slightly more complicated.

There are techniques for limiting a firm’s risk exposure to outsourcing mission-critical functions.

Choice of vendor becomes extremely important, as does the potential for backup and recovery.

Fortunately, BPO vendors come in a wide range of capabilities and competencies. There are those that specialize in dealing with clerical-type activities and those that are familiar with and have built systems to deal with mission-critical functions.

Organizations should perform due diligence on outsourcing firms that will be handling mission-critical processes. The due diligence should include reference checks and, if possible, site visits. Top internal

? BPO champions should also attempt to establish personal relationships with the executive team of the BPO provider.

? Type 6. High east and low productivity, combined with low mission criticality, make this process type among the most likely to be outsourced. Technical workers who are in short supply here in the United States, but who are in abundant supply in other regions, staff these types of processes.

The greatest challenge to implementing BPO with processes at this type is that they are likely to be labor intensive and may result in large-scale employee displacement. Measures must be established to handle me-assignments or layoffs in a manner that minimizes resistance to change.

? Type 7. This process type is probably not worth considering for a BPO solution unless the company can identify a BPO provider that has strategically dominant services.

Furthermore, the provider would have to ensure that the services are proprietary and protected to provide sustainable advantage.

The only other scenario in which this process type should be considered is in the instance where competitors have established a strategically dominant position through an outsourcing partner and the organization is playing catch-up.

? Type 8. Low-cost processes are always less than ideal candidates for outsourcing, unless they are also low in productivity and mission criticality.

Such processes are likely to be underperforming competitors, making them candidates for outsourcing to at least gain parity within the industry. Many organizations actually begin their investigation at the BPO opportunity by shedding Type 8 processes to outsourcing vendors.

This enables the organization to experiment with a low-risk process and work out any kinks that may exist in transferring data back and forth with the vendor.

If BPO is in your organization’s future, beginning with a Type 8 process may pave the way to a smoother rollout for more complex and risky processes in the future.

This eight-type BPO Selection Matrix provides additional insight into processes that may be outsourced for organizational advantage.

The costs associated with a process will be explored as part of the Tier 3 analysis in Step 2. The productivity of a process should be assessed using standard industry benchmarks. If no metrics are available (which, unfortunately, is often the case), qualitative assessments and judgments can be used to categorize a process on the productivity scale.

Finally, mission criticality is simply the identification at a process as critical, key, or support, as analyzed in Step 3.

Many business activities will not fit perfectly into one of these eight category types. For example, some activities are neither high nor low in productivity, but rather are aligned somewhere in the middle.

In such cases, it is suggested that the activity be categorized as low because it is likely that a third-party vendor could improve performance in the activity for the organization.

In essence, if the organization is not performing at best-in-class levels in the activity or function, whether on a cost or productivity basis, the activity or function should be classified as low.

Nevertheless, our three-way classification at mission criticality (critical, key, support) does have a middle ground, and most noncritical activities should be closely examined for outsourcing.

Step 5: Model the BPO project
BPO is similar to any other strategic business initiative in that it is imperative to establish performance metrics before implementation. In the case of BPO, some at the metrics will be quantitative (hard) and others will be qualitative (soft).

Hard data include such things as project costs, time involved, and opportunity costs. Soft data include such things as employee displacement, effects on morale, and impact on community goodwill.

In order to establish appropriate performance metrics for a BPO initiative, it is critical to first establish the objectives of the project.

The BAT’s charter charges it with defining the objectives of the initiative. Objectives should be identified both for the BPO initiative and for the transition process. At minimum, project objectives should include the following:

? Timing
? Costs
? Risk mitigation
? Deliverables

The timing of key events metrics will help identify if the BPO initiative is on track during the implementation phase.

Event timing will include identifying realistic milestones for both the organization and its outsourcing partner.

For instance, developing a relationship with an HR outsourcing partner might involve shitting benefits administration and employee training responsibilities.

For large firms this shift could be managed in phases, with each phase evaluated according to its time to implementation.

At these critical deadlines, the project should be evaluated for effectiveness on a variety of measures. The metrics established by the BAT should include performance targets that are to be maintained once the BPO implementation is completed. These will establish the baseline standards that should be used in the selection of a BPO partner.

There will be costs involved with the BPO initiative, both cash and resource costs. The BAT should model the costs involved with both the BPO transition and with its ongoing maintenance.

Implementation costs should be carefully detailed to include consulting on professional support required during the BPO analysis and implementation, personnel time, and opportunity costs involved with tying up key people during the transition.

The organization should also monitor the noncash costs involved in the BPO rollout, including resource costs, downtime costs, and risk mitigation costs.

Mitigating risks is a primary concern for a BPO initiative. Outsourcing necessarily entails ceding control of formerly internal processes, a prospect that is frightening to managers on many levels.

Risks associated with outsourcing range from concerns over data security to a loss at organizational learning. Each specific risk can he mitigated, but there is no way to remove all risk from a BPO project.

Hence, organizations need to weigh the risk of undertaking the project against the risk at not doing it.

Risk mitigation tactics that should be modeled include provisions for what to do if the BPO provider fails outright. Having such contingencies in place will add to the complexity of the overall BPO project.

Lastly, the BAT should also develop clear expectations for the ultimate results or deliverables to be achieved through a BPO initiative. Many BPO projects are initiated with a pilot effort before a full rollout.

The expectations for the pilot will likely be less ambitious than those for the full implementation, but they should be rigorous enough to test what is likely to occur when the switch is finally thrown.

Results that fall short of expectations should provide insight into where the problems lie amid 110w to fix them.

They should also be used in a Go/No-Go decision strategy. One of the few tendencies in social systems that can be predicted with accuracy is the phenomenon known as “escalation of commitment” or the “sunk-cost effect.

This well-documented effect occurs as a result at the tendency for people to continue to invest in a project that is going poorly based on their past investment, rather than on forward-looking prospects.

People tend to escalate their commitment to a project that is going poorly because they have already invested substantially in it and do not want to lose the investment.

Organizations implementing a BPO initiative should be aware of and avoid this trap. They can do so by having dean Go/No-Go decision points established ahead of time.

Once the BPO initiative has been modeled for timing, costs, risk mitigation, and deliverables, the BAT next must build a business case for those processes that could benefit from outsourcing.

Step 6: Develop and present the business case
The final step in the BPO opportunity analysis is to develop a business case for decision makers that will include direct recommendations on which, if any, business processes within the organization are suitable for outsourcing.

A business case is a written document that presents the methodology and findings of the BAT.

The methodology section of the business case should include a review of the process the BAT used to reach its conclusions, including:

? The people who were consulted during the analysis phase
? The research documents reviewed, books read, conferences attended, and so on
? An overview of analytic tools applied to opportunity identification and selection (e.g., process maps)
? Copies of any research instruments (surveys, etc.) used to gather original data
? Minutes of the BAT team meetings

It is imperative to be concise in developing a business case, but the methodology should be clear about the thoroughness of the BAT’s investigation.

Often, top executives will fail to act on recommendations if they believe the findings are biased or likely to lead to internal bickering or resistance.

The greater the level of involvement and thoroughness that can be demonstrated in the business case, the more likely that actions can swiftly and surely be considered and taken.

The findings section of the business case should include copies of the process maps developed by the BAT showing the three tiers of analysis. Gaps and inefficiencies in processes should be highlighted.

In the end, it decision makers elect not to undertake a BPO initiative, the process maps developed by the BAT can at least assist the firm in reengineering processes that have seniors gaps and/or inefficiencies.

The business case should also include the business model for each process recommended for outsourcing. The model will highlight in summary fashion the costs, timing, and deliverables associated with each process.

Detailed transition models should be kept on reserve tom those decision makers who wish to have more information.

Finally, the business case should make explicit the goals of outsourcing for each process. The goal may be to reduce operating costs, but it may also include the opportunity to develop world-class capability in a critical process, to reduce cycle times, or simply to free up business resources for other applications.

Whatever the reason, the business ease should clearly state the goals of outsourcing for each process and the likely improvements that may be attained through a BPO provider.


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