A Successful Outsourcing Engagement, Step-by-Step

To conduct a successful outsourcing engagement, learning organizations must devote considerable time and energy to pre- and post-planning. Jim Hanlin, Ph.D, chief operating officer of TrainingOutsourcing.com, describes the relationship between the learnin

To conduct a successful outsourcing engagement, learning organizations must devote considerable time and energy to pre- and post-planning. Jim Hanlin, Ph.D, chief operating officer of TrainingOutsourcing.com, describes the relationship between the learning organization and its outsourcing provider like dating. “You’re learning about each other through examination, questioning, documentation, further clarification. You need to get that dating out of the way before you get married,” he said.

TrainingOutsourcing.com’s process has seven steps. Step one is an internal assessment, where the learning organization looking to outsource takes a hard look at its own business and chooses what function has the greatest potential to create organizational value if outsourced. Hanlin said that many organizations find this first step to be the most important. “If you don’t get that part correct, the following steps are all going to be focused in the wrong areas,” he said. “It’s a critical path analysis to any project management—every step is the most important step after the previous step. The internal assessment can be done with an outside partner that is very objective, but we recommend that the internal assessment be done by people within the organization because they’re the ones who are going to look objectively at the situation.”

Step two is the RFP or proposal phase, where the learning organization defines what its vendor or outsourcing provider relationship and responsibilities will entail. “Depending on the complexity of it, you may need to involve financial people, line management, legal and human resources, particularly if the RFP involves a transfer of employees,” Hanlin said. “I think financial and procurement people always have to be involved in the team that puts together the RFP. Vendors need to respond in a manner that indicates their capabilities, obviously. It needs to be short, to the point and really involve solutions. In some cases, it may involve some cost estimates, although cost is typically not the number-one reason a vendor is selected. It’s not even a number one reason why companies decide to outsource. They are looking to enhance the value of their learning organization to the business. In outsourcing you’re looking for a partner who can improve your practices and your learning organization for the company.”

The RFP should be well documented and thought out, and should express the important items defined in the internal assessment. “When you move along the spectrum of complexity in training processes, the more you’ve got to look at any potential risks that there might be in outsourcing. For example, when you outsource administrative functions, registration, record keeping, e-learning development and delivery, those are usually low-risk business processes,” Hanlin explained. “When you come to content development and delivery where you’re involving internal processes and products, you have to look and see if it will be advantageous for the company to outsource those. Is the risk worth it, and can they really do it better than we can do it?”

Step three is the due-diligence phase. Hanlin said that this process looks at both sides of the outsourcing formula with a fine-tooth comb. “Did you define what the outsourcing company should do, and do they have the capabilities outlined in the RFP? Do they have the resources and experience? Literally, it’s a very intensive examination on both sides to determine whether or not everything that has been presented and decided up until that point is true. If not, make adjustments,” Hanlin said. “Or in some cases, say, ‘Hey, this deal shouldn’t go forward.’ Most of the bad outsourcing deals fall apart in the due-diligence phase because they’re not done thoroughly enough, and two companies become partners who really don’t know each other and haven’t explored. The last thing you want are surprises down the road.”

Step four is contracting, which defines variability in the learning organization. For instance, Hanlin said if an organization does customer training for an average of five product releases a year, and then suddenly there are 10, is that contractually acceptable? Will there be penalties? Further, there are often legal considerations involving intellectual property rights. If a learning organization outsources content development to a supplier, who owns the intellectual property for those training materials? “That’s very important to most organizations. When you go through the contracting process, you need an experienced outsourcing legal counsel. Also, whenever there’s a transfer of human capital, human resources issues must be covered properly,” Hanlin said.

Step five is transition. The learning organization should have a transition management plan to assuage employee nervousness or anxiety and address their productivity concerns if they have transferred to the new organization. “If you have a plan to show what the affects will be, a realistic objective plan and present that to people, you can avoid potential problems,” Hanlin said.

Step six is governance or the structure the learning organization establishes once the outsourcing deal has been consummated to administer and manage the relationship. “In most cases you’ve got different levels on that governance structure,” Hanlin said. “At the strategic or highest level, people from both sides meet maybe on a quarterly basis to determine the goals, objectives and review results. Then you’ve got the programming level of governance, which may involve the highest-level reps from the learning or IT organization from a supplier side. They may meet monthly or bi-weekly. You may have line managers there as well. Then there’s an operations level who do the day-to-day work. They meet more frequently to talk about design, content development, delivery schedules, etc. There should be reps from both sides.”

Step seven is the transfer of processes or repatriation during the implementation phase and establishes how the learning organization moves its processes and people to get to the next stage in the relationship or, if necessary, how outsourced processes can be repatriated back into the company.

Jill Kidwell, vice president of business transformation outsourcing at IBM, said her company has defined four key areas a learning organization should consider in order to launch and sustain a successful outsourcing engagement. Several of these steps gel with the steps laid out by TrainingOutsourcing.com.

First, make sure the company has the right leadership capabilities to oversee the deal. These include analytical approaches to problem-solving, the ability to conduct financial analysis and experience in deal-making. Also, establish the vision for what the learning organization hopes to accomplish by outsourcing. Essentially, where do you want to be in five years, or seven years? “We also see the need to involve people who are familiar with change management because at the end of the day, there will be a lot of impact—some to directly affect the employees but also to the organization as a whole. Having somebody on board who can do that is really critical,” Kidwell said.

Second, focus on transition management. Don’t just assume that things will go well. Instead, put some discreet effort to ensure that there are fewer hitches. “You’re taking processes that you do today and asking someone else to do them tomorrow,” Kidwell explained. “You don’t just turn one off and turn the other one on. You really need to migrate from one way of doing something to another way of doing it. What’s the pathway both the company that’s outsourcing as well as the outsourcing provider needs to take to get from what is today to what needs to be in the future? Sometimes clients tend to let that go over to the side of the vendor, but it requires a very close partnership where both sides are looking at the activities that would be undertaken.”

Third, develop a governance and relationship management process that will help facilitate the relationship. Make sure that all the right people from both organizations are engaged to oversee the delivery of services on a strategic, program and operations level. “At the strategic level, the two senior execs will be looking at the overall delivery, making sure that service-level agreements are met, focusing on the future and what initiatives do we need to engage in this year? The program level is focused more on meeting the key milestones, hitting critical satisfaction issues and looking at activities that might need to be brought into place to keep service levels high,” Kidwell explained. “At the operations level—and this is where I think learning outsourcing engagements are different—in some areas, the provider is simply executing against the plan. They have processes in place and move forward. At the operational level, there is not as much engagement between the client team as there is in a learning outsourcing deal. You almost need a permeable membrane between the two organizations so that those teams can be in contact when needed, as needed, to really make sure that day-to-day issues are addressed.”

Finally, build a measurement and reporting framework to measure success and manage the output of the outsourced function. “We frequently see coming from the client teams a series of inputs, or 200 or so measures, and it’s really important that the teams net those measures out to a smaller number and focus on the outputs and the outcomes.” Kidwell said that people need to spend quite a bit of time on that to make sure they understand the true levers that make a difference in the way services are delivered. “Make sure that once they (learning leaders) agree on the service levels to be provided, they have a way to come back and adjust those, perhaps on an annual basis, and weight them differently because their priorities may be changing and they need to change the way things are measured as well,” she concluded.