Operating Model and Management in a BPO firm

The Operating Model

The operating model is the first key deliverable in any organizational design. The model describes in broad terms how the new organization will operate and interact with its customers and other stakeholders.

As can be seen in the example, the operating model does not have any reporting lines, role descriptions or headcount numbers. However, it describes in broad terms what activities are undertaken and how the various relationships work. There are interactions with:

• External customers (these could be suppliers, tax and regulatory authorities)
• Internal customers
• Other business units
• The corporate centre
• The example also shows that self-service is a key part of the model.

The text that would usually support this model would describe the nature of the interactions, including what information is passed across the interface.

This level of detail will probably be sufficient, for example, for a shared services strategy document. However, a much more detailed description of how the model works will be required for the detailed design of the shared services organization.

Organization Models

Once the operating model has been developed, the next stage is to develop the organization structure to support it. Organization models can take various forms, from functional/process models to matrix models and market/customer models.

For shared services the design is usually based on a functional model, although when there are multiple customers it’s common to find an organization design that incorporates sub-groups that service specific customers within each functional grouping.

The structure of the retained organization is usually based on traditional functional designs. The sidebar, “The Retained Organization,” at the end of this article contains more guidance on that.

Job Descriptions, Grading and Role Profiles

These document the roles, skills, experience and competencies required to support the new organization. Most organizations have their own templates for this information; however, it’s important to note that the switch to a shared services or BPO environment will mean that additional skills and competencies (for example managing across organizational boundaries and client relationship management skills) will need to be included in a number of roles that have not required these in the past.

How Organisational Design Supports Organizational Effectiveness:

An organizational design that is fit for purpose is a prerequisite for organizational effectiveness. This is why OD must cover more than just organizational structure, as other elements such as governance and stakeholder management processes play an important role in ensuring that effectiveness objectives are able to be met.

Organization and Links to Governance

Shared service/BPO governance is about making decisions and assigning accountability for agreed outcomes; it comprises a set of processes and structures that are designed to address top management concerns such as:

• Governance relating to the shared services
• Measuring and improving shared services performance.
• Cascading shared service strategy and goals throughout the organization.
• Providing resources to implement and improve the use of shared services.
• Governance relating to user organization
• Aligning the shared service capability with the business strategy.
• Ensuring the shared service capability is adopted and fully used throughout the organization.
• Evolving the retained function to operate in a shared services environment.

An effective governance structure can be designed using the following principles:

Decision making responsibilities should be clearly articulated and confined to the formal governance structure.

Appoint recognized leaders to the governance team. Governance bodies need membership from the business and shared services/BPO communities with a mandate to represent their constituents.

Implement a clear communication approach. It’s critical that mechanisms exist to collect information and disseminate decisions throughout the organization.

The shared service/BPO governance structure should reinforce the roles and responsibilities of the business function and the shared services capability.

Key components include a governance board consisting of:

• Senior customer representatives.
• Heads of profession for the key functions in the shared services.
• Senior representatives from the shared services operation.

This governance board receives inputs from customer forums and the shared services operations management team. The board has responsibility and oversight of the shared services capability and will:

• Set the policy for shared services/BPO.
• Champion convergence of shared services requirements.
• Determine the performance management regime to be applied and ensure links to broader performance management mechanisms.
• Moderate and approve plans, priorities and investment.
• Monitor delivery of shared services objectives.
• Approve framework commercial agreements.
• Address and resolve shared services issues which threaten to limit achievement of overall objectives.
• Consider and approve interventions required to deliver on shared services objectives.

Service Management

Service management is about building relationships with key customers and stakeholders and ensuring that the services of the shared service operation deliver to their needs. At the highest level service management exists to meet regularly with customers to share objectives, review past performance and set expectations for future activity. A successful service management team will continually check the alignment of the services from the shared service centre with the goals and objectives of the customer groups.

Service management is usually made up of the following key activities:

• Quality control to monitor standard processes and outputs on a day by day basis.
• Performance measurement to track volumes and adherence to service key performance indicators within cost parameters.
• Process improvement teams to manage change requests and to act to correct service non-compliance in a timely manner.
• Service level agreement (SLA) management to set up suitable SLAs that define the responsibilities between service provider and customer.
• Performance reporting of key performance indicators (KPIs) and balanced scorecards on a regular (normally monthly) basis to inform the dialog between the service provider and the customer.
• Customer satisfaction feedback surveys to measure baseline satisfaction with services on a regular basis (normally a sample approach across different customer sectors).
• Governance boards, which meet on a quarterly or half-yearly basis to review overall performance and prioritize new services for roll-out, improvements to be scheduled or investments to be made.

If service management is deployed correctly, it will help drive:

• A customer-focused service centre culture.
• An efficient mechanism through which performance against agreed-upon service levels can be managed and non-performance escalated, as necessary.
• A focus on service performance and a continuous improvement mindset.
• A regular supply of data and analysis to ensure that the governance of the shared service arrangements is conducted in an informed, evidence-based manner.
• There is no clear cut rule for how service management organizations are usually structured, but it’s common to find four main teams reporting into an overall service management director.