Organisational Design in a BPO Firm

Defining Outsourcing

Outsourcing, which was initially a preferred option for small businesses and non-collateral sufficient to support activities of their specialization, in recent years has become a solution for medium and large firms.

The contemporary unfavorable economic conditions direct the developed firms outsource business processes to the mainstream, thus giving up a part of information and resource control for optimal utilization and cost reduction. This leads to 10-15 % of gross savings that the outsourcing company gains on the total cost, due to economic scales.

Apart from financial advantages, there are further considerations and incentives, like gross increase in focus on the core processes, providing access to internally unavailable resources and standardized processes. There are even additional incentives like specialized, complete and professional solutions, ease of installation and configurations, integrated applications, powerful, flexible and secure, increase accuracy, productivity and efficiency, reduce or even eliminate storage needs.

On the other hand, there can arise some doubts while resource outsourcing, issues like organizational strength, control losses and compromise on quality or performances.

Introducing Business Process Outsourcing

Globalization and Industrialization have improved communication and Information Technology capabilities. The reduced international trade barriers allow the situations where organizations across the globe can easily interlink with each other.

This results in intense global competition amongst competent and challenging business managers across the world for finding resource optimization, cost reduction, business conducts and global resource access.

The re-organisation of business models to leverage benefits of outsourcing and focus on core core competencies has become a key strategy pursued by large corporations across the world.

Thus, BPO service providers are required to provide the other companies and firms, a wide spectrum of advantages and benefits to their customers, ranging from having great expertise for the outsourced processes, lower costs achieved through economic scales, scalability and abilities to absorb load cyclicality.

In business process outsourcing (BPO), a client’s business process is performed by a vendor.

Certain business processes of the client are transferred over to the vendor, and the vendor’s office then becomes the “back office” for the client’s outsourced business processes.

The vendors are given the responsibility to manage the client’s business processes, such as call centres, emergency hotlines, claims management, helpdesks, data management, document processing and storage, financial services (banks and insurance), payroll, auditing, accounting, travel management systems, various logistics and information systems services.

Hence, a BPO vendor needs to have the capability to provide consistent levels of customer service spanning across a range of services and businesses.

It may be convenient, or even necessary, to define some or all of the methods to be used for control of the outsourced processes in a contract between the organization and the supplier. The potential impact of the outsourced process is based on the outsourcing’s capability to provide product that conforms to requirements. Care should be taken, however, not to inhibit the supplier from proposing innovations to the outsourced process.

The organization’s control of the outsourced process has to be based on the need for product conformity to requirements.

Ensuring control over outsourced processes does not absolve the organization of the responsibility of conformity to all customers, statutory and regulatory requirements.

Designing the Organisation

Organizational design is sometimes used to mean simply the design of an organization chart. However, we imply a most commonly used definition which covers the operating model, the organizational structure (including the organization chart), the roles, competencies and job descriptions.

For shared services and BPO the model has three main areas, as follows:

The service management organization is the shared services/BPO operation itself, undertaking the various transaction processing or administrative activities. Some shared services/BPO operations will deliver specialist and expert services. This organization may be an internal shared service centre, serving one or many internal customers, or external, which is typically the outsourced/BPO option.

The retained organization is the term used to describe what is left behind when the shared services or outsourced activities are transferred to the new service provider. There are two aspects to the design of the retained function. First there is a need to design an organization that is effective in “receiving” the service delivered by the shared service/BPO provider. This will require an organization where there is clarity of responsibility for inputs and outputs to and from the provider. Second, there is a need to design a retained organization that is effective in performing its role in supporting the business.

The governance layer term refers to the activities that are necessary to manage a customer/supplier relationship, including the management of service level agreements, performance reporting, billing, and issue resolution.

The reason for making the distinction between the three components is that each has a different job to perform in terms of ensuring the effectiveness of a shared services or BPO initiative, with different requirements in terms of skills and competencies, career and reward structures, culture, and performance management.

Where Does the Organizational Design Fit?

Organisational Design is about developing an organization that is fit for purpose. However, it can’t be seen in isolation, but as one element of a complex mix of activities that fit together to deliver the overall change to a shared services/BPO environment.

We thus define a framework for change management, of which “Organization” (the Organisational Design work-stream) is a critical component.

Delivering a working organization structure, this defines:

• Organization structure
• Job descriptions
• Staffing and skill requirements
• Grading
• Clarity about the boundaries with other organizational groups

To get to these outputs, there are often externally imposed “inputs,” such as the overall operating model for the wider business, political and strategic constraints, existing structures and people, and headcount targets, which will often have been articulated in the shared services business case.