Redefining Outsourcing Success: Beyond Service Level Targets

One of the main distinctions between outsourced vendors and an internal team is the lack of control that BPOs have over their transactional volume. The internal team, based on its business processes, determines what types and number of transactions to send to the vendors. Therefore, even if the BPOs achieve all their targets, they could still under-deliver or over-deliver on the service level or the objectives the company is trying to achieve.

In my opinion, it's better to set targets on controllable variables for the BPO and measure their performance against these targets. This approach offers additional benefits as well. If you have multiple BPOs that perform similar work for the company, you can conduct a comparative analysis and allocate spending based on performance to maximize ROI from the vendors. By providing targets, you also create a clear line of demarcation of responsibilities between the business and the vendor.

Some of the controllable targets within the BPOs could include:

1) Throughput targets, such as Average Handling Time (AHT)

2) Shrinkage

3) Adherence

4) Compliance

5) Scheduled Hours

6) Scheduling Effectiveness

7) First Contact Resolutions

Lastly, if executed properly, this approach reduces the workload for the Workforce Management (WFM) team. The focus shifts from merely achieving service levels in the short term to devising solutions that help improve the controllable variables for the vendor. Over time, this process will contribute to reducing service level variability.

Shifting the focus from setting rigid service level targets to emphasizing controllable variables within the BPO operations offers a more strategic and flexible approach. By aligning performance metrics with these variables, companies can better optimize vendor performance, allocate resources effectively, and foster a collaborative environment between the business and vendors. This approach not only enhances operational efficiency but also paves the way for long-term improvements and a more stable service level, ultimately contributing to a more resilient and successful outsourcing strategy.