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The Seven Habits of Highly Effective Outsourcing

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The late Stephen Covey provided practical and timeless principles in his book, “The 7 Habits of Highly Effective People.”  The book has been a touchstone for business executives for more than 20 years.

Covey’s principles apply to virtually any setting, and can provide a framework for establishing and running a successful outsourcing operation, serving both sides of the equation, the service provider and the customer.

At its core, the objective of outsourcing is to gain high productivity at a lower cost. However, a successful outsourcing operation is not a simple process. It requires a commitment of both parties (the customer and the service provider), as well as strong communication between them.

So, in tribute to Mr. Covey, here are the Seven Habits of Highly Effective Outsourcing:

1. Be Proactive: take initiative and be responsible for your actions

A business needs to decide, “Is outsourcing for us?”  If the decision is “Yes,” then it must realize that outsourcing is a process and commit to it. This requires both parties to be actively engaged with each other, at the beginning, when the processes and operating model are being defined; during transition, when both parties need to agree on the timing and “rules of engagement”; and during production, when there needs to be ongoing communication and support. Strong executive sponsorship is a key to a successful outsourcing relationship.

The service provider needs to be accountable to its service levels and performance requirements. If a client’s processes are inefficient, the outsourcer must take the time and effort to make them better. Taking over bad processes without a vision to improve them is just continuing a cycle of ineffectiveness. Or, as my 6th grade teacher used to say, “Good enough isn’t.”

2.  Begin With the End in Mind: understand what you are trying to accomplish

Is this about cost savings, efficiency, performance improvement, compliance?  All of the above? Both parties need to go into the engagement with pre-defined goals that are realistic and measurable.

3.  Put First Things First: prioritize, plan and execute

The transition to outsourcing requires careful planning and communication. Businesses need to communicate internally exactly what is going on, so that its employees understand how it will work and who will be affected. The explanation needs to cover not just information about employees who may be losing their jobs, but should also include information on how the departments will function and interact with the areas being outsourced. How will the new functions work, where are the “hand-offs” and how will issues be communicated and resolved?

The service provider needs a realistic plan and timeline to execute. If a customer’s functions are poorly documented and controlled, the service provider needs to account for the time that will be needed to develop detailed operating documentation and then to validate it with the client. If the function is complex, the service provider needs to ensure that the training and ramp-up cycles aren’t minimized. Ramp-up to full production needs to be undertaken realistically, and the customer must understand the process at each step of the way.

4.  Think Win-Win: strive for a mutually beneficial engagement

This habit is the cornerstone of an effective outsourcing relationship. Both parties need to get what they need from the engagement. The customer needs high performance at a lower cost. The service provider needs a reasonable margin to deliver the expected results. Doing this “on the cheap” does not benefit either party. In the end, you get what you pay for.

5. First Seek to Understand, Then to be Understood: create a positive atmosphere of trust and respect

It’s all about expectations and communication. Setting proper expectations is critical to a successful outsourcing relationship. Both parties are partners in this relationship, and open, frank communication is integral to its success.

6.  Synergize: work together to ensure success

There will be issues; that you can count on. Understanding their root causes and addressing them collaboratively will help to ensure that problems are resolved quickly and effectively.

7.  Sharpen the saw: balance and renew your resources

In Covey’s view, work/life balance is important to create a sustainable and effective solution. The same applies to outsourcing. Attrition is a common issue facing many outsourcing firms. When it does take place, attrition disrupts both the service provider and the customer, through lost production, lost revenue and diminished customer service. Valuing and investing in your team, not overworking it and having it be part of the solution will create a positive, sustainable team environment.

In the end, a successful outsourcing relationship is a true partnership that epitomizes the axioms that Covey promoted, with common sense, communication, respect and trust at its center.

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Eric Liebross

Written by

Eric Liebross

Eric brings more than 30 years of experience and a proven track record of success helping CFOs modernize and achieve peak performance in their back office to become more scalable, innovative and strategic oriented. He joined Auxis in 2002 and serves as Senior Managing Director, overseeing all Finance Transformation, Process Automation and Business Process Outsourcing services at Auxis. His areas of expertise include financial operations performance, shared services strategy, organizational and operating model design, process automation (e.g. RPA), and systems integration.

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