Tuesday, July 31, 2007

Customer satisfaction in Outsourcing

Two articles came across my inbox this morning that caught my eye, because we've been thinking a lot lately at Macadamian about how to bring customer service to the next level.

The first was an article about how recent polls show that customer satisfaction in outsourcing has decreased (ouch).

The second was a white paper from Tholons titled "Relationships at the Core of Successful Outsourcing Contracts".

Both cite that roughly 70% of organizations are dissatisfied with their outsourcers. The Tholons white paper highlights something interesting though - around 80% of respondents in their study beleived their outsourcing provider were meeting their contractual committments. Huh? How can you be meeting your obligations yet still have an unsatisfied customer?

Therein lies the kicker - the big secret that's sure to raise the hackles of anyone in legal - in a successful outsourcing deal, the contract doesn't mean squat. It's all about the relationship. Case in point: last year I put a panel together of VPs of R&D in Boston to discuss outsourcing best practices, and the panel agreed - if you get to a point in the project where both parties are pulling out the contract and arguing about what's written and what the obligations are, you my friend are in deep doo doo.

Contracts focus on meeting service levels and specific deliverables - or as the Tholons paper puts it "a fixed unit of utility at a fixed unit price for a fixed time period". If this were taken literally, quality takes a back seat. In reality, the customer expects flexibility when priorities shift mid-project, expects the outsourced team to treat the product as if it were their own, and expects continuous improvement. Often, especially in a fixed-price project, the contract is at odds with these goals.

The survey from the Outsourcing Center, cited in the Tholons paper, sums it up well - in the reasons for outsourcing relationships to fail, the majority is attributed to unclear expectations, poor communication, poor governance, and misaligned interests. Poor performance accounts for a small fraction.

In my own experience, the best projects I've worked had a clear and open line of communication between the outsourcer and the customer. Both show give and take and both feel comfortable picking up the phone at any time to tackle an issue head-on. Conversely, projects that didn't go well boil down to a misunderstanding or a gap in expectations. Sometimes, in a new relationship, people are reluctant to ask the tough questions up front. Either you don't want to ruffle feathers so soon or you're in a rush to get started. Often a frank conversation up front about what everyone expects of one another, how we will judge the project a success, and what makes it a win-win for both parties will save a lot of headache down the road... especially near release-time, when anyone who's worked in product devleopment knows, this is not the time you want to be having a conversation about misunderstandings and mismatched expectations.


rnbresearch said...

I think, you have a business & idea generator mind. yet you could have been done more.

Gravity Gardener said...

Many companies lose their way after they become successful. The sound of the cash register drowns out the voice of customers clamoring for better service or products. When the company begins to lose sight of their core business strategy and their value to the customer, the business can suffer dramatically. Improving customer satisfaction is not a nice to have but a critical function within any business.

Gravity Gardener