The Best Practices in Outsourcing

More and more companies nowadays, have resorted to outsourcing in order for them to cut their overhead costs. Moreover, a lot of companies in the United States and in Europe had paved the way for the increase in the employment rate of some of the developing countries such as India, China, and the Philippines.

Outsourcing, however, is not just delegating tasks and/or getting the service of a certain provider and providing employment to low wage countries. There are some rules and practices that the companies must learn and follow in order for them to be succesful in this field and gain an even more increase in their profits.

First of all, the companies and the providers must develop good working relationship with each other. The usefulness of the relationship between the key management personnel of both teams depends on good understanding and strong working ties between them.

Presenting a quantifiable objective is also an important factor in outsourcing. The client or the company requiring the service must clarify with the provider their level of expectation when it comes to quality of service. That way, strifes or misunderstanding will be avoided.

Before the signing of the agreement of the client and the provider, they should agree first on the incentives if the provider would be able to meet the client's expectations, and the penalty schemes if the objectives would be consistently missed. The provider should be driven to meet the established customer expectations or even exceed it by adopting the performance based pricing criteria.

The client must review periodically the performance of its provider. A formal review meeting at least twice a month would be of great importance. This way, the two parties could discuss the performance of both teams and further determine the future goals and objectives of the company accordingly. Moreover, the meeting could also be a good avenue to discuss product reviews and all other deliverables. Both parties must understand that there might be a need to revise performance objectives to adapt to the the changing market conditions and the opportunity costs of both firms.

Most importantly, communication between the two parties must always be placed on top priority. The client and the provider must ensure that they communicate well with each other to be able to bridge whatever cultural differences they may have. Since the two parties belong to different countries and cultures, it is expected that there are some things or issues that they might not agree on most of the time. It could, however, be enhanced by organizing social events, educating each other about company background, and active participation in each others' quality programs. As always, communication is always the key to better understanding and establishing good and healthy relationship. It might also be a good idea to send a top and loyal employee to the business process outsourcing site for a couple of months to make him/her understand the implementation phase.