Confessions of a Corporate Shopaholic

I applaud what the territory’s Ombudsman Alan Lai Lin said during a press conference over the Water Supplies Department’s mixed-up meter readings screw-ups over the last 20 years.  Apparently over 100 cases of water-meter mix-ups are reported each year.  A complainant received water bills up to HK$900 even though her flat was vacant for 6 months.   The Ombudsman pointed out that although the installation of water meters has been contracted out in recent years, greater supervision is needed by the Department.  “Even though the work is contracted out, the responsibility should not be contracted out.”, said Mr. Lai.

This couldn’t be more spot on.  Whenever I lead contract negotiations on outsourcing deals, mediate issues and performance complaints with incumbent outsourced providers, or conduct qualification analysis over whether or not to outsource with senior business partners, I always see people with the wrong understanding over the objectives of outsourcing, or contracting out in the above scenario.  Aside from obvious savings on costs and headcount, many corporations look at moving part of their processes offshore so as to focus on core elements of their businesses.  This has been gaining traction over the last 10 to 15 years.  In fact, no one would be surprised to see that a lot of the customer facing functions are being contracted out.  Call handling, customer services, direct selling, payroll, HR, and installation like what we see above for water-meters.  Oh yes, procurement can be outsourced as well.

Many clients think that the worst is over once the decision is made and endorsed by management.  They believe that they can then sit comfortably and bark orders at the outsourced providers and transferring all business targets onwards.  These are clearly the most irresponsible clients.  Experienced leaders understand how much more difficult it is to manage outsourced providers, much more so than running their own team of staff in-house.   Businesses need to undergo what we call risk analysis.  They need to brainstorm and  list out everything that could go wrong, and then place relative likelihood and precautionary as well as handling guidelines for each scenario.    They need to assign specific resource (in-house) who is tasked with managing the outsourced provider on a daily basis.  Sometimes this resource needs to work on-site with the provider.  Accountability has to be set right from the start with clear distinctions.   I have seen too many clients who think that the outsourced providers are the only party shouldering responsibilities.  In fact they themselves are equally liable to provide the necessary direction, management and rectification whenever they see problems ahead.  Laying the blame on the outsourced provider only proves how incompetent the client really is.  To me, they share the biggest part of the blame.

Most outsourced relationships fail because of issues like this.  There is nothing wrong about the concept.  Technical competencies maybe, but it could easily be rectified by trainings and investment.  I see time and time again that my clients fail to grasp the right techniques, processes and mentality to manage the providers.  Whenever catastrophes appear like the water bill foul-ups cases above, they pass on the blame and ask for more money from the top!