Effective communication for successful outsourcing
In the November 2001 Project Management Institute Pharmaceutical Specific Interest Group benchmarking survey of over 300 project managers across the pharmaceutical industry, respondents pointed to communication as the most important project management activity (Nielsen et. al, 2002).
In an environment where some or many activities in a project, requiring value addition by humans are outsourced, the communication needs between the partners continuously evolves over the life cycle of the relationship. Note the use of the word “partners” rather than “vendor” or “sub-contractor”. For a successful relationship, it is quite important that both parties recognise this as a long-term partnership rather than a “purchaser-supplier” relationship. Given that both parties appreciate the need for “partnering for success”, let us now examine how effective communication management contributes to this success. In future sections of this paper, the term “Offshore Development Centre” (ODC) has been used to represent the partner providing outsourced services and the term “Customer”, for the partner outsourcing these services.
The Evolving Nature of Communication Needs
The outsourcing relationship usually commences on a small scale, typically as a pilot where some simple project functions (task level) such as drawings development are initially outsourced. These simple project activities actually form the basis of a long term relationship for greater engagement on complex and in-depth involvement in project activities. Extensive communication is required at this stage between the senior management as well as at the executive levels of both organisations, encasing:
- Capturing of expectations;
- Developing a Control Plan;
- Deploying the Control Plan (monitoring adherence);
- Developing a Framework for progressive engagement.
Communication at this time should ideally be through face-to-face meetings, preferably by an empowered committee with members from the ODC and Customer leadership that would sit through a workshop to complete these requirements management activities and develop a Control Plan using Six Sigma tools such as Thought Process Map, SIPOC, Process Map, Cause & Effect and FMEA. More information on Six Sigma methodologies is available at http://www.isixsigma.com/me/.
The complexity in communication typically increases as the relationship between the ODC and its customer matures over a period. If the ODC commenced with six draftsmen doing design work for one engineer in the customer's office, the communication channels would be 21 (N*(N-1)/2). As the relationship progresses to encompass some more design and engineering functions with say 35 engineers at the ODC delivering work to about seven lead engineers of the customer, the communication channels shoots up to 861. This is only to illustrate that a five fold increase in work by the ODC increases the communication needs by over 40 times.
As the relationship matures, customer expectations, too, increase many fold and may sometimes be indicated through a drop in the customer satisfaction index. This puts further pressure on the communications framework to step up and cater to increased expectations.
Organisation Structure & HR Framework
It is apparent that the ODC needs to adopt a resilient organisation structure that caters to enhanced communication needs over a period. Some of the important components of the organisation structure are presented below.
Alliance Management: A focused group comprising senior level managers is necessary, with representation from the ODC and customer organisations, and with their primary KRA (Key Result Area) being successful engagement and growth of the relationship. This group would be entrusted with the task of “Alliance”, “Collaboration”, or “Engagement” management. Strong representation in this group by the customer organisation, encompassing wide geographies and functional areas is essential. Obviously, the size and responsibility of this group would increase with increased engagement resulting in increased communication needs.
The ODC Delivery Organisation: An elaborate organisation structure may not be necessary at the commencement of the engagement when task level work in few functional areas is typically outsourced. A lead engineer in the ODC can easily supervise the activities of a small group of engineers; manage the communication needs with the customer, as well as within the group. This could include communicating customer expectations unambiguously, supervising delivery, training for skill enhancement, developing and deploying standards and work processes, monitoring quality, and reporting to the customer organisation.
These very functions would require greater focus with increased engagement. The Alliance management team would decide when is the right time to revise the organisation structure so that the delivery, operational and communication effectiveness of the partnership improves with increased engagement. At a mature engagement level, the ODC would have several dedicated functions such as:
- Delivery Management: Responsible for work process development, standardisation, monitoring adherence to work processes, and meeting quality expectations of the customer.
- Process Owner Groups: Responsible for continuous improvement in work processes through the analysis of defects and lessons learnt.
- Project Management: Responsible for all project management functions at the ODC for the tasks and activities outsourced from within a customer's project.
- Program Management: Responsible for alignment of project management activities in the ODC, with functional or geographical units in the customer organisation.
- Communications Management: Responsible for aligning the communication needs with customer expectations, across all functions including process development and continuous improvement, project management, program management, learning and development, growth and engagement efficiency.
- Learning and Development: Responsible for maintaining skill inventory and enhancement in the ODC, aligned with the customer's roadmap for growth and technology enhancement.
- Account management: Owns business intake, growth in intake and relationship, aligned to specific geographical entities or functional groups in the customer organisation.
- Centres of Excellence (CoE): These centres should be considered for focused communication needs around specialised skills or functions. Such a centre would align strongly with a similar body in the customer organisation, simplifying communication and facilitating enhanced alignment with standards and processes of the customer's Centre of Excellence. Examples within an Industrial Process Control Systems environment could include:
- Safety Systems CoE, aligned to the IEC61508 standard;
- Operator Training and Simulation CoE;
- Paper and Pulp Industry segment CoE
- Panel design and drawings CoE;
The Alliance Management team needs to catalyse or facilitate the evolution of an elaborate organisation comprising these or more functions, as the communication needs increase with maturity of the relationship between the partners.
It is essential to note that “Outsourcing” need not be restricted to a customer organisation outsourcing from a different company for skill or cost benefits. It can apply to outsourcing to a particular location within the customer organisation due to reasons such as economies of scale, standardisation, and cost effectiveness.
Infrastructure and Tools
Several online collaboration tools are available today that enhance the quality of communication between the ODC and its customer. Some examples:
The primary criteria in the selection of these collaboration tools should be their scalability, which ensures that the same tool continues to be used, as the ODC grows from a few people organisation to a large one. One should also ensure that individual tools collectively help support process standardisation, quality management, project management, and most importantly, high level reporting on the health of the relationship. Homegrown tools may also be considered to offset the cost of the ones available off-the-shelf. However, it is important that the organisation recognise that there will be investment in the long-term for maintaining and scaling homegrown tools.
Voice and Video Communication: Voice and video communication enhances the quality of relationship between team members of the ODC and customer. Video conferencing infrastructure costs may be prohibitive when the ODC is in its nascent stages, but would pay for itself as the ODC grows. VOIP is a very cost effective means of voice communication and encourages increased dialogue between team members of the ODC and customer. The degree of success of a project is usually directly dependent on the degree and quality of communication between the ODC and customer project teams. Particularly in an ODC where communication within local geographies is likely to be absent, the ODC may consider VOIP instruments being made available at every desk in lieu or in addition to telephone extensions.
Working across Time Zones: The ODC should be willing to work schedules that ensure at least a couple of hours overlap with the customer's working hours, to facilitate voice and video communication between the teams.
Co-located meetings: The Alliance Management team should meet at the ODC and customer locations quite frequently for review and corrective and preventive actions and follow-up. For reasonably sized projects, the kick-off at the ODC should be through a meeting of all key members of the customer's team at the ODC. This increases collaboration between both teams, particularly during planning activities such as WBS preparation and the like are done together. It is also essential that there is participation of the ODC and customer leadership in each other's periodic planning exercises (Strategic Planning, AOP, Long Range Planning).
Transparency and Trust, Mitigating Perceived Risks
There are several real as well as perceived risks by both partners in the relationship. From the customer perspective, some of the risks could include loss of control on the project, IPR and confidentiality concerns, use of inappropriate skills on the project by the ODC, poor quality leading to rework, illegitimate schedule and cost overruns, and too much dependence on the ODC leading to inability to spread risk. Some of the risks from the ODC perspective could include creation of alternative ODCs by customer resulting in erosion of business prospects in the long-term, and unrealistic demands on productivity, quality, cost, and schedule.
These, and several other perceived risks need to be systematically identified by the Alliance team, and assessed for failure modes on a periodic basis. A well defined communication plan should be in place to mitigate perceptions at both ends through a high degree of transparency in periodic reporting on identified parameters. The communication plan could include:
- Periodic reporting of ODC skills inventory and experience, Learning and Development initiatives including soft skills training (communication) and training around requirements management;
- Frequent sharing of Work processes, Quality processes, project health monitoring processes of both partners;
- Sharing Project Review findings, Quality Review findings, and Action Taken reports;
- Periodic reporting of mutually agreed quality and productivity metrics;
- An effective and transparent issues and concerns resolution mechanism between the partners;
- Sharing of long-term plans, growth initiatives, cost structures and perceived future trends.
The outsourcing partner relationship has a profile of needs and abilities which is unique. It is at once able to be more innovative as well as capable of anticipated growth, and requires special features in the communications tools chosen to serve it. It is recommended that the organisations incorporate scalability as a critical feature of its senior management focus groups as well as its communication tools. Communication solutions must be found which are tailored to this special partnership. Because of the uniquely high need for communication, support tools must be chosen which permit communication to remain clear and organized during periods of dynamic change, nurturing transparency and trust. Scalability becomes an increasingly important quality of tools chosen to sustain the partnership. The final quality of the project and potential for the future will depend on management's ability to prioritise communication and its quality, bringing trust and transparency to the partnership.
Nielsen, J, McDonough, J, & Wilson, E. (2002) Project management in the pharmaceutical/biotechnology industry: lessons from an international survey, submitted for publication in October, 2002.
© 2005, Savyasachi Tumkur
Originally published as a part of 2005 PMI Global Congress Proceedings – Singapore