The need to plan

Before the transition gets underway it will be essential for each step of the transfer to have been planned in detail and every effort made to ensure that the staff, both those retained and those to be transferred, know what is expected of them. The contract will have been finalized and signed and any necessary pre-contract consultancy and other fact-finding work completed.

The transition relates to the period of time necessary to complete all the changes required before the transferred function or functions are finally placed under the direction of the service provider or joint venture management. Prior to the transition, the client’s staff will have carried out the entire workload, but by the end of the transition the ongoing work will be carried out by the new team. In a conventional outsourcing arrangement the transferred staff make up around 80 per cent of the new team with some long-term additions or changes of personnel made by the provider.

In some outsourcing arrangements though, the transition is completed in distinct phases, which effectively result in responsibility being transferred before all the planned changes are completed. This can occur when a project area within the scope of the relevant functions is not considered a major contributor to service improvements or substantial short-term savings and both parties agree that work on it can be safely postponed. However, it is most likely to happen when part of the overall project is dependent on some other work being completed, which is outside the provider’s control. Both parties should agree on a risk management plan in advance of the transition if there is a real risk that progress might depend on the successful completion of projects outside the provider’s control.

When a provider believes that there are major factors that it cannot completely control, it will naturally become concerned that problems of someone else’s making could occur before or during the transition. Service providers faced with such a situation usually request that the client accepts responsibility for all the costs up to the end of the transition. Clients forced to accept this request frequently end up paying the provider a management fee to cover its own costs up to the end of the transition. Clearly, when these circumstances prevail, the contract will normally only come into being once the transition has been completed. In most other circumstances the contract is effective from the start of the transition. Pre-transition work is normally covered by an agreement for consultancy services.

Outsourcing an important function is a major step for any organization, particularly if it is contemplating such an arrangement for the first time. In truth few organizations begin discussions with service providers believing that outsourcing is the only likely option or outcome. The service providers are well aware of this and fully realize that even though they may have responded to an RFP and made follow up presentations, outsourcing may still be one of several options being considered by the potential client.

From the point where outsourcing becomes a serious option the client will be constantly trying to balance the benefits and risks involved.

The very fact that outsourcing is such an important step to take, makes a strong case for suggesting that the decision should not be made in haste. With that in mind it is often a good idea to create a ’breathing space’ before the service provider is given the ’ go-ahead’. If advisers are involved, their opinions should certainly be sought but the final decision ought to be made at least a week after they were last seen to allow key internal staff time to develop their own independent views.

However, once outsourcing becomes the preferred option and at least one provider has been isolated, then the preparation to outsource should begin very quickly. Independently from its chosen service provider, the client should begin to map out certain key areas in detail. In these key areas it will be necessary to evaluate and re-evaluate the requirements and timing on a regular basis before the contract is signed.

If the client makes little or no preparation prior to finalizing the decision to outsource with the chosen service provider, then it will always be playing ’catch-up’ with an organization that starts off being much more knowledgeable about the subject. This appendix, therefore, concentrates on the pre-planning work that should ideally be done before a successful provider is chosen and at the same time goes into more detail about some of the more technical aspects of outsourcing that are only briefly covered in the first part of the book.

It has been suggested to me on more than one occasion that it ought not to be necessary to do pre-planning work of this type. ’Surely if we are going to put so much trust in this service provider why can’t we just let them get on with it and tell us what they want from us?’ This is best answered by considering the treatment of transferred staff – an area where it is obvious that client and service provider will both be united in their desire to treat the staff fairly. It will certainly be in the provider’s interest that the client plays its part in keeping the transferred staff up to date with developments, but the provider may not have advised a client on this subject before and in any case it has its own problems. Although it is in the best interests of both parties that the employees are treated with respect it is still an area that the client must pay careful attention to. As stated earlier, a client who alienates the transferred staff by its failure to plan ahead and keep all concerned fully informed, is taking unnecessary risks with the quality of the future service.

It follows that the importance of pre-planning will be much more important for the client in areas where the aims of both parties do not exactly match.

Some of these areas are considered below:

• service level agreements

• service performance measures

• continuous improvement programmes

• management of the contract.