Damage to an organisation’s reputation can have a direct and catastrophic impact upon its market share and profitability. Yet time and time again large corporations and institutes continue to engage in ‘toxic’ outsourcing. This is the strategic decision to outsource what is essentially a core competency.

Poor outsourcing is experienced by almost everyone in their everyday lives. You purchase a product, service or membership from a reputable source only to find yourself trying desperately to communicate with someone halfway around the world who represent the organisation’s customer service.

The person you are talking to has had little or no training has no perception of your geographical location, your personal circumstances or your specific needs. It is highly likely they are following a decision tree on a computer screen or reading from a script. Taking the initiative is not in their vocabulary and they seem to be disparate from the rest of the organisation.

This type of outsourcing is toxic because it is poisonous to the reputation and growth of the organisation. From a strategic decision to outsource comes a venom that spreads through the operational infrastructure causing customers to leave and potential customers to decide not to use the organisation thanks to the spread of information through social media.

Outsourcing Is Not Always The Right Strategic Decision

At a strategic level, all seems good. The decision to outsource customer service has resulted in cost savings (the real reason) and all is fine in the world. Unfortunately, the facts and figures shown at board level fail to take into account the silent pound – the money that drifts away to competitors due to a failure to respect the customer. This is often because the reason to outsource is based on cost reduction and not the development of efficiency and effectiveness. These decisions are also based on political power and not commercial reason. Cost cutting is a short-term plan with little long-term advantage.

Outsourcing has always been a supply chain decision. However, the focus has been on upstream components related to suppliers or those activities deemed as support services. Ironically this has sometimes included customer service. When looking to outsourcing, it is important to consider the total supply chain from raw material to end customer.

Deciding Whether To Outsource Customer Services

It has been recommended that organisations outsource non-core competencies to suppliers who possess the core competency themselves. One of the most common strategic mistakes is to outsource a core competence. Which brings us to the subject of customer service. Core or non-core?

Based on your own experiences you may decide that your banks, building societies, communications providers, institutes and many others are there to serve you as a customer. In which case, customer service is core to the business.

Key drivers to outsourcing include cost, quality, business focus and available human resource. But if the resultant outsourcing is toxic it can damage any benefit that it was originally supposed to support. If the objective of an organisation is to retain and satisfy customers, then a prime objective should be to employ enough competent staff to support the customer rather than gain the advantage of reduced costs by outsourcing.

How Procurement Can Support Outsourcing

So how do we make outsourcing non-toxic? The answers lie in the procurement process. First of all, the decision must be made whether customer service is core. Then, if the decision is made to outsource the function, the potential contractor must demonstrate excellence in customer care and knowledge of the organisation, not simply be competent. Their competence must be ‘ideal’ not just capable. This raises the standard for strategic outsourcing. It is no longer acceptable to state that the competence of the contractor is ‘high’.

Once an Ideal Centre of Excellence (ICE) has been identified it will be essential to integrate the outsourced partner and monitor them on an ongoing basis. Constant communication with regular visits and updates must be the order of the day. Lack of information is often a key cause of frustration.

Meaningful metrics must be introduced. Not just the number of calls made or answered but the efficiency and effectiveness of the calls. Every single call must be rated every time. Any fall in satisfaction must be identified and eradicated to stop the venom spreading.

We’ve all experienced toxic outsourcing, let’s hope better strategic decisions are made in the future. If not, ask to speak to a manager…