Change Management in Outsourcing

Observing a current client's ways in managing change in their transformation initiative, I thought it worthwhile to give my views on the challenges and effective methods of change management.

Change management can arguably be considered as the most important aspect of any shared services, outsourcing or transformation initiative. There are numerous examples of where weak change management practices have had long lasting negative impacts on organisations and their relationships with service providers. A few of these challenges are-

Challenges faced in phases prior to transition:

• insufficient engagement with stakeholders leading to a lack of buy-in
• insufficient skills to support the project leading to increased cost
• reliance on contractor staff, leading to a potential loss of knowledge and skill
• insufficient input from business unit leading to an insufficient solution
• trade union/staff opposition and industrial action leading to disruption

Challenges faced during transition:

• loss of morale of staff leading to disruption of delivery of service
• inadequate management of job reductions leading to a loss of skills and knowledge
• reduction in the quality of service to end users leading to a disruption of frontline services

So what does effective change management entail:

• A broad-based communications strategy for each key stakeholder groups in the organization, including not only HR but also executives, managers, and employees;
• An effective staff transition strategy, including appropriate redeployment, severance, and retention policies;
• An organizational design strategy for both the new governance organization and the retained organization whose positions are affected by the change in roles and responsibilities due to outsourcing;
• A change acceptance strategy to help make the HR transformation initiatives “stick;” and
• A training program to help employees, managers,and the retained organization understand how to work with the provider in the post-outsourcing environment.

Other aspects are:
Leadership
There needs to be complete clarity around the vision of the initiative and its rationale. Project sponsors have to be clear on their vision and need a forceful communication strategy. This communication strategy must be measured through means such as metrics and surveys and each stakeholder group needs to be evaluated on their readiness and comittement. There needs to be as many face to face meetings as possible, there must be ongoing, open and clear communication. Always question how the stakeholders can be engaged and provided information.

Project Management
The need for sound project management and project management professionals cannot be overstated. Due to the nature of many outsourcing projects increasing amount of "technical professionals" act as project leaders for outsourcing initiatives. They usually excel by narrowly focusing on a technical problem, concentrating solely upon the problem and worrying little about communication and management. As they suddenly become project leaders, they are faced with new challenges, requiring new skill sets.

Stakeholders
Ensure that you know who the critical stakeholders are at the beginning of the project, consider creating a stakeholder map that shows the stakeholders and the levels of acceptance of the project. Devise a plan to incorporate their assistance and make them visible champions of the outsourcing initiative. Involving the critical stakeholders at the onset of the initiative can help them develop a personal relationship with the approach, and offering them unique retention initiatives, compensation and bonus packages makes them feel as if they are an integral part of the project. Any inputs to the project by them are added bonuses. Last but not least, their hesitations and resistance are good indicators of what to expect later from the organization, providing important input for your communication strategy.

Align performance management/rewards and compensation
The outsourcing goals have to be in line with the compensation model of the organization. All too often, we assign people to outsourcing projects as "add ons". Their daily deliverables and workloads stay the same. And worse, the bonus plan defined at the beginning of the performance cycle only talks about the "daily" work, not the outsourcing project - would you blame anybody to treat the project as a second priority under those circumstances?

I hope these few pointers come of use.