Former President of ACS HR Solutions, Inc. joins Motif, Inc. as U.S. based CEO

Studies have shown that outsourcing actually can help a company create a higher-performance finance function. And with buyer demand for finance and accounting (F&A) outsourced services predicted to double this year (according to FAO Research, www.faoresearch.com), outsourcing some portion of the F&A function seems inevitable. The big question then becomes, "How can I outsource and still keep the necessary control to comply?"

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With outsourcing increasingly becoming a way of life in the global economy, the key question for many businesses is how a well managed outsourcing process can translate into business improvement across the board. Forbes.com spoke with Tom Koulopoulos, founder and CEO of the Delphi Group--the management and technology arm of Perot Systems (nyse: PER - news - people )--and author of the recently published book Smartsourcing, from Platinum Press. He has an incisive view of world trade and the part played by suppliers and manufacturers as they move from bringing workers to the work to taking work to where the workers are.

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The phrase "core competency" was introduced by C.K. Prahalad and Gary Hamel in a groundbreaking article in 1990 in Harvard Business Review. They wrote that a core competency is "an area of specialized expertise that is the result of harmonizing complex streams of technology and work activity." Honda Motor Co.'s core competency is its expertise in engines. The company builds motorcycles, lawn equipment and automobiles around their engines. Volvo's core competency is widely perceived as safety. Outsourcing introduces a new wrinkle when handling the core competencies of any company. Which business processes do you outsource?

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NelsonHall, the leading independent business process outsourcing (BPO) analyst firm, announced the availability of its latest research entitled "Targeting Benefits Administration." This report is a comprehensive assessment of global benefit administration outsourcing services.

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1. Do not limit what you can offshore

   One of our first decisions was to exclude client facing work, except call center, from our offshore outsourcing initiative. It is amazing to me how much managers tended to overestimate the amount of work that is client facing due to their initial fears of outsourcing. It is a great excuse for some managers to run away from the outsourcing initiative. We learned that we should not have limited the work suitable for offshoring. In the end, we found back-office work the easiest to move offshore but call center and even some client facing jobs were quick to follow.

2. Training at the offshore location is more efficient and cost effective

   The next lesson learned is that some managers think their work is too hard and they will never be able to move it offshore. This one always baffles me since the education level of the people doing the work offshore is generally the same as the people doing the work onshore. Solving this problem is difficult since you have to prove the offshore workers can do the work before onshore managers will outsource the work.

   The typical resolution for this situation is to have a few of the offshore team members come to your location and learn your work. After learning your work, they go back to their home country and train others to do your work.

   There are four problems with this approach. The first is that this method of training is very expensive. Since training is done at an onshore location, the expense is at least five times the cost of training offshore. The second problem is that it takes twice as long since you must do double training. The third problem and possibly the biggest is that the offshore team members being trained onshore learn the bad habits as well as the good habits, since they are exposed to all employees and not just the pre-selected trainers. Finally, we found it bothered some of our best workers who were worrying that these offshore workers sitting right next to them might take their jobs at some point.

   The solution to this problem is to choose your best people to do the teaching offshore. This will raise lots of questions about who would want to do such a thing. Frankly, I have been doing this for 6 years and have never had an issue getting volunteers to go offshore and teach their work to others. Most people see it as an invaluable life experience. An added benefit is that you end up with well documented processes and training materials that work onshore and offshore.

3. Replace attrition and add for growth offshore

   Another lesson learned is not new to most managers. Managers do not want to downsize for any reason and especially due to moving work offshore. This is a very difficult issue and there are a few solutions that can help reduce or eliminate downsizing due to offshoring. First, you can decide to only offshore when you have attrition. If this is too slow, then add all growth to the equation; only hiring offshore for growth. If you still need more jobs, then create some involuntary attrition. As the COO of a 3,000 person operation, I always forced my managers to drop the bottom 5% of our staff every two years. By dropping off the bottom 2-3 annually you keep your team performing at a higher level. In most businesses the combination of these three ideas should generate an 8-10% of annual attrition rate, so in a short 5 years almost 50% of your jobs can be offshored. In all cases, make it a hundred times more difficult for your managers to hire onshore verses offshore and then sit back and watch your offshore workforce grow.

4. Get client consent through proof of concept and testimonials

   The last issue I want to mention is the most difficult one to solve. There are usually some client contracts where permission is needed to outsource any of their work onshore or offshore. Luckily, many clients are multinational and are themselves outsourcing, so it is not usually an issue. Some clients just do not like the idea and to address this issue, you can demonstrate the quality of the offshore operation and explain how moving work offshore will help you remain price competitive. You should also encourage the client to visit your offshore locations if they are agreeable since seeing is believing and many of the offshore vendors I have worked with were truly World Class organizations.

John R. Coker
The author is the CEO of Motif, Inc. (www.motifinc.com), a specialized BPO (Business Process Outsourcing) company providing back office transaction processing services which require decision making and personalized customer support services to Fortune 500 clients with a five plus year track record of 100% client retention. John brings to Motif over thirty years of valuable Financial Services & Benefits Administration experience from leading global corporations such as Mellon Bank, Fidelity Investments, Prudential Investments & Affiliated Computer Services (ACS).