Outsourcing refers to a situation when a company chooses the "buy" option to go with, out of the two available alternatives, "make" or "buy". The company to which the job is outsourced is entrusted with the responsibility of carrying out the ancillary activities of the client.
Such organizations make money by encashing the "lift and shift" mentality of the client companies. In majority of the cases, the tasks outsourced are important contributors to the efficient performance of the core operations. So first thing that clients check is the operational efficiency of the company to which they outsource their critical tasks. This requires the firm getting the outsourced work to efficiently perform the tasks and meet the expectations of the client. This calls for an effective and optimum method to accomplish this task. KPIs (Key Performance Indicators) are one of the many available ways for this purpose. These are the specific, measurable, actionable, relevant and time-bound parameters that quantify the dimensions on which the performance is to be evaluated. An even more useful manner is utilizing Balanced Scorecard (BSC) which is a set of KPIs organized along four perspectives.
KPIs are structured to obtain a holistic view of the operations of the organization. For Financial Perspective, these may be accounts receivable, percentage increase in revenues and percentage increase in operating costs. Customer Perspective can be had from number of clients, privacy issues and integration capabilities. Operations can be assessed by average team size, percentage of projects completed in time and accuracy of projects. Education and Growth perspective can be judged from project related training programs, motivational programs and number of brain storming sessions done.
KPIs help in addressing various challenges faced in organizations in financial and operational terms. One of the primary challenges faced by the service outsourcing companies is the quality of work they must produce, for many a times, the client may keep finding faults with the nitty-gritties of the task done. This can be improved by possessing the needed expertise. Though recruitment of competent and capable employees is of utmost importance to any organization, the nature of work of an outsourcing company makes careful screening of candidates all the more important. Getting appropriate working staff is to be paid the desired attention in such organizations. Such firms need to understand that they cannot follow the "we can have it all" philosophy. So only those tasks they excel at need to be done and not everything. Another hurdle experienced is regarding the confidentiality of work done inside the organization. The privacy concerns are an important factor used by the outsourcing companies in settlin g for a
partner. This makes necessary the use of measures to ensure minimum leakage of the information. Such and similar challenges can be overcome via formulating suitable KPIs to wind up with the projects in time without compromising on the quality provided.
KPIs, in outsourcing companies do the work of aligning the operations in line with the expectations to have the maximum output from minimum inputs. For instance, if the learning and growth abilities are not as per the requirements, this may be indicated via the values obtained for project related training program or no. or brain storming sessions held. Such programs may then be arranged and improvement can be had.
KPIs enable evaluation of service outsourcing companies by providing an overall view which is backed by the magnitudes assigned to the indicators grouped under the four categories. This method provides the companies with a tool that is ahead of the qualitative assessment of organizations. It helps in both, spotting the aching areas of the company and knowing the extent of the problem. Subsequent steps can be taken to improve the conditions and attain the desired level of excellence.