Ratcheting Up Outsourcing Success

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As 2012 comes to its conclusion, you can look BACK on what has been accomplished, what we have learned and which battles ended in victory. Others prefer to look FORWARD to what still needs to be accomplished, plan on what we need to learn, and consider the battles that we hope to win. Of course, in Washington the past and the future are pretty much the same thing. The big fiscal battle of 2012 is a repeat of the big fiscal battle of 2011.

Discussions about how to raise more revenue from taxes was pretty much the same as last year. Of course, when we look at the debate on cutting costs, the argument has changed 360, and… we’re talking about exactly what we talked about last year. With just a bit of luck, we should be back to where we were the talks crashed in July of 2011. Wouldn't life be a lot easier if every time they make some progress in Washington you could nail it to the ground, and then build on that progress instead of this treadmill without moving forward?

For most of us this “life on a treadmill” is nothing new. This is the way that life works. You mow the lawn, a little later you need to mow it again. You send your kids to school, watch them graduate to the next grade, and at the start of next year’s classes they seem to have completely forgotten everything they were taught. In Greek Mythology, a particularly odious character by the name of Sisyphus has a special fate when he dies; every day he must roll a huge bolder uphill, but just before he completes his task, the bolder gets way and lands back at the bottom of the hill.

Definitely a familiar feeling!

When we look at work, we can see all the projects that were successfully completed. Yet, when we add them up… especially over a period of years… something strange happens. The total benefits for all the products don't add up. Let’s say that you had a few improvement projects this year, and a few the year before, even a few before that. Each of these was supposed to reduce costs or improve some other metric. Assuming that you had specific metrics and benefit targets for each project, when you add up all of these improvements and apply them to your current operations, you will probably see something doesn't add up? By now, you should be much more efficient, operating for a lot less, and getting much better feedback from your users. If that’s not happening, you have to ask yourself, “Why aren't all of these programs ratcheting up my performance?”

That’s an interesting word, “ratchet.” Have you ever seen a ratchet? It’s just a gear, with a “thingy” (technically, it’s called a pawl, but thingy will do for now) that drops into the gear to stop it from slipping backwards. Ratchets are very old technology that pre-dates the Roman Empire. Backsliding has been a problem for a long time! The ratchet merely acknowledges physics: anything at rest wants to return to its position at rest. If it’s your job to make that thing rise upwards, you’re fighting all sorts of powerful forces: in physics it's just gravity, but on your job it’s also culture, personality, convenience, and other forces that always want to return to where they started. In the world of physics and of work, you need to put something in place if you don’t want your work undone. A ratchet is a pretty good idea. Let’s see how this works.

Let’s say that you wanted to lift a heavy weight. You've got a weight on a rope attached to a simple pulley, and the rope is tied around the weight. You pull the rope with one hand, but it’s too heavy. You now pull with both hands, and the weight rises up! But after one pull, what do you do next? You need to let go, grab the next length of rope and pull again. But once you let go, the weight falls back. However, if there was a ratchet, the weight rises as you pull, but when you let go the pawl drops into the gear and stops the rope from gain backwards. You pull again and it rises, and stops. You repeat until the weight goes where it is supposed to go, and someone there takes the weight off the line. Progress!

If you’re working hard on an outsource project, you’re putting projects in place, but you aren't making headway, you need something that works like a ratchet. In knowledge work that thing is… continuous improvement. This is a general philosophy that operations can become better over time, through a series of improvement projects. Think of each project as a “click” from the ratchet, as you move forward. There are many different variations of how to bring about continuous improvement, but here are five simple steps to get you started:

TARGET: Decide what you need to improve (or which weight you need to lift). Not every improvement has equal value to your organization. Lower cost is always a good idea, and it should be an annual goal for your organization, every year. But you need to listen to your customers and focus on what will make them happier. If users complain about service quality, focus on quality. If no one has an issue with meeting deadlines, don’t make that your focus, even if you can easily improve it. Target your biggest issues, so that your efforts are meaningful to your customers. It may surprise you, but improvement to areas your customers didn't ask for can make them angry. Why? Because it tells them that you aren't listening. Instead of praise, you may hear, “If you spent your time on what we want, instead of what you want, we would be happy.”

VALUE: Now that you've prioritized your options and chosen the projects that will make the most meaningful contribution to your services, you need to assign a value to the potential improvement. Think of this as designing the spurs on the ratchet. Whether the improvements are designed to affect the amount of staff, reduce the number of contracts, or make staff time more effective, you need to assign a value to each project. Each of these projects needs to be carefully measured to come up with a total value for all the projects.

Be careful! When you measured the value of each item, did you allow for interaction? For example, if there are three automation projects that are each expected to reduce staff by 10%, how much will that reduce total staffing? Three times 10% = 30%, so you can expect the operation will only cost 70% of the original cost when you’re done, right? Not quite. After your first project, if it works exactly as planned, the operation will have 90% of the cost. If the next project reduces this by 10%, the next saving is 9%. The third project on 81% of the cost yields an 8% savings, and so on. The three projects reduced your cost to 73%. This is a VERY simple model. In the real world, the math can get complicated, so don’t be surprised if the total of all of your projects is quite a bit lower than the total value of each project. Make sure that you have carefully measured the “clicks” you planned on.

MEASURE: Now that you have projects and expectations for your benefits, you need to refine your measurements. How will you be sure that each project measures up to your expectations? Your target may be to “reduce” the number of missed deadlines. But how will you measure this? How specific is your deadline? When you’re waiting for the cable guy to show up, the appointment usually looks like, “Monday from 9AM to 5PM.” If he shows up at 4:55PM, do you feel he is on time? If your measure is by the day, then how do you even capture smaller improvements? Perhaps when you first start to give a deadline, you start with the day, but you need to move to the hour and even the minute.

But when you’re down to the minute, the exact way you measure still matters! If everyone who works in your operation just looks at their own watch, everyone will have a different time and a deadline becomes arguable. Have you ever gone to a store with a sign on the door that says "closes at 6:00," and at 5:45 the door is locked? Isn’t it frustrating when other people loosely interpret the time? In your workplace, do you have one clock that you can turn to and say, “This and only this clock is the real time for any work we do!” If people are in different locations, you can synchronize the time on all PC’s in a network or on a specific server (if staff is in different time zones, agree on one-time zone as “universal time,” and don’t get caught by Standard vs. Daylight saving's time!). Measurement means both having the right amount of precision (the refinement of the measure), and the right definition of how you collect that information (always use the clock on the wall, not any other time). This is how you check that the “ratchet” is working the way you expect.

REPORT: Accurate and readable reports are absolutely necessary to make this process work. Every click and turn of the ratchet you built must be reported. If you think you've progressed 20 clicks of the ratchet, you must verify this. The management report is like adding a device that counts ratchet activity. Typically, when we have projects we do measure the clicks as we move forward. But we rarely check to see if other actions undo our progress. Perhaps another project in order to move its metrics forward, does something that undoes the progress on your project. By attaching a reporting device to the ratchet, we can immediately identify backsliding as well as unexpected moves forward. Examining both will tell us how to improve our operation. Remember, even the best staff doesn't always do what you tell them to. Often, this divergence comes from your staff trying to interpret your instructions (change a process, add staff, reduce staff, cancel a contract, send staff to training, etc.), and “improve” on what they've been told to do.

It is important to remember that no matter how valuable a management report is, reports do not run your operation nor do they improve it. Reports only identify “interesting” things, both good and bad. Reports tell us where to look, and where to put effort. From reports, we learn when projects do not yield the results we want, and where we need to concentrate our attention. Instead of trying to look at everything, not very effectively, focusing our efforts on specific issues makes it more likely that we can fix issues. Likewise, you may see that there are unexpected improvements. By identifying and then understanding these anomalies, we may find ways to further boost these positive results. At a minimum, when we find that something good is happening unexpectedly, we can learn how to apply a ratchet to these improvements and hold them in place.

CORRECT: In real-life things go wrong. Even the best designed ratchet will sometimes slip. Or it can jam. Or you may have just miscounted how many clicks you made on your ratchet. Assume that problems will arise. Prepare for this by having backup plans ready, and carefully observing the results in your management reports. When some metric slips, or a deadline isn’t going to be met… put your plan “B” in place. Is this an unexpected issue that does not have a plan “B”? No problem. If you anticipate a problem, you are ready to act when it occurs. Is the data you need in your report, or do you need to add something new to the report? Should your report move from monthly to weekly so that you can more quickly measure results? As long as you know that making changes can provide the answer, you will be ready to act quickly!

If you follow these five steps, you will be able to improve your progress on existing projects but also hold onto the benefits of the projects of the past. When you do both, then your outsourcing program can begin to truly improve. Over time, the combined benefits from all of these programs will be combined to develop a truly transformational program!
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