winning the bpo leadership challenge

8/3/2019 Winning the BPO Leadership Challenge

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By almost any measure, the Business Process Outsourcing (BPO) industry remains

robust. What began in the IT, telecom and nancial sectors has moved into sectors like

pharma, government, utilities, manuacturing and more. BPO has also spread beyond

the geographies o only a ew high-cost markets to become a global phenomenon with

large companies in Latin America, Arica and Asia now seeking its benets. Since 2004

the global sourcing business has grown three-old and is expected to continue growing.

Figure 1 Projected BPO Industry Growth

While the outlook or the industry is very robust, with continued investment and anincreasing amount o work being transitioned to centers o excellence, the pressures o

increased eciency and cost reduction are increasing. A number o global majors have

created large centers in low-cost countries, and the commoditized low-end BPO

business is acing competition rom ultra-discounted cost centers like Vietnam,

Philippines and Chile, among others. This has put revenues, and thereore margins,

under pressure.

The challenge or the BPO industry is to determine how to continue to grow protably.

Given that the labor arbitrage model o yesterday is no longer enough to build

sustainable competitive advantage, BPO providers need to nd new ways to grow

by delivering higher-value services to their clients.

As the model or success continues to evolve, so does the requirement or truly efective

leadership. The current stage o evolution is an exciting one, as the right kind o

leadership continues to have signicant impact on the direction the industry can take.

In this paper, we discuss some o the ways the industry is re-gearing itsel and what that

means or leadership requirements.

Winning the BPO Leadership Challenge

3 Egon Zehnder International

the labor arbitrage model o yesterday is no longer enough tobuild sustainable competitive advantage.

2008 2012

1200

1000

80 0

60 0

40 0

20 0

0

Market Size

(in US$bn)

$188

$975

Source: BPO Watch News Desk


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Emerging challenges

Excelling at Being a Low Cost Provider

As with any industry, the BPO sector has begun to mature. With the prolieration

o several large and small players it has become ar more cost-competitive than in the

early days o the industry. Further, more transparency in cost models has resulted in

additional price pressure rom clients. And that pressure has been increased by the

growing phenomenon o erstwhile captive BPOs being sold and joining the rankso 3rd-party providers.

As competition grows, it is becoming increasingly important to work smart and squeeze

costs out o standardized processes. Thereore companies must strategically ocus on

establishing strong operational capabilities with continuously improving processes

and systems.

This leads to the continued requirement or strong operational leaders who bring

signicant leadership in process excellence to the table. Industry leaders such as

Genpact leverage their GE manuacturing processes heritage in this regard and

other market-leading BPOs both 3rd party and captive have built strong

practices and approaches in this context as well, whether inherited or developed

as a competitive advantage.

We are transerring and adapting the same manuacturing best-in-class principles, like Lean, Six Sigma, and Continuous Improvement

to the Services sector to enhance our own operating excellence. Hartmut Liebel, President Jabil Global Services


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Increasing Need or Domain Expertise

Typically, or low-end process outsourcing (data entry, or example), the BPO provider

does not need to deeply understand the business domain in which the client operates.

However, in order to provide greater value-add, companies increasingly need sector-

specic insights and understanding. This is especially true in contexts where judgment-

based decisions must be made, as opposed to rule-based decisions.

As a result, providers need a deeper understanding o the customers core business,

or at the very least, an in-depth understanding o the customers industry. As the level

o accountability o BPOs towards their clients is increasing, the seniority o people

expected to have that domain intimacy is also increasing. It is no longer enough to have

someone on the team that can speak to process comort. Instead, it is important that

the clients counterpart within the BPO be able to speak the customers language and

engage on business issues.

Within the IT services world, this trend began a ew years ago, with leading services

providers recruiting senior leaders rom the industries they wished to serve. A similar

trend is emerging in the BPO sector today. From a process perspective, in act, some

BPOs are beginning to use their support o (and insight into) multiple clients in a

given industry to develop best-in-class processes in the domain, a competence that is

increasingly becoming a strong competitive diferentiator.

The need to have domain expertise has also had a critical impact in the way BPO

companies are organized internally. New verticals have been created within BPO

companies that allow them to develop and retain critical domain expertise, which in

turn allows or ar more meaningul discussions and business engagements with clients.

In the Analytics domain, or example, we are getting our people towork within the global organization, gaining insights into operationaland customer requirements and uncovering opportunities orsignifcant process improvements.

Sandeep Dhar, CEO Tesco Hindustan Service Centre


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Up the Value Chain Becoming an Integral Part o the Clients Business

The initial ocus o BPOs on the reduction o costs due to labor/process cost arbitrage

typically yielded a majority o cost savings in one large step. Beyond that, incremental

improvements in eciency have led to incremental cost gains. While continuous

improvement is important, BPO providers are extending their ocus rom being a

cost-saving solution to becoming problem-solving business partners or their clients.

This shi t in ocus rom cost-o-process to business outcome is changing the value

propositions (and thereore the revenue prospects) o BPO providers. For example,

enlightened companies are asking their BPO service providers to move away rom

managing the cost o the accounts receivable process to lowering the cost o

capital thereby directly impacting uture revenue. This also necessitates a move

rom being an order-taker to becoming an integral part o the value chain.

Interestingly, this challenges the notion o having a customer whether internal or

external. At the end o the day, given the integral part o the operations that the BPO

team provides, the BPO and the client are working together to address the needs o the

same person the end customer. This dicult change o mindset requires both the

BPO provider and the client to change their approach to what has traditionally been

a client /supplier relationship. BPO companies must thereore develop the right

measures to ensure greater accountability towards business outcome within their

teams, and clients need to increasingly give authority and ownership to their

ofshore counterparts.

One needs to think about a global delivery model that leveragesTime & Knowledge across the entire value chain to increase capacityo the whole system. I done right, any changes are sel unded andwill improve EBITDA.

Rohail Khan, Executive Managing Director,

ACS, A Xerox Company

Domain expertise is critical in scoping a BPO arrangement anddelivering results beyond outsourced unction cost savings. Inaddition, without domain expertise, a BPO provider risks adverselyimpacting their clients business as well as their own.

Chris Draper, Former Accenture BPO Partner


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As Figure 2 shows, BPO leadership thereore needs to both evolve and elevate:

Evolve rom being task masters to masters o the process or the domain. BPOs need

to think o themselves not as being cost optimizers but as being business optimizers or

their clients. This will help in thinking through both the kind o skills that are needed

on the team as well as the kinds o knowledge that are needed to make a diference to

the client.

Elevate rom being a contractor to being a partner and a trusted advisor. BPOs should

aim to set benchmarks in the domains in which they operate and to get the best talent

in the horizontals they service so that they can engage with clients on critical business

issues. This makes them a part o the competitive strength o the client which is the

only way or both parties to get value out o the relationship.

Criic

Ieci

Pis

Basic contact/callcenter

Email management

Inbound calls

Helpdesk

Data entry

Back ofce processes

Finance & Accounting

Outbound calls

Documentmanagement

Complex transactionprocessing

HR/Beneftsoutsourcing

Logistics outsourcing

Sotware development

Investment research

Equity research

Biotech/Pharmaresearch

Business research

Customer analyticalresearch

Risk modeling

Data mining

Telecom services

Network outsourcing

Legal services

Reengineering services

Enterprise applicationservices

Program management

Business continuitymanagement

Basic transactions/

services

Simple, standardized

activities, basic skillsrequired

Specialized

services

EvolutIon

valuE/ComPlExIty

Advanced technical skill

and some judgmentrequired

Complex analytical

& knowledge based

services

Extensive judgment

and analytical skillrequired

End-to-end

business processes

across value chain

Comprehensive set o

multi-dimensionalskills required

Figure 2 Moving Up the Clients Value Chain


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Leadership imperatives

The continuously evolving business model in what is still a nascent industry is both

exciting and challenging or practitioners. Far-sighted leaders are recognizing the

changes that their senior management teams now need to adopt and champion

throughout their organizations. Some o these changes, like domain specialization,

process excellence, and a deeper understanding o the end-customers mindset, can

be taught. Others are more dependent on managers intrinsic capabilities like thecommercial savvy to leverage organizational assets to address client problems, the ability

to see opportunities where others see business problems, and the ability to take risks.

As these changes compel BPOs to develop empowered and strong business managers,

leadership selection, development and retention become increasingly important.

This evolution in the critical competencies required, and thereore the implications or

the people strategy or the business, is becoming top-o-mind or business leaders in

the industry.

Our best perormers are those that not only look out or challenges

that clients recognize, but also or those that they may not yet seecoming at them. The not-so-great perormers are the risk-aversemanagers who ocus on Business As Usual while they should beocusing on Judgment, Risk Taking and Decisiveness, to deal withemerging competitive and economic challenges.

Piyush Mehta , Global Head o HR at Genpact


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Critical leadership competencies

What, then, should the enlightened leader o tomorrows BPO look like? In the past

ve years we have conducted more than 25,000 appraisals o VP, SVP, and C-level

talent and their external benchmarks. These appraisals provide a wealth o insight into

the critical leadership competencies required to succeed with transormative strategies.

These competencies include:

Commercial Orientation BPO companies

will need to bolster their traditional low-cost

mindset with marketing sophistication and

true customer insight. Without this

perspective, even a strategically-minded

leader can all into the trap o thinking that

the process coners competitive advantage.

Genuine customer insight includes the ability

to anticipate customer needs, to innovate in

service and delivery models, and to provide

a customer experience that is diferentiated

rom the competition.

Strategic Orientation Customers want service level agreements and transparency.

BPOs need the ability to develop multi-business platorms and strategies that move up

the value chain to add value to outsourcing complex processes. Instead or remaining

entrenched in the operational mindset, the winning providers will be externally-acing,

agile, and able to seize strategic opportunities.

Change Leadership BPO leaders need the ability to understand and overcome

barriers to adopting change not just in their own organizations, but also in client

organizations. Getting the organization and clients to adopt new ways o working can

be dicult. The best players create joint teams that bring current in-house personnel

along while integrating resh perspectives into the modes o engagement betweenprovider and client.

Team Leadership and People Development Talent is the ultimate game-changer.

Providers must be able to create a strong and cohesive team, recruit and retain top

talent, and develop high potential talent through stretch assignments and strategic

succession planning.



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Collaboration and Inluence The days o command and control management are over.

A customer-acing organization, rich in talent and intent on moving up the learning

curve rapidly, requires a culture o collaboration. Facing a whole new breed o

competitors and new terms o competition, providers need the innovation that thrives

in such cultures and todays talent, or whom BPOs are vying, expect such a culture.

Results Orientation The ocus on low-cost processes honed a actory management

mindset in operational leaders. However, to up their game, leaders have to shit

their ocus to metrics that measure and motivate higher value-added services and

an end-customer ocused business. They should invest the time to understand and

communicate what success and its underlying drivers look like and then put in

place the processes and measures that will achieve it.

How to Compete and Win on Talent

BPOs can do three things to ensure that they have the right mix o competencies in a

rapidly changing, increasingly competitive, insight-driven, and service-centered business:

Assess existing talent Whether the business needs a major overhaul in strategy or just

a candid assessment o its ability to compete going orward, it will need a clear set o

key competencies to execute successully. The organization not only needs to under-

stand that inventory o competencies but also to understand what level o competency,

both in individuals and collectively, will be required. An objective appraisal o the

companys team on both dimensions reveals where the gaps lie, provides a develop-

mental roadmap or the organizations high-potentials, and depoliticizes evaluation and

career progression. (See Figure 3)

Create a culture that attracts and retains talent With the competition or top talent

more intense than ever, BPO companies must strive to create a culture that enables

people to grow and to contribute to the companys success. Its not simply a matter o

compensation, but o ofering the kind o proessional opportunities and challenges

that talented and ambitious executives seek. That means a culture marked by diverse

leadership reely exchanging ideas, a high-velocity learning environment, and an

embrace o agile, creative, intuitive thinkers who are intensely customer-oriented.



Visionary leaders in the industry understand that their mix and levelo talent will be the single most important determinant o success.


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Continue to bring in talent rom client industry segments As more BPO companies

move toward new market segments, traditional players need to expand their talent to

include knowledge o those segments such as retail, travel and leisure, and other service

industries. They need talent who can develop deeper domain and unctional expertise

in, or example, supply chain, hospital management, and more. They must nd people

who can expand geographic strategies beyond low-cost countries to other geographies

closer to clients. And they must bring in people who can innovate, as with digital plays

that add value to clients processes.

No matter where your company alls on the spectrum o players, thenew terms o competition in the industry present a stark choice:

transormation or slow death. Visionary leaders in the industry under-

stand that their mix and level o talent will be the single most important

determinant o success. For an industry that grew out o leveraging

low-cost talent, the time has come to ocus on leadership competencies

that will take companies to their ull potential as genuine business

partners with their clients.



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Figure 3 Leadership Development at Egon Zehnder International A Comprehensive Process


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Beijing

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Bogota

BostonBrussels

Budapest

Buenos Aires

Calgary

Chicago

Copenhagen

Dallas

Dubai

Dusseldor

Frankurt

Geneva

Hamburg

Helsinki

Hong Kong

HoustonIstanbul

Jakarta

Jeddah

Kuala Lumpur

Lisbon

London

Los Angeles

Luxembourg

Lyon

Madrid

Melbourne

Mexico

Miami

Milan

Montreal

Moscow

MumbaiMunich

New Delhi

New York

Palo Alto

Paris

Prague

Rio de Janeiro

Rome

San Francisco

Santiago

Sao Paulo

Seoul

Shanghai

Singapore

StuttgartSydney

Tel Aviv

Tokyo

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prior permission o Egon Zehnder International.

Egon Zehnder International is the worlds leading

privately owned search frm with over 380 consultants

working in 63 ofces in 37 countries. The frm

specializes in senior level executive search, board

consulting and director search, management and

team appraisals and leadership development.

winning the bpo leadership challenge

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