You are on page 1of 14

Implementation of Business Process Outsourcing & its Impact on Organization Structure, Culture, Business Processes & Motivation of the

Workforce
Syed Ali Zamin Landmark, Alkhobar, Saudi Arabia Email: SyedAli.Zamin@halliburton.com Tel: +966 3 838 9588

Abstract
Business Process Outsourcing (BPO) simply means subcontracting a secondary business process or task to an outside company that specializes in that particular field. BPO is a high-tech concept that has completely transformed the very methods of conducting business as usual. Geographical distances have become insignificant and brain drain, a problem for developing countries, has also decreased to a degree because a plethora of opportunities are available to the skilled professionals in their homeland. Outsourcing of business processes has altered organizational structures, cultures and processes and employee employer relationship as a whole. Research results indicated that organizational structures have been transformed in a manner that some departments have been added and some have been removed (42% of the respondents.), organizational culture has changed due to introduction of new technologies (22%) and both introduction of new technologies and terminologies (22%). Regarding Business Processes, respondents were of the view that legacy processes have been fine-tuned and incorporated into the computerized system (24%) and both legacy and new approaches have been synergized to achieve process automation and business process outsourcing (24%). Workforce indicated a high rate of motivation by stating that they were experiencing no risk of job elimination at all and their motivation is increased due to acquisition of new skills. (42%) BPO is largely dependant on strong and reliable ICT infrastructure, therefore, government should strengthen IT and Telecom infrastructure to ensure that this unique sector of economy keeps growing and earns much needed foreign exchange for Pakistan.

Keywords: Business Process Outsourcing, Organizational Culture, Business Processes, Employee Motivation

1. Introduction
Business Process Outsourcing (BPO) simply means subcontracting a secondary business process or task to an outside company that specializes in that particular field. The motivation for outsourcing business processes offshore is to attain a considerable cost cut. On the other hand, there are other benefits to outsourcing offshore. They include: keeping human resources within an organization focused on the main business of that organization and allowing a company to control the best processes and systems with a smaller investment than creating and maintaining that process in house. Examples of processes that can be outsourced offshore include telesales, billing, recruitment activities, IT support or legal services. In this project report, author has endeavored to inform the reader regarding

various dimensions of the BPO concept and gauged its impact on organizational structure, culture, business processes and motivation of the workforce.

2. Literature Review
What is Business Process Outsourcing?
"BPO is the long-term contracting out of non-core business processes to an outside provider and, whether you know it or not, your company probably already does it. Does someone else manage your desktops, run your human resources department or handle your travel services? If so, then you are already a customer of BPO services. If you arent already a BPO customer, consider the benefits. If you manufacture widgets, why use your resources to book flights and hotels for your sales force, when you can outsource that function to a travel company? Likewise, if you provide medical services, why use your resources to buy office supplies and computers, when you can outsource that function to a company that specializes in procurement? The benefits are obvious: If you can outsource non-core functions to a specialist that introduces new and better practices, or provides a lower cost solution, your company can focus on the more important tasks of increasing market share and brand value. " (Colson & Perotti, 2003)i

Types of Outsourcing
"There are two primary types of BPO: back office and front office outsourcing. Typical back office processes that may be outsourced include payroll, billing, logistics and human resources. Some companies offer their services in collections, credit analysis and job recruitment. More than ever, processes that one would never think would be outsourced, such as claims processing at an insurance company, are being outsourced to separate companies. Examples of front office outsourcing include technical support, customer service, marketing and advertising." (Wise Geek, 2009)ii

Reasons for Outsourcing


"A company may utilize BPO due to cost considerations, or simply because they do not have the expertise to deal with certain aspects of business. Many companies have come under criticism for using BPO to cut costs, especially in regards to call centers. Companies in western countries, particularly the United States, are finding that countries like India offer the services they need at an excellent price. This is due to the fact that many of these countries have a well educated labor pool, high unemployment rates and a low cost of living. In India, which had approximately 63% of the offshore BPO market in 2006, labor is cheap, and employees are sometimes better educated than higher-paid workers in the US." (Wise Geek, 2009)iii

Principles for BPO Success

Is our business ready to accept that form? What are the keys to a winning BPO/offshoring plan? What will be the premeditated impact of our BPO/offshoring verdict? Which working model will best satisfy our needs? Are the questions which a company should be able to answer before launching its effort. (BCG, 2005)iv

Critisicm on Outsouring
The roll of corporations that have commenced endeavors in business process outsourcing (BPO) and offshoring raises on a daily basis. Many of these businesses, though, are ordained for disenchantment. A research conducted by The Boston Consulting Group reveals that approximately half of the corporations that take on BPO and offshoring will have unfavorable outcomes. To add insult to the injury, a small number of of them will be able to identify where they went off beam or what to do about that. (BCG, 2005)v

BPO & Organizational readiness


A special significance must be attached to change management and cultural issues and for this purpose, alignment of all functions, businesses, levels and regional operations with the long-term outsourcing strategy has to be ensured. Employees must be specially made aware of the importance the company gives to the renewed goals. Importance of this task is realized by most of the organizations, however, only a few are able to transform it from theory to practice. (BCG, 2005)vi

Organizational Structure
Acceptance of BPO as a Business Reality An opportunity has been unlocked by the new technologies to work from one state to the other side of the globe as if it was on the same stage. An entire world of services is at our disposal today. A corporation can nowadays work with anybody on the planet to carry out its business practices and expansions regardless of its geographical location, its volume or its main business area. (Latreille & Duval, 2006)vii

The Transformational Potential of BPO


"BPOs have a vibrant environment. Generally the interiors are also done up in a way that it makes people feel nice and energetic. This glamorous industry also involves a lot of hard work and specialized skills to deal with all kind of customers. 24X7 work environment: BPOs have a round the clock working culture and people work in day and night shifts. This is because International BPOs offer services to countries like US and UK that have different time zones. Perfect amalgamation: The work culture in quality BPOs is a blend of professionalism and friendliness. Humans are not treated like machines but are given equal opportunities of growth in every sphere of learning. BPOs create a friendly working atmosphere so that the employees dont feel suffocated." (Scribd, 2008)viii

Organizational Culture
"Long working hours and pressure to meet deadlines and achieve targets takes its toll on the well being of the employees. Quality BPOs offer world class channels to de-stress employees and to motivate them. Entertaining events and parties are organized at regular intervals so that the employees are relieved and invigorated to take the challenges head on. World-class BPOs also have gym, sports and caf facilities. BPO employees work hard to meet deadlines and targets. Motivation is a great booster when it comes to delivering high end results. So to ensure that the team is motivated, team leads and managers keep the morale of the employees high through encouraging words. Good and outstanding work is always recognized and rewarded in the form of perks, incentives, gift certificates, etc. in the BPO sector. At no point in time the employees feel the dearth of guidance and warmth of encouraging words." (Scribd, 2008)ix

Business Process
Efficiency is also attained by streamlining internal processes, by enabling faster and more informed decision making, and by speeding up transaction processing.(Ndou, 2004)x There is an old adage, Good generals discuss strategy and tactics, great generals discuss logistics. Extrapolating this out towards business, one could state that good CEOs discuss strategy and tactics, great CEOs discuss processes. Recognition and implementation of efficient processes is the key to the successful operation of any business entity; be it a shopkeeper, selling mangoes on a street corner or multinational bank, doing business in fifty different countries. In fact, the larger the organization, the more important are the processes. Companies that rely on the strong processes will, in the long run, always outperform and outlast companies that rely solely on strong CEOs, CFOs, CIOs, and or strong strategies or tactics (Rafi, 2005)xi

Motivation of the Workforce


"People from every nook and corner of the world are lured by the state-of-the-art facilities and hefty pay packages. Apart from the culture shock there is a gold mine prospect of rubbing shoulders with people from different educational, professional and cultural backgrounds." (Scribd, 2008)xii Employees also need continuous motivation and there are very few companies that understand this fact. Moreover, to stay in this business for a long period of time every company should imbibe the best practices of the company among its employees. In addition many employees have no idea about the goals and visions of their companies. (Talentgurus,2009)xiii

3. Methodology
Population
Since the project report relates to matters of policy and strategy, the population of the study is Senior Consultants, Consultants and Junior Consultants working in various organizations.

Sample Size
A sample of 100 respondents; consisting of 25 Senior Consultants, 35 Consultants and 40 Junior Consultants.

Procedure
Convenience sampling method has been used.

Data Collection
This research used primary and secondary data. Instruments to collect the primary data was questionnaire The secondary data will constitute relevant literature such as journals, reports, magazines, internet and related books which will contribute to the development of the study.

What Kind of Instruments Is Being Used?


Questionnaire method has been used for collecting data.

What Kind of Data Required?


Both primary and secondary data has been used in this research.

Why this approach is being used instead of others?


Mailed questionnaire method is the most suitable, efficient, effective and economical for obtaining data from the subjects of a study.

Method of Data Analysis


Computer software such as SPSS and Microsoft Excel were used for data analysis.

4. Data Analysis
Respondent Profile
All people working in various capacities in Business Process Outsourcing projects / organizations from the population of this project report. 85 out of 100 mailed questionnaires were returned by the respondents.

Table 1: Experience-wise Frequency Distribution of Respondents Range [1-10] [11-20] [21-30] [31-40] Total Frequency 39 26 15 5 85 %-age 46% 31% 18% 6% 100%

Table 2: Academic Qualification-wise Frequency Distribution of the Respondents

Qualification Masters Bachelors Intermediate Total

Qualification 61 22 2 85

%-age 72% 26% 2% 100%

Table 3: Age-wise Frequency Distribution of the Respondents

Age Range [20-29] [30-39] [40-49] [50-59] Total

Frequency 40 26 14 5 85

%-age 47% 31% 16% 6% 100%

Do you believe that the Structure of your organization has been revamped as a result of BPO?
40 30 20 10 0 Both a & b are true. Some Departments / Work Areas have been added

Some Departments / Work Areas have been eliminated.

No change in structure has taken place

Figure 1: 2 Do you believe that the structure of your organization has been revamped as a result of BPO?

The figure-4 above depicts respondents' stance on the degree of change in organizational culture. It was revealed that the statement "Both A & B are true" was mostly endorsed (42% - 36) by the respondents and only 12-14% responded that no change had taken place due to introduction of BPO in their organization. Table 4: Q.3 What aspects of Organizational Culture have been transformed due to BPO?

Statements A A,B A,B,C A,E A,B,D A,D,E B B,C B,C,D,E B,E C D E F

Frequency 19 19 16 14 4 3 2 2 1 1 1 1 1 1

%-age 22% 22% 19% 16% 5% 4% 2% 2% 1% 1% 1% 1% 1% 1% Legend A: New terminologies have been introduced. B: New means of communication have been developed. C: Now we can work from home as well. D: We dont have to physically meet most of our colleagues. E: Workplaces have been transformed and look like high-tech control rooms, swarmed with computers.

Total

85

100%

F: All of the above are true.

What aspects of organizational culture have been transformed due to BPO?


A A,B A,B,C A,E A,B,

A, ,E B B,C B,C, ,E Figure 2: Q.3 What aspects of Organizational Culture have been transformed due to BPO ?

Respondents expressed their opinion in a maze-like manner, but majority (19 22%) preferred the statement "A" and "B" in equal strength, whereas, 16-19% selected the statements "A","B" & "C" together. (For detailed statement, see legend at the right side of the Table-5 above).

Business Process

A A,B,C B C D D,E E

Figure 3: Q.4 Business Process

Table 5: Q.4 Business Process Statements A A,B,C B C D Frequency 13 1 20 20 15 %-age 15% 1% 24% 24% 18% Legend A: We have entirely new ways of performing our legacy process / tasks. B: Legacy processes have been fine-tuned and incorporated into computerized systems. D,E 1 1% C: Both legacy and new approaches have been synergized to achieve process automation and outsourcing. E 15 18% D: Most of the transactions require coordinating with people who are not on organizations payroll. Total 85 100% E: Newly devised procedures are easy to learn and ensure accuracy.

Majority of respondents (24%-20) equally agreed to the statements B & C (detailed in the legend in the Table-6 above.).

State of Motivation of Workforce


You are experiencing high level of burn-out & elimination. Your motivation is lowered after introduction of BPO due to (a). Both a & b are true.

You are experiencing no risk of elimination at all.

Your motivation is increased due to acquisition of new skills. Both d & e are true.

Figure 4: Motivation of Workforce

Table 6: Motivation of Workforce Statements Both d & e are true. Both a & b are true. [d] You are experiencing no risk of elimination at all. [b] Your motivation is increased due to acquisition of new skills. [a] You are experiencing high level of burn-out & elimination. [c] Your motivation is lowered after introduction of BPO due to (a). Total Frequency 36 27 11 6 5 0 85 %-age 42% 32% 13% 7% 6% 0% 100%

36 respondents -42%- believed the statement "D" & "E" to be true whereas none of the respondents endorsed the statement "C" as described in the Table-7 above.

5. Findings
y Experience and Age-range of the Staff Since BPO is a young and growing filed in Pakistan, majority of the staff employed is also young (20-29 years-46%) and low experienced (1-10 years-47%). It means that they will grow with the field and as both mature professionally, real benefits of BPO would follow.

Academic Qualification of the workforce

61 respondents (72%) reported that they possessed Masters Degree, whereas, 22 (26%) had a Bachelors degree and only 2 (2%) had Intermediate as qualification.

BPO & Organizational Structure

36(42%) respondents believed that their organizational structure had been changed due to addition and deletion of departments, 12 (14%) said that there had been no change posed by Business Process Outsourcing in their organizations.

BPO impacts Organizational Culture

The biggest changes in organizational culture as posed by BPO were 1. Introduction of new terminologies (19-22%), 2. Ability to work from home, 3. Ability to use new modes of communication (19-22%).

Motivation of workforce

BPO tends to have little negative impact on the motivation of the workforce, as 36 [42%] reported that they did not fear job loss, nor did their motivation lowered because of BPO inception, whereas, another 27 [32%] believed that they felt exactly the opposite i.e. they feared job loss and their motivation was also decreased due to introduction of BPO.

6. Conclusion
BPO is a breakthrough concept that has entirely changed the way business as usual is conducted. Geographical distances have shrunk and markets have expanded both for businesses and individuals. Brain drain, a dilemma for developing countries, has also decreased to an extent due to abundance of opportunities to the skilled professionals in their homeland. Outsourcing of business processes has transformed organizational structures, cultures and processes and employee employer relationship as a whole. Through this project report, author has endeavored to inform the reader regarding various dimensions of the BPO concept and gauged its impact on organizational structure, culture, business processes and motivation of the workforce, which can be considered as

being encouraging and promising. BPO is largely dependent on strong and reliable ICT infrastructure; therefore, government should strengthen IT and Telecom infrastructure. Given the availability of young and educated human resource, Pakistan can reap tremendous benefits through this unconventional sector of economy, if it is ensured that the bottlenecks in its way are removed by improvement of infrastructure.

7. Recommendations
y BPO means the ability to do more with less BPO is there to cut costs and provide maximum value per resource consumed. This is the single sentence which delivers the message of heaves of literature dedicated to the study of Business Process Outsourcing. Every project to outsource a function must begin and end on this single note and this is the only criteria for taking on an outsourcing project. There is always a tendency among managers to run after buzz words but a wise manager will and must think about outsourcing with cost reduction and performance optimization in his mind.

Strengthening of Professional Knowledge of BPO

BPO as a field is so much benign that it is prone to shakes and brakes; its foundations need to be strengthened by development of specialized training institutes and special interest groups where experts could exchange their experiences and newbies may get a clue regarding the essentials of success in this profession.

Reaping full benefits of the Global Village

The world has indeed turned into a global village where there is no traditional limitation or bottleneck to production or provision of a service. Outsourcing evolved out of this very opportunity and doing business across nations simply seems like operating in a small city or a village to be exact where you are provided limitless options and alternatives to choose from and that too with added advantage of reduced costs and improved quality. An organization must do well to reap the maximum benefits offered by this phenomena and must be continuously on the lookout for such opportunities.

Outsourcing does not only mean working beyond countrys borders

The bottom line for entering into an outsourcing arrangement is to slash costs and in no way it means that it can only be done by working outside borders of your country or continent alone. A countrys economy is a combination of unevenly developed areas. For example in the United States, not all the states or all the cities earn equally or provided equal economic benefits. There are always areas where there is quality human capital available and is not utilized. By utilizing such opportunities, outsourcing can still deliver and that too by keeping the money within the home countrys economy.

Strategic vs. sort-term outsourcing

You never kill a sparrow with a tank. That is true for business environment as well where there is clear divide between short term and long term outsourcing decisions. Short term outsourcing decisions are random, less detailed

and of a summary nature. Long term / strategic outsourcing decisions; on the other hand have to be circumspect, detailed and in-depth with plenty of meetings, paperwork and headache. Companys mission statement is viewed and reviewed, cost considerations are analyzed and product / service portfolio is overhauled. Companies which are able to understand and act accordingly by keeping these differences in mind usually come out as winners in outsourcing ventures.

Management of Cultural, Language and Political Differences

Business does not operate in a vacuum, it has to respond to and interact with the cultural elements as well. Language and specifically the accent play an important role when outsourcing contact centre or call centre operations. European and American companies were severely hit initially when their services were outsourced to India where a large chunk of available workforce can communicate in English language but in their own strange accent altogether foreign to the European or American accent and ignorance of cultural dimensions such as salutations or other elements of speech which added insult to the injury and made outsourcing ventures counterproductive. Whereas political turmoil in countries like Pakistan, Bangladesh and Srilanka have put those countries at a disadvantage despite their being available a useful English speaking (and that too in right accent) workforce. Companies have become cautious of these facts however late but it is always better than never having to become aware of these factors.

Selection of Vendor and Relationship Management

A comprehensive criteria must be developed for hiring the services of outsourcing vendors keeping in view the companys strategic financial and operational goals and in-depth, comprehensive TORs (terms of reference) should be chalked out. So that only those vendors which meet the requisite criteria are selected and contract is written according to the TORs developed in congruence with the companys mission and objectives. Criteria and TORs must be developed by a team of staff hailing from all concerned business areas for example Finance, IT, Production, TQM, Customer relation and Marketing etc. Outsourcing is a sort of paper-marriage and relationship management is more complex as compared to other contractual obligations. The managers must take on new roles and attitudes to make this relationship a successful one because; in this connection general management skills play a more effective part as compared with technical or operational management tactics. Negotiation, communication and commercial savvy people are most effective for the longevity and effectiveness of this unique relationship.

Academic Qualification of BPO Workforce

It was noticed that majority of surveyed BPO workforce was highly qualified. The need ,however, is to turn BPO sector in an open for all area where all professionals; highly qualified or technically trained, may offer their services in order to broaden the spectrum of services and to attract greater amount of foreign exchange to the country.

BPO and Organizational Structure

Todays organizations need to be very much organic in nature in order to absorb the changes brought by Business Process Outsourcing. Departmentalization does no more need to be strongly infused in the body of the organization; rather it must result in loosely based work teams who may at the discretion of management and on the requirement of the situation take on any responsibility for the benefit of the organization.

BPO and Organizational Culture

Strong cultures always resist changes of content and context. It is the characteristic of growing organizations that their cultural dynamics are flexible enough to be mounded as per changing scenarios and market factors. Organizations aspiring for BPO must be change tolerant so that inception of BPO may result in least friction.

Motivation of Workforce

Motivated workforce always acts in the favor of the organizations which in turn are able to achieve their objectives in a smooth and effective manner and turn out to be market leaders. Workforce must never be left in a lurch; nor should they be kept in dark when changes are taking place in the organization; as it may create negative energy that proves detrimental for the cause of the organization.

Communications Management

As discussed above, workforce is a very precious asset to be depreciated or disposed off. Changes in organizations happen in a routinely manner but those transformations affecting the work or life of the workforce must not happen behind the closed doors or in hideous manner. Whenever an organization considers outsourcing, this matter must be discussed with the affected members of the staff, they must be given all information regarding the change and if it (the change) is supposed to have an impact on their work or life in any manner it must be openly communicated to them and reasons for so doing must be stated to them. In this way, the change will occur with least negative repercussions and the staff would either feel secure or esteemed (if their positions are not going to be secured). Secondly, when a process / activity is moved beyond the organizational borders, it essentially means that organizations policies, objectives, quality goals, customer preferences have also to be moved to that place i.e. the organization who is to provide the outsourcing service. For example, if a car manufacturing company has outsourced the manufacturing of seats used in its automobiles, it must make it clear to the outsourcing service providing organization that it will not settle for less than what was previously being manufactured when the seats were being manufactured in its own plant. Because the customer would be demanding the same level of quality and comfort that he got when the seat was manufactured in-house. For this purpose, specifications and procedures must also be communicated to the outsourcing service provider. This is usually done by adding the suppliers to the extranet of the organization so that it could obtain necessary information in a timely manner.

8. References
i Colson, .R & Perotti, .D (2003) DO YOU BPO?, retrieved September 14, 2009 from Martin Dale website: http://www.martindale.com/matter/asr-21776.pdf

ii Wise Geek, (2009), What is BPO (Business Process Outsourcing)?, retrieved September 14, 2009, from Wise Geek website: http://www.wisegeek.com/what-is-bpo-business-process-outsourcing.htm iii Wise Geek, (2009), What is BPO (Business Process Outsourcing)?, retrieved September 14, 2009, from Wise Geek website: http://www.wisegeek.com/what-is-bpo-business-process-outsourcing.htm

iv BCG, T. B. (2005). Achieving Success in Business Process Outsourcing and Offshoring. Opportunities for Action , 1. v BCG, T. B. (2005). Achieving Success in Business Process Outsourcing and Offshoring. Opportunities for Action , 1. vi BCG, T. B. (2005). Achieving Success in Business Process Outsourcing and Offshoring. Opportunities for Action , 1. vii Latreille, H. S., & Duval, V. (2006). A successful BPO is a well-managed operation. Eucis Global Services , 1. viii Scribd, (2008), Work Culture in BPO, retrieved September 14, 2009 from Scribd website: http://www.scribd.com/doc/5496116/Work-Culture-in-BPO ix Scribd, (2008), Work Culture in BPO, retrieved September 14, 2009 from Scribd website:

http://www.scribd.com/doc/5496116/Work-Culture-in-BPO

x Ndou, V. (2004), e government for developing countries: Opportunities and challenges, The Electronic Journal on Information Systems in Developing Countries, 1-24

xi Rafi U.(2005), Basel-II Capital Accord: A Comprehensive Solution, E-Governance: A Catalyst for Change, 38 xii Scribd, (2008), Work Culture in BPO, retrieved September 14, 2009 from Scribd website:

http://www.scribd.com/doc/5496116/Work-Culture-in-BPO

xiii Talentgurus, (2009), Challenges of BPO Industry, retrieved August 02, 2009 from Articles Base Website: http://www.articlesbase.com/outsourcing-articles/challenges-of-bpo-industry-892709.html