From my experience, many customers with whom I had the opportunity to discuss consider that ?loss of business control? is the key issue when you transferring the processes to outsourcing.
This is why in this post I have decided to approach one of the latest topics in the BPO?s field, namely KPIs. Let?s try to figure out how KPIs can be used in outsourcing agreements.
What do KPIs represent?
The Key Performance Indicators (KPIs) represent a set of values and parameters, which can be determined and compared with benchmark indicators. These are your work`s results that you want to obtain within business process outsourcing. ?In case of failure to achieve or partial achievement of the projected goals, the outsourcer receives a smaller reward and sometimes even pays penalty charges.
It is known that KPIs are nowadays basically used in all management fields. KPIs allow expressing the necessary motivation, joining the personal goals with the company?s goals while focusing the team?s energy towards the desired direction. The outsourcing agreement allows a more accurate focus on goals achievement. All you have to do is set your needs that you planned to transfer to ??the service provider.
By concluding the accounting or HR activities agreement, you will give the service provider concrete tasks, such as collection of documents, making calculations, reports presentation, drafting payrolls, etc. For each type of activity you have to establish at least one indicator. For example, the time required to prepare the calculations, the deadline for statement submission etc.
Prioritizing the indicators can be another possibility. The relative importance should be determined for each KPI. Thus, the deadline for submission of the report to the tax agency can be more important than the presentation of the current work report to the department manager. Or making transactions for salary can be more important than the accuracy of the compliance of internal regulations on documentation execution. Usually, the additional indicators are determined with the chief accountant and the finance manager of the customer.
6 rules for choosing the KPIs
With regard to the experience in providing HR and accounting outsourcing services, the following can be concluded: you have to follow six simple rules when choosing concrete KPIs and then all your expectations on the level and quality of services will be most likely satisfied.
- The agreement should only establish the KPIs which are truly important for ???? your business. Each indicator has to reflect real advantages, for example, the in-time payment of salaries increases the employees` loyalty, the submission of accurate reports facilitates the management activity, etc.
- Use?only fast parameters. You should not use complicated KPIs, which require steady?work in order to be determined (such as the organization of research and advanced data analyses, or they should be standardized).
- The?use of each parameter should be comprehensible for the outsourcer. For ???? example, the use of parameter ?deadline for the delivery of office?documents? does not entirely reflect the outsourcer?s activity,?because the delivery of documents is most often carried out by courier companies. In this context the parameter ?deadline for the delivery of?correspondence to Courier Company? is more appropriate.
- KPIs?should be assessable and measurable and should not be subjective. For ???? example, when using the ?quality? parameter, the assessment?scale and the criteria for compliance with the required parameters should be put into place for this parameter.
- A?few compliance factors should be used for the evaluation of the activity (such ???? as the percentage report in relation with the required results). Even if??the executor has already exceeded its deadlines or made an error, he will?understand that the sooner he rectifies such error, the higher his profit?will be and any delay will trigger new losses.
- Give?the outsourcer the task to regularly report the status of the main?efficiency indicators. This will give more time for their calculation and will further stimulate the outsourcer to better fulfil his duties.