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SDS 84 | Outsourcing

 

When your business is in growth mode, the path that you obviously have to take is outsourcing. It is part of the tenets of the executive strategy skills to create a business that scales with business cycles. Evan Green talks about how you create a scalable business so you can grow without disruption, at the heart of which is outsourcing. As someone who has been in the business process outsourcing for 33 years since 1985 and now the Founder and Chairman of Personiv, Evan has learned some great insights about outsourcing. He outlines the reasons why people outsource and how it can benefit the company to more success.

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Outsourcing To Grow And Disrupt with Evan Green

My guest is Evan Green, who is the Founder and Chairman of Personiv. He has been in the Business Process Outsourcing business for 33 years since 1985. I brought him on the show for one specific reason. One of the tenets of the executive strategy skills is to create a business that scales with business cycles. That means both up and down. I’ve invited Evan to join us on the show to talk with us about how you create a scalable business so you can grow without disruption. Welcome, Evan.

Thank you, Mark. It’s great to be here.

You’ve been doing this for a long time. How did you get into the business of outsourcing?

Life does work in serendipitous ways. I was involved in another venture that dealt with some atomization and flow-sensing technologies. I was only 22 at the time. I was responsible for the offshore prototype manufacturing in Taiwan. That brought me to Southeast Asia. I’m more of a service person than a products person. Through my exposure to Southeast Asia, I came across the Philippines back in 1985. I saw some of the great things that they were doing at the beginning of the information age with data entry, data conversion projects. It seemed this could be a terrific opportunity. I love services. I love to be my own boss. I chose to step away from that current company that I was with and start something new from scratch.

You recognized an opportunity and you exploited it?

Yeah, it’s definitely been a great adventure for me and my family.

Why do people outsource? What’s the driving force for executives to say, “I don’t want to have these people on staff. I’m going to reach out to others who do this.”

Sometimes it’s reactive and sometimes it’s proactive. I’m a big fan of making it proactive. I noticed that a lot of the bigger enterprise companies tend to be somewhat masterful of being proactive outsourcers. If you’re looking at the Googles of the world, the GMs of the world, the IBMs of the world, the S&P 500 companies, they’re masters at proactive outsourcing and very strategic outsourcing.

They have people on staff that do that.

They do that. It’s well-thought out, well-planned with a strategy behind it. It could be done to scale up during growth periods and scale down during down cycles. There are financial reasons behind it, turning fixed costs into variable costs. I do find that a lot of smaller, medium-sized companies. When I say medium-sized, these could be in the middle market. It could be companies that are still doing several billion dollars’ worth of revenue that they might be a little bit more reactive than proactive. It might vary from industry to industry or company to company, but that’s generally fair statement to say. There are different reasons. In growth mode, you’ve got to keep up with work so you’re almost forced to outsource, sometimes in down cycles.

All of our production occurs overseas. There are potential cost savings and particularly in down cycles. Companies are always looking for ways to cut costs when their revenues start to fall off. In this world, it’s becoming more complex with all of the different activities a company has to do to succeed. Whether it’s risk compliance, technology, network administration, besides the traditional stuff like finance and accounting, sales and customer support. There’s a shortage of subject matter expertise in a lot of companies to do certain activities effectively without finding an outsourcing partner that can help them not just survive that task but excel at it.

Life does work in serendipitous ways. Click To Tweet

There are a couple of things that we can outsource. One is things that are common, accounting for example. Accounting is accounting and people are pretty much using the same GAAP approach, the Generally Accepted Accounting Principles. There are things that a little more complex where you have a certain level of skill that’s required. It seems to me as though we should probably be outsourcing the things that make sense to people who can do it less expensively, that can do it in bulk essentially. What about these things where it requires more skill?

What you’re pointing to is there’s a low-hanging fruit. These repetitive tasks that you say, “GAAP is GAAP,” and then there are some of the higher skill level, even subjective. As an example, we do a lot of graphic design and creative services. Our client A, it’s subjective in many senses but it’s objective in other senses. Client A might have a whole different set of specifications than client B, even though you’re doing the same thing such as designing a direct mail card or designing a billboard advertisement. What you’re pointing to is very good. That’s one of the things we at Personiv have tried to tackle is giving companies the ability to outsource things that might not be the low-hanging fruit. Do it in a way where we custom tailors our programs to each and every client.

We’re having our teams work with our client’s teams. In essence, we’re becoming an extension of our client. We’re learning their internal processes. We’re learning their internal guidelines. Even though the activity such as designing a billboard or direct mail card might be the exact same activity we’re doing for client B, client A might want it done in a different way for their own reasons. As you move up that food chain, you definitely are starting to work more in partnership with clients than just be a vendor and we’re going to go with the lowest price, the vendor who meets the minimum level of satisfaction. That’s where it’s grown is outsourcing these activities that have typically not been outsourced, particularly in the middle market.

It might scare our audience a little bit to say, “I don’t know if I want to outsource that level of creative out of my company. I need to have my control.” It seems to me as though if you treat an outsource partner like you would treat your in-house team, you’re going to achieve the same outcome.

There’s no doubt about it. I could give you a list of stories where the clients’ expectations are even exceeded and sometimes they come to us and say, “We’re beside ourselves. Within six months you’re outperforming our internal teams.”

SDS 84 | Outsourcing

Outsourcing: As you move up the food chain, you are starting to work more in partnership with clients rather than just being a vendor.

 

That happens frequently in entrepreneurial-driven organizations where the entrepreneur doesn’t necessarily know how to manage a team with those skill sets.

It happens for that reason and for other reasons. Being an offshore provider, as an example of whether it’s in accounting, graphic design or web development. We might be able to hire somebody with five or ten years’ experience does that task. Whereas in the United States someone with five or ten years’ experience wouldn’t want to does that task. It’s not that the overseas people are smarter or more inventive than Americans. We’re able to hire people with more experience levels to do some of the tasks that we might consider a lower level. In working with clients, it’s not that they lose control to process because we’re still submitting our deliverables to the client. They’re doing whatever checking they’re doing at the beginning stages. They might be reviewing 100% of the work and then they might detail it down to random sampling until some type of issue is detected. Maybe go from 1% or 2% random sampling and escalate that. I like to think of it as us being an extension of our clients. Whether we’re an extension because we’re in the office next door to the client or whether we’re in an office 8,000 miles away, we’re still connected to the client and we’re still an extension.

It feels like the basic difference here between offshore and doing things out of the United States is cultural. That offshore people view their career differently through a different lens than perhaps our American compatriots that are looking to jobs and do something different to every twelve months or so. Is that what you’re seeing with your providers?

That is what we see. I’m a big believer if we’re outsourcing something, that we’re also giving Americans an opportunity to advance their own careers. As an example of that, we acquired back in 2006 a small graphic design company in South Carolina. That company had about twelve or fifteen artists at the time. A whole group of those artists who were doing piecemeal work without tremendous amounts of benefits or pay beyond the piecemeal work they did became our program managers. Now, instead of designing one piece at a time throughout the day, they’re overseeing a team of twenty people, 50 people, 100 people. They’re traveling around the country visiting our clients and then resolving issues with our clients and doing trainer programs. It gave them an opportunity to take the talents that they have to a whole new level for themselves, their careers and their families.

Still retaining some of the cultural elements of US-focused businesses?

Yeah. When I started the company, it was important that we’re an American company and we want to be an American face to our clients. We do have US offices. Our clients tend to be shielded from some of the differences in the offshore cultures. We filter that for them through our executive sponsorships or program management. They feel like they’re dealing with an American company. They don’t have to worry about time differences, cultural differences and whether there’s a holiday going on in Asia, what have you. We take care of all of that for them. Their experience is they’re dealing with an American company at a very good price point.

As we have declining unemployment here in the United States, I expect for things to be pretty good economically for the next few years and fewer and fewer Americans are going to be available. I see a higher and higher demand for the services that Personiv offers. How do you see companies making that adaptation to be able to handle outsourcing as people become scarcer for key jobs?

In growth mode, you got to keep up with work so you're almost forced to sometimes outsource in down cycles. Click To Tweet

Everybody outsources. If you’re using ADP for payroll, you’re outsourcing. If you’re using the CPA firm to do your tax firms, you’re outsourcing. One of the missings, particularly in the middle market, is effectively outsourcing. To do that you’ve got to be strategic about it, you’ve got to first identify the need and the areas that make sense to outsource. For me, a big part of that is having your internal teams focus on your core business and what’s going to grow it. Looking at all of the other activities that aren’t critical to the business and start to come up with a plan, “What makes sense to outsource?” Some of these big companies have departments in place to manage all of this. You almost need to make sure your internal processes are good enough to bring someone on board locally in the United States. Do you have the training manuals in place? Do you have the onboarding programs in place? Do you have a person designated in your office? If you were to hire three, five more people in your own business, are you setting them up for success? Are you setting them up for failure? If those people couldn’t step into your own office and succeed because the infrastructure isn’t in place regarding onboarding, training manuals, programs and contact people to interface with to have questions answered?

As part of that expectation setting, it’s not a realistic expectation to go through your interview process, hire someone, throw them at a desk and expect them to be a superstar and say, “Good luck. You’re setting yourself up for failure.” Some companies who are not outsourcing certain activities and then decide to outsource, they’re setting them up for failure. They think the outsourcing company is going to be some magician with a magic wand who could read minds. An outsourcing company with expertise can help them work through but we’re not mind readers. We need to know what you have. If your processes aren’t consistent in-house, it’s going to lead to some difficulties. We’ve come across that with a few clients where we rushed the process and we realized that contact A in the company had a different view of how something should be done than contact B. We submit our deliverables and sometimes we’re superstars and then we do the exact same thing and the next time was failures. It’s like, “We were told we were superstars and we did the same thing.” As companies start to look at what to outsource, a great place to start is to review your internal processes, your internal systems and your internal programs. You have to see if the infrastructure is in place to set up an outsourcing partner for success rather than failure.

It starts with what do you need to grow or what do you need to scale down within your organization. Do you have the processes in place, the documentation in place and the systems in place to make all that happen?

We’re a big fan of a train the trainer programs. Sometimes we fly our folks out to our client’s site where they work on-site for a couple of weeks and get that native subject matter expertise. They go back to our facilities and they train the teams and act as the supervisors. We’re big fans of that but when you outsource something, I like to take that long-term approach. It’s like when you hire somebody, you don’t expect to get a return on investment in your first few months. You’re going to be making an investment. You’re going to be spending a lot of time answering questions, training people, dealing with matters where you could more easily do it yourself. Over time it’s like, “What a blessing.” Sometimes that might be the three or six-month period where you’re starting to reap huge benefits not only in cost savings but in time savings because you properly and methodically took on activities to outsource.

SDS 84 | Outsourcing

Outsourcing: When you outsource something, take that long-term approach. Don’t expect to get a return in your first few months.

 

Who should the outsourcing team report to within an organization? Do you see a best practice for managing that relationship with an outsource company?

It can vary depending on the size and nature of the company. A lot of the key accounts that we work with, it’s usually the vice president of operations or the vice president of production. They’re the person ultimately accountable for operations and production, whether the work’s done internally or outsourced. Often that’s the contact. In smaller companies, it might be the CEO. If it’s a company that has a few million dollars’ worth of revenue and you’re outsourcing the finance and accounting, you could be reporting directly to the CFO or the CEO. It can vary depending on the nature of the work and I would say particularly the size of the company.

What amount of time should somebody give themselves if they’re thinking about, “I need to look at this outsourcing?” How much time should they allow for doing the work of identifying what they can outsource, reviewing and having conversations with outsource companies and then bringing that on? Is it a six-month runway? What do you see?

I’m going to say it’s probably about a three to six-month runway depending on how much time they have available to devote on a weekly basis. It’s something that most importantly needs to be planned instead of done in a hip pocket manner. If you’re doing this strategically, I always like a one step at a time approach. Maybe you’re identifying one or two key activities to start with but in the selection process of your partner, your vendor, you’re picking a partner-vendor who could grow with you. Even though they’re certainly capable of doing the first one or two activities that you’ve assigned to them, that they can grow with you and become a strong partner. It becomes a bit difficult to manage even for big companies. Do you want to manage half a dozen partners? I’m a big fan of having a limited number of key partners that you relate to as partners and that can grow with you as your business grows and as your business changes and gets into new areas.

In today's world, it’s becoming more complex with all of the different activities a company has to do to succeed. Click To Tweet

What are some questions that an executive should ask, maybe a process that they go through when they’re looking to bring on a outsource partner?

I like to compare it to the hiring process of an employee or staff member.

Given that though, a lot of people don’t do a good job hiring staff.

They are horrible at it. It’s probably one of the most expensive lack of skills that businesses in general have.

When I poll my executive audiences, they all say, “I have made bad hiring decisions,” and I can raise my hand when asked that same question. I don’t want to make a bad outsourcing decision because that feels like it’s going to be even more expensive or costly and painful.

In certain ways more expensive, in other ways the collateral damage is less. When you have a bad egg that’s sitting in your office, it infests your own employees. One is before you even come up with the questions to ask, what’s often most important is the listening. When you hire an employee, you can give them a DISC test. You can give them a whole series of tests and get a sense of their behavior and their personality. You can’t give a company for this test. You want to make sure at a contextual level, you’re choosing an outsourcing partner who fits your company’s culture and value system. In essence, they are an extension of your company. That requires a lot of listening.

That’s a great idea because that’s how you choose the best people. You start with culture. Are they a cultural fit?

You start with culture. If they don’t have the right culture, I cross them off the list because you’re not going to get your return on investment because you’re going to have problems. You’re putting in so much time and energy that first three to six months.

It’s a complete mismatch with your people, with your customers and your processes so, no.

Sometimes it’s hard to say no to that superstar salesperson because they’re bringing in revenue but you also know they’re destroying your company and infesting it at the same time. Listening is very important, which is why a three to six-month process is important. You’re going to go through different stages and get a sense of who the company is. Do they fit your value system or not? We like to be the company who’s flexible and who’s versatile. For us, honesty and integrity are important. We truly believe our clients don’t fully appreciate us until an issue escalates. It’s easy to be a great partner when everything’s going terrific. What happens when you have a problem? That’s when you know who’s a great partner and who’s not.

SDS 84 | Outsourcing

Outsourcing: It’s easy to be a great partner when everything’s going terrific, but what happens when you have a problem?

 

I believe in the listening and going through the process is important not just to find the right partner from a subject matter expertise or track record viewpoint, but to find it from a culture and values fit. You just can’t throw a test at a vendor. In terms of the kind of questions and what you’re exploring, the subject matter expertise is important. What is your track record? What are the success stories? What are the case studies they can point to? I believe a big advantage of outsourcing is the value-add. If you’re outsourcing accounting, accounting is accounting. There might be some great efficiencies that could be added to the process that the client wasn’t aware of internally.

Finance and accounting is an area that we do. We work with dozens of companies. Not that we’re geniuses, but we have exposure to the way dozens of companies and finance and accounting are doing their journal entries, are doing their management of employee reimbursements, are doing their order processing. We can take that experience across all of our clients and leverage it, not sharing proprietary confidential information. We have exposure to lots of processes, best practices and ways of doing things that a single company may not have because they have one accounting department. Finding a partner who’s going to not just get the job done but add value to the process that goes beyond what your internal teams might be aware of is also a big opportunity. I’m also a believer in doing some piloting. The piloting gives everybody a chance to get acquainted with each other. It’s a bit of a reality check on how good are your instructions from the customer viewpoint. How well does the potential partner listen, ask questions and respond? Those would be a few of the areas that I think are important. Probably the most important is listening and finding that right partner from a values and culture fit.

Is there anything else that an executive needs to do from a due diligence side to make sure that the partners they’re selecting are going to be protective of their corporate data? That’s one of the biggest concerns of a lot of people outsourcing is your IP theft all the time, especially out of Asia. How do we prevent that? What due diligence do we need to make sure that doesn’t happen?

It’s certainly a major concern. The truth is, although outsourcing might be known as an area that’s more prone to IP theft, particularly when you talk about China and intellectual property. We’re more of a service business. As a service business in the areas that we deal with, they’re for sure confidential and private information from customer lists possibly financials and other things of that nature. I believe that outsourcing something to overseas like to the Philippines, the information is probably a lot safer there in many respects. No one in the Philippines might care as much about it as internal people. If you look at your sales department as an example, salespeople have a high turnover rate. Your own people are interested in stealing your own customers if they change companies. Someone sitting at a desk in Manila, they might be less interested. It’s definitely a concern. From a service business viewpoint, I’m not talking about intellectual property. It’s not my level of expertise. I would be concerned about intellectual property vendors in China and all that stuff. From a service viewpoint that we deal with, we’re an extension of your own company. You’re implementing similar controls to what you would with your own company.

When you have a bad egg that’s sitting in your office, it infests your own employees. Click To Tweet

The controls are internal. Those extend to the new partner.

There are telltale signs in terms of when you do reference checks. Everybody’s going to give you good references to check and some might be better than others. How long are these companies doing business with that partner? Is their turnover high every couple years? We tend to measure our customers in decades unless they’re a newer customer or have been bought out or something of that nature. You could start to tell and you can start to dig in that interview process or reference-checking process. That’s a good way to get at the reputable the true reputable nature of the potential partner you’re looking at.

This has been an informative conversation. Evan, how can an executive get ahold of you perhaps to start a conversation about Personiv or other ideas that you might be able to offer to them?

I love the open-door policy. There’s nothing that gets me more joy in life than being a contribution to others. Anybody who’d like to contact me, to do some brainstorming, to get deeper into some of these areas, feel free to reach out to Evan Green. I’m the Chairman of Personiv. You can reach me via email at Evan.Green@Personiv.com or on my mobile phone number, (310) 592-7874.

That’s very generous of you. Thank you so much for sharing your expertise, your insights and your 33 years and growing experience in outsourcing.

I enjoyed being here. Be well.

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About Evan Green

SDS 84 | Outsourcing
Evan is Founder and Chairman of Personiv, a global provider of Business Process Outsourcing (BPO)services. With operations in the United States and Asia, Personiv provides a broad range of business services to leading companies in the areas of recruitment, customer contact solutions, graphic design, web development, publishing services, and more.

 

 

 

 

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