The Benefits of Business Process Standards

Not satisfied with your company’s outsourcers? Perhaps your business is lacking process standards. According to Thomas H. Davenport, three things must happen in order for your business and its outsourcing capabilities to function properly. An excerpt from Harvard Business Review.

Throughout the history of business, most firms have built their own processes for almost everything that needed to be done. Producing widgets. Paying vendors. Administering payroll. Whether the processes involved were critical to the organization’s strategy or incidental to it, they were generally performed by people within the organization. Sometimes they were done well, sometimes they were done badly—but since a company had no way of determining how well an outside business might perform these processes, they were kept in-house. […]

Despite the trend [today] toward outsourcing, however, most companies have remained in do-it-yourself mode for most processes. (Huge multinationals are the most likely to take advantage of outsourcing, but even then, only for highly transactional and administrative activities.) Because of a paucity of process standards, it would be risky to do otherwise. With the exception of IT system development, there is generally no clear basis by which companies can compare the capabilities provided by external organizations with those offered in-house, or to compare services among multiple outside providers. As a result, firms that choose to outsource their capabilities have to proceed on two criteria: faith that the external provider will do a good job and cost. Given the lack of comparability, it’s almost surprising that cost is by far the primary criterion that companies apply in evaluating outsourcers, and that cost reduction is their primary objective. The lack of standards may also explain why, in the few broad studies of satisfaction with outsourcing, many companies—up to half in some studies—are dissatisfied with their outsourcing relationships.

by Thomas H. Davenport

Full Article: http://hbsworkingknowledge.hbs.edu/item.jhtml?id=4895&t=technology