The Decision to Outsource
13 Dec 2021
The key ingredient
A decision to outsource should not be taken lightly. However, upon reflection, it often appears to have been clearly signposted. There are a number of drivers that put outsourcing on the table, but it usually requires that special catalyst; that key ingredient.
For our client, it was the imminent departure of a key staff member. A review identified underlying issues laying ‘dormant', readying to erupt at a later date to demand urgent attention.
In this case it was outdated technology; limited resource availability and high costs. These reasons are familiar to many, but in themselves were not a powerful enough driver.
Although the process itself is largely the same as any other selection exercise, first time outsourcing presents unique challenges that require strong project management.
Many, many cooks
Each company is unique, full of little quirks and eccentricities; there are a variety of stakeholders with differing opinions, motivations and sensitivities; there are the specific service requirements; and, there is always a reluctance to relinquish control!
Perhaps the most critical of these is the multitude of stakeholders: the administration team, the wider pensions team, the company as a whole, the trustee, the bidding TPAs. And that's not to mention the potential for other advisers to become involved, for example the actuary, a data cleanse specialist or the legal advisers.
This gives a multiplicity of views, opinions and attitudes. The company wants to cut costs, the pensions team and trustee want a good service for members and the administration team want security of outcomes (e.g. TUPE).
Somewhere in this mixture there needs to be a project manager. Somebody that can drive others towards agreed objectives, secure buy-in and maintain motivation, manage personalities, be flexible to the competing demands and all with an awareness of the sensitivities involved. This was part of the role that we took on for our client.
But tasty broth!
Through the successful delivery of the project, our client was able to appoint the right administrator for them. An administrator that was able to TUPE their existing team, an administrator located nearby, and one that was able to deliver the precise scope of services required.
First time outsourcing is never easy and it always brings unique challenges. The number of stakeholders, the sensitivities and the cultures of each company make for an interesting and demanding project.
- There are so many variables that no first time outsourcing exercise is likely to be the same, and they should be approached with this in mind.
- Often underlying issues aren't urgent enough to precipitate an outsourcing decision; there normally needs to be a catalyst.
- A strong project manager with the right skills is needed to bring together the multitude of stakeholders and maintain focus on the agreed, central objectives.