Outsourcing of business processes has been gaining popularity over the last few years driven to a large extent by the fact that US firms have been enjoying much success from adopting this business strategy. However, companies that are looking to outsource non-core processes to third party service providers are literally placing their fate in the hands of another company. A primary concern and challenge with the adoption of an outsourcing strategy lies in ensuring that the high level of quality that has been achieved in house, prior to outsourcing, is not diluted. In the absence of correct checks and balances, companies run the risk of jeopardizing their relationship with customers through the inability to provide continuously good service.
Introducing a quality assurance standard is a fundamental way of measuring the efficiency of business processes. A quantifiable benchmark enables problems to be pinpointed and can assist companies in identifying ways and means of improving their processes. It also encourages adoption of best practices in relationships with customers, suppliers and employees. A number of standards exist, which companies can work towards achieving. The most recognized and widely used include ISO 9000, Total Quality Management and Six Sigma, a data-driven methodology based on a measurement strategy focusing on systematic process improvement and variation reduction through the application of powerful statistical tools.
Each of these standards has been designed not only to eliminate defects but also the root causes of defects in business processes in order to work towards greater efficiency, productivity and accuracy. These quality systems follow different methodologies, each of which has its strengths and weaknesses. Any of these can be applied to improving quality and therefore it is important for an organization to understand these nuances when considering the introduction of a practice to benefit outsourced business processes.
The principal benefit of the ISO 9000 quality standard is that it is globally accepted its core requirements have the same meaning worldwide. It is an all-purpose model for quality management and more than 130,000 firms worldwide have been certified. The ISO 9000 standard looks at every area of a business where quality problems or defects can potentially occur, including order entry, procurement, training and document and process control. Because the rationale behind ISO 9000 involves the whole organization, the certification process and the speed of implementation tends to be fairly lengthy as employees across the board have to adjust to newly introduced changes in process the certification process itself can take anything from six months upwards. It is also difficult to track tangible results with the ISO 9000 standard because of its focus on the organization as a whole entity.
Unlike ISO 9000, which looks at all areas of a company, the primary focus of the Total Quality Management (TQM) standard is on process management. It aims to solve quality problems by involving everyone that is part of a particular process in the analysis and correction of any occurring defect. It is based on studying past data to help encourage continuous improvement. However, it still remains difficult to measure tangible results from the introduction of a TQM standard. This is because there are a number of TQM definitions and the onus for implementation falls on the internal personnel who are championing the initiative TQM requires no external audits, documentation or record-keeping like ISO 9000. It also takes a notoriously long time to implement because of the huge level of analysis, evaluation and confirmation of buy-in across departments for a successful implementation.
Six Sigma, however, tracks tangible results very effectively because it is based on a statistical process that guarantees a 99.99966 percent level of perfection as close to flaw free as possible. Specific processes are evaluated and no more than 3.4 defects per million opportunities are allowed to occur. Six Sigma can be used to monitor a single process or a range of processes from anything as specific as a line of code or an administrative form to any aspect or transaction within the business.
This level of specification makes the Six Sigma standard a good methodology to use when checking the quality of outsourced business processes. The Six Sigma methodology is completely flexible each individual company can define what it considers a defect and then go about resolving the defect to ensure that the standard is achieved. If a third-party provider uses this methodology, an organization will be able to outline the defects it would like to track at the Service Level Agreement (SLA) stage, ensuring that they are monitored. The SLA will then include all critical issues that need to be addressed no matter how small the detail.
Six Sigma is self-policed but because of the detailed data-driven approach that it is based on. An organization can involve the most relevant people in its implementation so that those involved in the process are responsible for its success.
If a third party provider uses a recognized quality standard it is a reasonable expectation that outsourced business processes will be in safe hands. The accreditation to ISO 9000 and the practice of TQM standards reflect a dedication to high quality service. Six Sigma, being a process oriented methodology, is a disciplined approach that fits in well with the needs of both the client and the processor and complements internal quality assurances already in place
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