Outsourcing Concerns - Taking a Quality Approach

As a subscriber to www.linkedin.com, I am increasingly finding more press about the impacts of outsourcing and offshoring.  I will share an article which outlines the risks for North American banking companies.

Bank Offshoring Article.

I personally take the position that, as with any enterprise, a quality approach to planning and performance will support the success of any endeavor.  The article below reveals several "red flags" associated with the assumptions and expectations of outsourcing, which would lead to disappointment and failure.

- Vague purposes for engaging in outsourcing, with non-specific expectations for cost savings ("Offshoring was going to save the banking industry millions. We just had to do it").
- Inadequate integrity of governance, status and tracking ("pretended everything was going to plan")
- Inadequate training and knowledge transfer ("Offshore staff was not as efficient and rework was common")
- Incompatible processes, tools, and approaches ("Offshoring was adding overhead to projects and processes")

The article below advocates the benefits of face to face interaction for product design and deployment, particularly if Agile design methodologies are used.  One term that is increasingly used is "Near-shoring" where lower-cost resources within the same geographical proximity are used.  This may be a more palatable approach to provide some of the cost and time advantages of offshoring, along with the closer connection of onshoring.

I will express that outsourcing includes controversial elements which can only be overcome with a deliberate quality management approach.

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Time to Bring Bank Staff Back Onshore
Michael Nuciforo
APR 24, 2013 12:00pm ET

When I first started working in banking, the industry was at the peak of its obsession with offshoring. All I ever heard about for the first three years of my career was offshoring this and offshoring that. If I wasn't working with a team offshore, I was working with a team that was about to be.

Offshoring had become something of an El Dorado for the industry – the myth had become so tantalising that any semblance of realism was lost. And much like the hundreds of explorers who succumbed to the temptation of looking for the lost city of gold, banking executives bought into the hype. Offshoring was going to save the banking industry millions. We just had to do it. Every other industry was. It made perfect sense. How could the talent locally compete with India or China? These countries had more students graduating with MBAs every day than we had students – period. Banks invested millions in setting up offshore campuses all over Asia. There were assimilation programs, training courses and cross-pollination of resources. Special two-way video screens were even purchased – it was Skype before Skype.

Banks tried ever so hard to make it work. In some cases they even pretended everything was going according to plan. But firms were taking one step back for every two steps forward. From a set-up perspective, the regulatory and cultural challenges were underestimated. On paper, employees were cheaper, but more were required. Offshore staff was not as efficient and rework was common. Frustration at home was further exasperated by having to deal with poor communication lines. The media was quick to jump on any negative customer experiences.

Besides not delivering the benefits expected, offshoring was actually adding overhead to projects and processes. There were challenges with communication as teams worked at different hours around the world. Local and offshore teams were suspicious of each other – both felt as if the other was slacking off. It also necessitated an overreliance on email messages and lengthy documentation. Offshoring also made it practically impossible to adopt more innovative delivery models such as Agile that rely on face-to-face interaction. The final nail in the coffin was the genuine appreciation that teams developed better products collaborating in the same environment.

Finally, it dawned on the industry: El Dorado didn't exist. Now, after many years of searching and coming up empty-handed, offshoring has lost its appeal and banks are starting to bring the work back home.

So why does onshoring make so much sense in banking? With both China and India growing year on year, the cost savings are less appealing. Wage growth in these regions means that the difference in salaries, compared to local talent, has become increasingly marginal. Banks are also more focused on the cost reduction opportunities offered by an increase in digital channel usage and a decline in branch activity. Regional branch closures are expected to grow again this year. There is also an acceptance that delivering quality technology now, more than ever, relies on face-to-face interaction. Having a team full of people co-located and empowered means not only an improvement in product quality, but a significant increase in time-to-market.

Whereas offshoring was once considered a competitive advantage, it is now considered the opposite. More and more banks are looking to bring jobs back home, and even analysts and investors are starting to ask questions. The key to the transition is to do it smartly. No more inflated business cases. No more forced changes. By onshoring too rapidly you run the risk of making the same mistake most banks did with offshoring. Have clear objectives so you can easily decide what roles or departments are going to grow locally.

With wage costs on the rise offshore, talent available in abundance locally, and new delivery models required to create exciting new products, the world has moved on. The sad irony is that for banks that are willing to pack up and abort the mission, the real gold is waiting for them right at home.

Michael Nuciforo is a mobile and digital banking consultant and the founder of Keatan who previously worked at Australia and New Zealand Banking Group Ltd. on the ANZ goMoney application and more recently was head of mobile banking at Royal Bank of Scotland managing the U.K. retail portfolio. You can follow him on Twitter at @TheBoldWar.

New Body of Knowledge - Synthesis of Existing ASQ Offerings

In the latest View from the Q from Paul, the position is taken that Service Quality comprises such a significant and distinct set of practices that it merits a distinct Body of Knowledge from which to base proficiency and professional attainment.  The ASQ Service Quality Division has advanced this cause by preparing a SQBOK Framework for review, along with levels of mastery required for each role or participant in the Service Quality workflow.

ASQ has been advancing the intellectual cause of Quality since 1946, and in those many decades several detailed and descriptive Bodies of Knowledge have been established, each with usable content.

As a member of the Quality Management Division's Technical Committee for Finance and Governance, I reviewed several of these existing ASQ Bodies of Knowledge to derive those individual subject areas pertinent to the advancement of Finance and Governance, the results of which are shown below.  I believe that if a similar approach is taken to synthesize elements from existing Bodies of Knowledge into the Service Quality framework (Customer Market Focus, Employee Focus, Communication, Service Delivery, etc.), the outcome will be more effective, more aligned with the format and style of existing ASQ Bodies of Knowledge, and more readily accepted.  I am a member of the Service Quality Division, and willing to volunteer for this initiative if the leadership is inclined to avail themselves of my services.

BOK Source	Body of Knowledge Area	Body of Knowledge Details
CQE	Cost of Quality (COQ)	Identify and apply COQ concepts, including cost categories, data collection methods and classification, and reporting and interpreting results. (Analyze)
CMQOE	Cost of quality (COQ)	Define and distinguish between prevention, appraisal, internal, and external failure cost categories and the impact that changes in one category will have on the others. (Evaluate)
CSSBB	Business processes and systems	Describe the relationship among various business processes (design, production, purchasing, accounting, sales, etc.) and the impact these relationships can have on business systems. (Understand)
CSSBB	Six sigma and Lean applications	Describe how these tools are applied to processes in all types of enterprises: manufacturing, service, transactional, product and process design, innovation, etc. (Understand)
MBB	Strategic plan development	Describe strategic planning tools and methods (hoshin kanri, SWOT, PEST, etc.) and their utilization in developing enterprise planning. (Apply)
MBB	Deployment of six sigma systems	Describe the following key deployment elements: Governance, Assessment, Resource planning, Resource development, Execution, Measure and improve the system. (Apply)
CMQOE	Stakeholder analysis	Identify and differentiate the needs of various stakeholders to ensure alignment with the organization's strategic objectives. (Analyze)
MBB	Stakeholder engagement	Describe to how to engage stakeholders. (Apply)
CMQOE	Internal capability analysis	Describe the effects an organization's internal capabilities (e.g., human resources, capacity, operational capabilities, etc.) can have on strategy formation. (Understand)
CMQOE	Legal and regulatory factors	Define and describe legal and regulatory factors that can influence strategy formation. (Understand)
CSSBB	Organizational roadblocks	Describe the impact an organization’s culture and inherent structure can have on the success of Six Sigma, and how deployment failure can result from the lack of resources, management support, etc.; identify and apply various techniques to overcome these barriers. (Apply)
CMQOE	SWOT analysis	Analyze an organization's strengths, weaknesses, opportunities, and threats, and develop and prioritize actions to take as a result. (Analyze)
CMQOE	Resource allocation and deployment	Evaluate current resources to ensure they are available and deployed in support of strategic initiatives. Identify and eliminate administrative barriers to new initiatives. Ensure that all stakeholders understand the plan and have the skills necessary to carry out their responsibilities. Identify advocates/cheerleaders for the plan and assign them initial activities and leadership roles. (Evaluate)
CMQOE	Organizational performance measurement	Design and use performance measures to drive and monitor organizational performance, and evaluate the results in relation to the plan. (Create)
CMQOE	Interdependence of functional areas	Describe the interdependence of an organization's departments or functional areas such as human resources (HR), engineering, sales, marketing, finance, research and development (R&D), purchasing, information technology (IT), logistics, production, service, etc. (Understand)
CMQOE	Risk management	Describe and use basic techniques for risk identification, control, and mitigation. (Apply)
CMQOE	Project management tools	Use benefit-cost analysis, potential return on investment (ROI), estimated return on assets (ROA), net present value (NPV), internal rate of return (IRR), portfolio analysis, risk assessment, etc., to analyze project risk, feasibility, and priority. (Analyze)
CMQOE	Measure and monitor project activity	Use tools such as cost variance analysis, milestones, actual vs. planned budgets, etc., to monitor project activity against project plan. (Evaluate)
CMQOE	Lean tools	Identify and apply lean tools and processes such as cycle-time reduction, 5 Ss, just-in-time (JIT), kanban, value streams, etc. (Understand)
CMQOE	Theory of constraints (TOC)	Define key concepts of TOC including local vs. system optimization, physical vs. policy constraints, throughput, etc., and classify various types of constraints such as finite resources, increased expectations, etc. (Understand)
CMQOE	Financial management	Read, interpret, and use various finance tools including income statements, balance sheets, product/service cost structures, etc. Manage budgets, calculate return on investments (ROI) or assets (ROA), and use the language of cost/profitability to communicate with senior management. (Analyze)
MBB	Project cash flow	Develop a project cash flow stream. Describe the relation of time to cash flow and difficulties in forecasting cash flow. (Analyze)
MBB	Sarbanes-Oxley (SOX) Act	Understand the requirements for financial controls dictated by SOX. (Understand)
MBB	Executive leadership roles	Describe the roles and responsibilities of executive leaders in the deployment of six sigma in terms of providing resources, managing change, communicating ideas, etc. (Analyze)
MBB	Governance methods and tools	Develop governance documents, tracking tools, and other methodologies that will support project success. (Create)
MBB	Performance measurement	Design a system for measuring project and portfolio performance. (Create)
MBB	Budgets and forecasts	Assess and explain budget implications, forecasting, measurement, monitoring, risk analysis, and prioritization for portfolio level projects. (Evaluate)
MBB	Costing concepts	Define the concepts of hard and soft dollars and use cost of poor quality tools, activity-based costing, and other methods to assess and prioritize portfolios. (Apply)
MBB	Project identification	Facilitate working sessions to identify new project opportunities that can be prioritized. (Apply)
MBB	Project qualification	Determine the elements of a well-defined project (i.e., business case), the process for approving these projects, and tools used in project definition (QFD, process maps, value stream maps, FMEA, CTx (critical to … customer, … design, … quality), etc. (Apply)
MBB	Financial measures	Define and use financial measures, including revenue growth, market share, margin, cost of quality (COQ), net present value (NPV), return on investment (ROI), cost-benefit analysis, activity-based cost analysis and breakeven time performance etc. (Analyze)
CSSBB	Financial measures	Define and use financial measures, including revenue growth, market share, margin, cost of quality (COQ), net present value (NPV), return on investment (ROI), cost-benefit analysis, etc. (Apply)
MBB	Business performance measures	Describe various business performance measures, including balanced scorecard, key performance indicators (KPIs), and the financial impact of customer loyalty; and describe how they used for project selection, deployment, and management. (Analyze)
CSSBB	Business performance measures	Define and describe various business performance measures, including balanced scorecard, key performance indicators (KPIs), the financial impact of customer loyalty, etc. (Understand)
MBB	Topics for Performance-based Section of Certified Master Black Belt (MBB) Essay Responses in Two Phases — 2 Hours (40% of Total Score)	Apply project selection criteria to select and prioritize potential six sigma projects using strategic planning tools, immediate- and long-term business goals, executive-level directives, risk analysis results, etc. Develop and deliver formal presentations that support the project selection process, identify progress, explain its status at conclusion, etc.
MBB	Topics for Performance-based Section of Certified Master Black Belt (MBB) Essay Responses in Two Phases — 2 Hours (40% of Total Score)	Develop and manage the scope, schedule, cost, and risk of six sigma projects using various project management tools to ensure proper monitoring, milestone achievement, and project success. Recognize when intervention steps must be taken to bring a project back on track or terminate it based on analysis of internal or external events.
CMQOE	Topics for the Constructed-Response (Essay) Portion of the Manager of Quality/Organizational Excellence Exam	Demonstrate management abilities in human resources, financial, risk, and knowledge management applications. Use effective communication methods in various situations to support continuous improvement efforts. Select and use appropriate tools and methodologies to plan, implement, and evaluate projects. Develop, deploy, and evaluate quality plans that can be used throughout the organization. Evaluate and recommend appropriate quality models or systems to implement in various situations.

WCQI - That's Me Wearing The Hat at the QMD Booth

I noticed on the ASQ website for WCQI, that my likeness from WCQI 2012 in Anaheim is being used as an example for Sponsors and Exhibitors.  I was operating the "Quality Wheel" at the ASQ Quality Management Division booth as the Division Chair, Milt, and a few of his Vice-Chairs looked on with amazement at the crowd of interested attendees.

I wore the fedora to distinguish myself from so many others among the thousands attending the World Conference.  It was part of my look at the booth, when delivering presentations, visiting receptions and hospitality suites, and enjoying myself at the gala.  It worked, as I would not have noticed myself in the picture except for my distinctive hat.

When speaking to a crowd, wearing a hat can go beyond aesthetic benefits to serve practical purposes.  In the heat of the conference rooms when addressing significant numbers (approximately 90-100 people attended my presentations), it is important to not let others see you sweat.  I have compared WCQI presentations to a job interview conducted by a panel of 50+ quality practitioners, who come armed with pointed questions and do not let a detail pass without scrutiny.

As an incentive to attend (and remain until presentations were complete), I offered an ASQ Press book that I co-authored.  Having a hat created an immediate container to collect business cards from which to draw a lucky recipient.  This was particularly useful for the ISE presentation, where the ASQ Software Division had additional books and prizes to present to attendees.

If you are attending, I recommend that you have an affectation to ensure that others can find you.  Conferences are fun and meeting many people within a short time is a great experience.

To those who may have objected or critiqued my choice of attire, this inclusion on the ASQ website validates that a dapper and debonair hat gets noticed and draws attention.

Excellence Canada for Canada - ISO 9004 for Global

In response to the View from the Q post by Paul B., I am providing a link to the Excellence Canada organization.

This site describes a program that was initiated by the Federal Government to support Organizational Excellence within Canadian organizations.

Admirable as this may be, it is somewhat irrelevant for a global organization.  A "day-in-the-life" from my Canadian location can start with a conference call from colleagues in Europe, addressing concerns of my current client based in the southern United States, which will require me to follow up with resources from our delivery centers in Asia.

Nationalism in Canada is also a potentially controversial subject, because within the sovereign state of Canada there exists a "distinct society" of francophones known as Quebecois, and the movement to partition Canada to permit the establishment of a Quebec nation is significant enough that the provincial leader represents the separatist "Parti Quebecois" political organization.

Canada is not unique, as there are several examples of nations which have segmented into smaller states to represent the nations of their population.  The former Yugoslavia has since been partitioned into multiple nations including Serbia, Croatia, Bosnia, and Slovenia.  Czechoslovakia went through its "Velvet Divorce" to permit the nations of Slovakia and the Czech Republic to emerge.  The risk is that in establishing a national program, breakaway territories will end up having to initiate their own programs.

The "nationalism" of Quality Awards and Programs can be misinterpreted to the point where it loses the spirit of its original intentions and becomes a vehicle for nationalist exhortations.  This risk is best addressed with Deming's tenth point shown below.

Rather than get caught up in the complexities of national interests and sovereign states, I advocate that organizations adopt and follow a generic standard that was developed for international use.  The ISO 9004:2009 is readily available and contains many of the same principles and practices which are advocated within national programs, without the pomp and public relations ceremony of those endeavors.  The ISO 9004 supports and augments an existing ISO 9001 management system, and the international recognition of ISO, along with the stringent standards of registrars, will convey international acceptance.