Staffing Best Practices
Outsourcers live and die on the competence of their staffs.
These staffing lessons can help you find the best outsourcer for
the job — or help you get the best from your staff within.
BY CHRIS M. HAZELL Darwin Magazine
As Nobel Prize winner, University of Chicago economist
Gary Becker writes in Business Week, "Human capital is the
most important type of wealth in the U.S. and other modern
nations." We've found that improving the ways that people
perform their work can reduce costs, increase productivity
and encourage commitment to the organization. Because
our future depends on the people we hire, we've learned to
become effective recruiters, trainers, motivators, team
builders and leaders.
As outsourcers, we are continually innovating in order to
successfully take existing work and perform it more
effectively at lower cost. It's our job is to assist clients with
their IT needs, including application management and
infrastructure support, and the only way we can effectively
do this is by focusing our attention on the most important
factor of success — the people we hire, manage and
develop for our clients.
One of the biggest factors in selecting the right outsourcer
is to understand how it manages human capital for high
performance and cost effectiveness. It will directly impact
your bottom line.
You can use the following to question a potential outsourcer
about its staffing selection and management. But these best
practices can be used by any company to apply to its own
staffing needs.
Attract and Recruit the Right People
The cost of recruiting and hiring the right people is
significant for many organizations. Gartner estimates the
average cost of replacing an employee is between 1 and 2.5
times the employee's annual salary plus benefits.
For outsourcers, the timing and length of the hiring process
is crucial. They must be ready to quickly find a resource
that matches a newly sold project. If they hire too early,
they have a non-billable resource; too late and they put
project delivery at risk. To accomplish this just-in-time
hiring, outsourcers must have in place:

A detailed understanding of the skill sets generally
required by projects


A database of people indexed according to these
skills
A hiring process integrated with the business
development process so that staffing for promising
projects can be managed
One way to be certain the right type of person is being
hired is to use a competency-based assessment system for
evaluating knowledge and skills, as well as the
demonstration of the application of those knowledge and
skills in the workplace. Some assessment systems only
measure knowledge but not its application. A competency
system recognizes that learning can come from many
sources, both on and off the job, formal and informal.
Outsourcers use the competencies defined in this
assessment not only in recruiting but also as part of an
employee's performance management plan, including
training. In this way everyone has a shared, objective
understanding of the requirements for advancement.
Integrate New Employees
Once employees are hired, many companies have
orientation or "on-boarding" programs to familiarize them
with the company and to get them productive as soon as
possible. "Studies show that relatively high-level people
coming into companies have a pretty high failure rate," said
Michael Watkins, associate professor of business
administration at Harvard Business School. "Typically, by
the end of five years, two-thirds have failed. So, companies
are interested in knowing how to reduce costs and get
people up to speed quickly."
Among outsourcers, the industry average for an entry-level
IT graduate with no previous work experience is about six
months to billability. With an intern program specifically
tailored to new graduates, one outsourcer was able to cut
this time down to a range of 6 to 12 weeks. For projects
with more mature applications, that outsourcer was able to
go as low as four weeks. For those who frequently staff up
based on project work, the goal should be to get more
junior hires contributing effectively to billable projects as
soon as possible.
Manage Performance
Assigning new employees, even those with the requisite
skill set, directly to a project without careful planning is
fraught with risk. Unless you build in time for project
members to mentor, you are asking them to take on not
only the project work but also to set aside time for
teaching, explaining and answering questions — a difficult
task. To effectively integrate new employees and team
members into a project, consider the following guidelines:



Explicitly plan for senior team members to mentor
new members. Make mentoring part of their project
responsibilities, and incorporate it into the project
timeline.
Architect the project work to facilitate bringing in
new people for chunks of time or project tasks. In
this way, you can confine the training to noncritical
times or well-understood modules.
Invest in a group of senior people with general but
deep knowledge on company business practices and
methodologies and make sure their expertise is
available across projects. Although remaining mostly
non-billable, this group is nevertheless in highly
strategic roles, ensuring that company best practices
are spread to projects in the field.
A best practice used in outsourcing firms is to ensure that
project team objectives and metrics stay at the team level,
and that they're not broken down into the individual level.
However, reports on the team performance are accessible
to everyone. In this way, team members can know how
their team is doing and still work privately with their team
leader on individual performance. In addition, team reports
are circulated to company directors and executives so they
have a snapshot of how projects in the field are doing.
Improve Work Processes
Improving work processes is another way to help people
perform better. One of the underlying principles in the Total
Quality Movement is "Continuous improvement," which
refers to the ongoing application of quality methods to
constantly search out opportunities to improve
performance. This is done by removing obstacles such as
unnecessary complexity, inefficient methods, manual effort
and sources of errors. For outsourcing companies, the need
for continuous improvement is critical. After the initial
implementation of the outsourced process, opportunities to
reduce cost by improving speed and availability, reducing
people costs, and reducing system errors can only be
accomplished by applying continuous improvement.
Achieving continuous improvement requires:




Clear improvement objectives
Defined procedures for achieving such objectives
Standard metrics for measurement
Ongoing investments in training and resources

Across-the-board buy-in to direct efforts towards the
objectives
Retain Talent
Retaining key employees remains a challenge for
companies, no matter what the economic conditions are.
The results of a survey of Fortune 1000 companies released
by Accenture in 2002 reports that when asked whether they
thought the battle to attract talent was still raging, 73
percent of senior executives said it was, 24 percent said
they believed it was temporarily on hold and 3 percent said
the talent crunch was over. Survey respondents
overwhelmingly reported that the most critical skills sought
were leadership and management skills (49 percent), while
technology skills ranked third (22 percent).
The keys to employee satisfaction and retention hinge on:



How valued they feel
How challenged they are
What opportunities they have for growth and
advancement
Leading outsourcing firms have implemented various
motivation and incentive programs with an eye towards the
above and integrated them into standard business
practices.
Companies use motivators to support their business goals.
This is a particular strategy for outsourcers, who have a
great need to motivate their employees — turnover goes
right to their bottom line — and an even greater challenge
to do so. The reason is in the nature of the projects they
take on. These typically involve older legacy systems,
processes with some manual components or back-office
functions, far from the glamorous new technologies and
innovation projects that typically interest IT workers.
Even if attracting talent with high salaries were an option,
these companies would still be challenged to hold on to
employees as they settle into the perceived drudgery of the
work. Instead of fighting against or ignoring this reality,
some companies embrace it. They encourage their
employees to look beyond the technology or the business
process to understand the underlying business problem that
the project is addressing. They challenge their employees
and develop them into strategic thinkers, even while they
are working on tactical solutions.
The result is a deep understanding of why customers care
about a specific issue, more knowledge of the particular
business or industry and an increase in its intellectual
capital.
Realizing that such projects are ripe for continuous
improvement, one company developed a bonus program
called Innovative Solutions. It rewards employees for
identifying opportunities for improvement and proposing
solutions. This challenge has been extremely successful for
both employees and the company.
Conclusion
People are an outsourcer's greatest asset and also its
greatest cost. In order to survive and be profitable in a very
competitive marketplace, outsourcers must make effective
use of recruitment, training, motivation and management
techniques. They must continually innovate in order to
successfully take existing work and perform it more
effectively at lower cost. If an outsourcer is not placing
great importance on its people, it will not be able to achieve
the continuous improvement in the future that most clients
are calling for today.