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Transformational Outsourcing with Rick Merson

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Join me and Rick Merson formerly Accenture Partner/Senior Executive, as we discuss “ Transformational Outsourcing” and how this is impacting the future of traditional outsourcing.

Rick will share his views on how outsourcing as a transformational opportunity opens the door to a broader spectrum of cost savings and potential quality improvements.

 Next episode:

• Tuesday - September 27th - 12:00pm EST – 12:30pm EST
• Rick Merson – Formerly Accenture Partner/Senior Executive
• Call-in Number: (323) 679-0913


0:39 Chad McDaniel

Good morning! You're listening to Voice of the Customer Radio. My name's Chad McDaniel. I'm your show host and we're excited to have everyone that's joined us here today. We have a number of callers who have dialed in to today's show. I'm excited that now we have Rick Merson on the call today, but in the topic we're gonna be talking about here, but also some opportunity to showcase talent that's available in the industry today. The Voice of the Customer Radio, our community Execs In the Know for our listeners is a community of about 40,000 strong, were all engaged professionals where we do a lot of intelligent mind sharing of the latest emerging customer response trends. We do a lot that have a passion for the customer, the customer experience, voice of the customer. We do our live events with the Customer Response Summit, in fact the Customer Response Summit III is coming up in Scottsdale, November 14th and 16th, and we're looking for to the number of executives that are gathering there to talk some of the trends, service trends that are affecting all of our service leaders here today, and Voice of the Customer Radio is just an extension of Execs In the Know where we bring in some of the best thought leaders and we engage in a very conversational format to really talk and explore further into these issues that are impacting and affecting all of us as service professionals.

2:06 Chad McDaniel

So again, you're listening to Voice of the Customer Radio. We've got Rick Merson on the show today from Accenture. And I wanna do -- Rick, I wanna make sure -- are you there? Good morning.

2:17 Rick Merson

Good morning, Chad.

2:18 Chad McDaniel

Excellent. And what I wanna do is I wanna start with a little bit of a prelude for our listeners here today, kinda get all of our thought process around what we're gonna be talking about today, Rick. And I really appreciate you making some time out of your schedule to be with us here today. Rick, I know you and I talked about -- there are a lot of multiple drivers that are forcing customer contact leaders to reinvent or transform their approaches and operations. You know, there's been a lot of discussion on Voice of the Customer Radio about social media and how this is intensifying the focus on customer experience. Some of the new interaction and analytics technologies are creating new opportunities and the complexity and the drive to reduce cost with all of us -- we'll be with all of us, I guess. And there's been a number of previous shows where we've heard from corporate enterprise leaders talking about some of those drivers, some of those dynamics, and the pressure on service cost, and so forth. Rick, as we get a little bit more into your background, I know outsourcing has traditionally been a tactical approach. Companies traditionally outsource customer contact work to focus on core competencies dealing with rapid growth and drive transaction cost now on either through labor arbitrage or access to skill and expertise, and I'm gonna have you comment on some of that here coming up. But viewing outsourcing as a transformational opportunity opens the door to a broader spectrum of cost savings and potential quality improvements. And I've heard this time and time from a spectrum of both vendor and corporate enterprise folks. So Rick, I know you bring a strong point of view on why outsourcing should be inherently transformative, either it's part of the transformation strategy or the key element in the strategy. Rick, I know your point of view and what we're excited about is your 25 years of diverse experience at Accenture, AT and T Wireless, and American Express, and most recently you've been with Accenture's BPO group.

4:20 Chad McDaniel

So without further ado, Rick, what I'd like to do and first of all, all our callers on, if you want to ask questions, we have a shortened show of 30 minutes today. If you would like to ask, call a question on the air, please press 1 on your telephone handset. We'd love to bring you into the show. So Rick, now that we sort of set the stage for today's discussion, why don't we get started and share a quick 3-minute background. Let's set the stage for our callers with yourself and give a little bit of background on yourself.

4:52 Rick Merson

Great. Thanks Chad, and I really appreciate the opportunity to participate today. I've been involved in all aspects of customer service. Leading operation, leading staff functions for companies, leading consulting projects, helping client outsource work, and also being an outsourcer myself. Most recently, I was a partner at Accenture. I started there on customer relationship management consulting group in 1999. Doing assessments, strategies, running programs, and primarily in the telecom and government space. I also had the opportunity to do some M and A work and some internal strategy work. For the last 5 years, I've been in Accenture's outsourcing group and I was most recently responsible for standardizing customer contact operations across global network of sites. Before I went to Accenture, I ran operations and held staff roles at both AT and T Wireless and also at American Express, and also had the opportunity to spend a year in the start-up company, start-up DSL Telecom Company as customer service vice president. Earlier this month, I left Accenture as part of a continued movement of roles to offshore locations, and at this point I'm taking on a short-term consulting project while determining my next steps.

6:08 Chad McDaniel

Well, thank you Rick. And I know there's a tremendous amount of value that you can bring. One of the reasons -- we have a very diversified set of listeners, between HR executive professionals and also marketing and operation professionals. We appreciate all the listenership. One of the things we are going to do in today's show is that we thought we would share some thought leadership that you've seen and witnessed to. We're gonna get into that. But also for our HR community out there, we're gonna do a little bit of a talent showcase and we're gonna talk a little bit more about Rick, too, and some of the things he brings to the table. But really, the spirit of Voice of the Customer Radio is about thought leadership and sharing ideas of the challenges that us, service leaders, live every single day. We sit in the chair and we face the same type of dilemmas and really to engage service leaders in sharing some of that mind share. So Rick, I guess the first question is just so we're on the same page, how do you define or how are we defining transformation and kinda break that down for us.

7:13 Rick Merson

Okay. Well, transformation is an overused word to some extent, but let's think about it as a market change, a change for the better. And what I'm talking about here is double digit movement of key metrics, like customer satisfaction, like employee satisfaction, like revenue, and like expense. Now a lot of people hear that and they think, "Now wow, this is gonna be expensive," "This is gonna be time consuming." And my point today is that doesn't really always have to be the case. The point of view is that outsourcing itself should be inherently transformative. And I like to talk a little bit about how companies can get optimal improvements when they outsource.

7:54 Chad McDaniel

And to put in perspective, Rick, I know that at Accenture, you were a partner senior executive for the business process outsourcing group, the global customer contact capability lead. So you've seen things from a lot of different viewpoints, a lot of different blinders I guess, because you've been working across many different enterprise organizations. In our show here, it's been interesting with some former guests, we've had a lot of discussion and debate about outsourcing in general, what is the future of outsourcing in different perspectives, in different thesis to it. When we talk -- and I'd love to get from you experience, when we talk about outsourcing today, we're often talking about moving work to lower cost offshore locations, or at least that's my perception, it might not be the correct wording for that. But don't the cost savings there meet the definition of transformation or at least on the expense side and how do you view some of that?

8:57 Rick Merson

Yeah, I think that's right. The primary driver for outsourcing has traditionally been effective labor arbitrage. And even before, back in early 90's, before we even got into talking about offshore and moving work to locations overseas, outsourcing was really a typical labor cost play. And there's a huge value there and it takes the right amount of expertise, investment, and skill to deliver that. So we don't wanna underestimate it. I think the point today is that we need to go beyond that labor arbitrage view. A lot of people in the industry and there's the expression, "mess for less" where people kind of talking about taking on an existing company's mess, existing processes for less money, and that's kinda pure labor arbitrage. I think the point is to get beyond that. And when we think about outsourcing today, there's really 2 kinds of companies. One, companies that have already realized the labor arbitrage benefits of outsourcing but now needs something more, and there's also companies that aren't comfortable of labor arbitrage yet but still need a more efficient way to deliver service. Both of these kinds of companies should be thinking about outsourcing from a transformational point of view.

10:13 Chad McDaniel

So then, what would be your point of view on this then?

10:17 Rick Merson

Well, twofold. One is, I think you mentioned this before, the marketplace itself is driving the need for step change. The customer expectations of change are a lot more holistic, there's a lot more pressure on all of us everyday. The other piece is outsourcing itself can be and should be inherently transformational. Companies can no longer afford to leave improvement on the table and only do labor arbitrage. And from an outsourcer perspective, if they're only offering a labor cost discount, they put themselves in a very tight margin situation, so they really need to offer more of the marketplace. Now, there's a couple of approaches to making outsourcing transformational. And some of the people of the phone, some companies are probably well down these paths, but some aren't. So 2 approaches. The first one is to get the inherent value of an outsourcer's skill, an outsourcer's technology, an outsourcer's rigor. Outsourcing really should be transformative, especially the first time you do it. And for many companies moving to the right outsourcers then they drive a new level of process rigor or new level of metrics rigor, and let the client reap the benefit of all of the investments that outsource service made in technology and process. So for those just starting in outsourcing, those lower on the maturity curve, and those with less skill, this might be the whole answer. But the key is the right partner and a deal shape that aligns with the company's quality and cost objectives. Now, the second approach is more far reaching. And that involves moving from a cost-per-hour or cost-per-transaction view to a full cost-to-serve view. And the denominator there can vary by industry, and the cleanest example is a cost-per-subscriber or cost-per-customer view used by monthly billers like telecom, utilities, financial services.

12:19 Rick Merson

But you can also use other things. I work with the finance client that uses the number of loan origination as their denominator and their cost-to-serve equation. Now when you focus on full cost-to-serve, well labor costs are still critical but it's only a last link in a longer value chain, and that value chain starts with reducing contacts, because if they don't come in you don't have to pay for them, reducing the time invested in each contact, and then finally you get to reducing the cost permitted of transaction time. And all of this kind of assumes that we're talking about quality, it kinda builds in both quality and expense because if you increase quality, you reduce expense. So, that's that part, Chad, back to you.

13:07 Chad McDaniel

Well, interesting, and when I think of traditional outsourcing, let's call it "call center voice" where it's a very mature model in regards to outsourcing, where that market has gone and is today. And you probably had a number of clients at Accenture come to you for a variety of reasons which some of that review in analysis and considerations. A little bit off key here for a moment, I'd like to get your thoughts though, Rick, when we look at the emerging channels of customer response such as social outreach and Web 2.0 or mobile video-type strategies, what we have found with our community is that a lot of that today is not being outsourced for a variety of reasons. Most organizations are holding that internally. It's kinda really the Wild West, it's unknown. What we've seen typically is FTE of 3 to maybe 5 FTE that these internal large corporate enterprises are staffing towards their social outreach. I'm gonna ask a little bit of a prediction or just again to sort of pick your mind a bit on this. How is some of these emerging channels response kinda add in to the mix of this whole transformational change and/or view, and are we really just on the very early stage of this? Or any insight that you can share from your perspective?

14:31 Rick Merson

I think early stage for some, not so early stage for another, but I also think of this as an extremely high-leverage activity that you wanna keep very close. So I think we were listening to Voice of the Customer Radio 2 Fridays ago, we talked a little bit about this, how could you outsource this sort of thing. And I think right now, I think there's a lot of things I would wanna outsource before, the 5 to 10 people running social media command center that really need to be highly integrated into the fabric of the whole organization. Over time -- and one of things I wanna talk about today is kind of a total outsource model where you have an outsourcer do everything for you, this might fit into that, but for now, I wouldn't start there.

15:23 Chad McDaniel

Okay. Again, it's always been a topic discussion and I'd love to get different people's viewpoints and predictions. In fact, one of our listeners said he'd like to share how you're approaching us right now or the thought process there. Please press 1 on your telephone handset or if you have a question you wanna jump in and ask, Rick. We always invite that type of interactive and informative dialogue and discussion. So please press 1, or if you're on the live chat, simply ask your question, I'll be happy to get the show -- or the question answered on the show here. So moving on here, I guess we're talking outsourcing being transformational for the first time -- or not the first time, but I mean, what's the path to the full cost-to-service focus with an outsourcer and any other considerations that we should all be thinking about with this view.

16:18 Rick Merson

The opportunity there and the challenge is effectively implementing the outcomes-based strategy. And I think about -- let's put into 3 parts. One is finding the right approach for the business situation and in a moment I'll suggest a couple of alternatives. The second is finding the outsourcer with the ability to fill in the skill, the resource and technology gaps the company might have, and also an outsourcer willing to truly put skin in the game. The third piece is structuring the contract. And the key here is to get objectives aligned as closely as possible. What you really wanna do is get yourself the client or the client company and the outsourcer sitting on the same side of the table metaphorically, so you're both incented by the same things and the contracts and the business arrangement drive the right behaviors. So there's a couple of approaches to consider there. Let's call the first one a total outsource, which is outsourcing everything but the core product, your service, and to our discussion a minute ago I would definitely include social media in the core. The company would retain a very tight-fitted core functions, possibly technology as well, and the contract would be structured to share risk, reward, growth, all based on customer experience and financial metrics. Now, the structure here is the key. Everyone's gotta be pulling in the same direction. And I'll also say while this may seem radical to some of you on the phone is like, "What do you mean, give up everything?" I've seen this work. The concept is so _17:56_ everyone's success that it's gonna get the right level of attention because both the client company and the outsourcer have this huge amount at stake. Again, I've seen this work, I've done this. I've personally participated in 3 large examples of this with thousands of agents, and I've also worked with folks managing several other arrangements like this.

18:18 Rick Merson

Now the other approach, making more conservative, let's call this the command center model. And I know the words commands center get used for a million things, but it seems to be the best description. And this is one where the company would retain accountability for the transformation itself, for the double digit or single digit movement, and the core functions needed to drive that transformation. And that, in my view today would include social media. The benefit here for the company is the level of control and it also allows the company to use a portfolio approach or a marketplace approach to combine internal and outsourcer sites in a network and really drive that network from that central hub. And how do you decide -- how do you -- and when somebody's ideas are a little new for folks, although there are people who are doing all of these now. But the question is, how you decide. Should I just outsource it all or should I go to the command center model? And I think the most important thing to think about here is the capabilities of the company versus what the outsourcer brings to the table. And a good way to evaluate that and think about it is to use a functional version of the capability maturity model, essentially a matrix with maturity factors for every function. That helps you determine where you are by function, what attributes are necessary, and then work on the business case. Now, I need to pause here for a minute because we started talking about outcomes-based approach and people get excited if this concept is getting a lot of their time in outsourcing circles, and not just in contact center. Listening to a webinar done by Horses by Sources, which is a pretty well known in outsourcing space around analytics, and they were saying that there's just a ton of discussion around outcomes, risk, reward in almost every deal shape people go in thinking about that. But the reality is when contracts get signed, you often find that getting dropped or what are down in favor of a more familiar hourly model. So if you're not there, a lot of other people aren't either.

20:36 Chad McDaniel

You know, we have just -- time flies in the show episodes and we're getting short on our 30-minute allotment, but Rick, first of all, as we mentioned, we have a number of HR listeners and other corporate leaders, you're in transition at the moment. How do people get a hold of you if they wanna ask you a question or if they wanna ping some ideas or just general tapping into some of your thought knowledge on this. Can you share with the show listeners how they can get a hold of you or send you an email?

21:09 Rick Merson

Absolutely. I'm very happy to talk to folks outside of the show. The email address is rickmerson@hotmail.com and my contact phone number is 914-522-9254.

21:35 Chad McDaniel

And again, that's Rick Merson, M-e-r-s-o-n. And Rick, you're also on LinkedIn, they can find you on LinkedIn.

21:41 Rick Merson

I'm on LinkedIn, and Chad, obviously, if the folks are connected with you, you know how to get me as well.

21:48 Chad McDaniel

Excellent. So with that, Rick, let's -- if you had to be an advocate of everything we've talked about, what would be your advice for our callers or what would you really want to reinforce and hammer home to us to be thinking and considering on some of the conversation we've had today or you really would like to highlight in this conversation?

22:15 Rick Merson

I think the key is to think about outsourcing as a business opportunity, as a strategic opportunity, and to make it as transformational as possible. Which to me means, when you think about your deal shape and when you think about your supplier, think about the full expense site, think about the full revenue site, not just if you can get like a dollar per hour off or the different minute rate, not that that's not important. I look at it more holistically.

22:52 Chad McDaniel

Have you seen situations where outsourcing was not the right answer?

22:56 Rick Merson

For whatever reasons? Yeah. I have. And I think -- actually, it's sort of an education for me. We're working with one of our large telecom client and I was talking to my executives there about why they weren't interested in outsourcing. And the point that was made is that, "Rick, I've got - I'm running an outsourcing because I have all the skill, I have all the technology, I can do all the things that the outsourcers are doing within the constraint of working it," now the constraint he was working in was unsure. So at that point, there was no appetite for moving politically and financially for moving calls to other locations. Now, that person actually had since moved on and had done some offshore outsourcing kind of change. But at the time, there wasn't any labor arbitrage advantage, there wasn't any transformational advantage to moving somewhere else. I think that's changed, but that's my long answer to a short question.

24:00 Chad McDaniel

Very good and I'm sure there's a lot of different perspectives, a lot of different opinions and debates, and we've seen quite a number of movement to what happened with traditional voice outsourcing from the offshore to onshore to near shore and all of the other components of transformation. You're listening to Voice of the Customer Radio. We have Rick Merson from formerly Accenture, vice president, partner, senior executive, the business process outsourcing group. Rick, in our few minutes left again, if you'd like to reach Rick, you can find him on LinkedIn, Rick Merson, M-e-r-s-o-n. Rick I guess, in final comment, the things that you may be able to assist our listeners with and to help them engage is that in the evaluation of to or not to outsource or some of the considerations they should be thinking about, if that's a model they're going down or how would you best phrase that?

24:56 Rick Merson

I'm sorry, can you rephrase the question?

25:00 Chad McDaniel

To the table, I guess there's a lot of things you could do organically to help an organization. And I guess in regards to some of the strengths that you would be able to bring as a really non-biased view about where they sit today, how you may be, if it's a right answer, wrong answer for them to consider some of the strategies that we've discussed here today.

25:20 Rick Merson

What I really kinda enjoy doing and can help with -- this whole outsourcing thing -- I think I kinda go back to kind of the broader point where we need to look at the business holistically. So the question is, I don't know that many people are asking me, should I outsource, should I not outsource before are questioned anymore. I think they're kind of asking about, "How can I use this in my quiver and my portfolio and how am I gonna handle it." So I think we talked earlier in the call about functional maturity models, capability maturity models, and I think that where I can help is how you -- where you outsource, what you outsource, and how you structure that outsourcing. There's just a lot of information in the marketplace about different costs and many different providers are anxious to talk to you, I think the key is finding that right mix or that right single outsourcer who can really solve your value, problem -- a word I use is transformation, but it can really help solve for revenue expense, customer satisfaction, and employee satisfaction, set of that model.

26:37 Chad McDaniel

I think very well stated and I agree. I like that comment about as a potential quiver versus -- you know in the arsenal, versus the traditional bigger question. And I think that's spot on. Rick, it's been a pleasure having you on today's show. In fact, thank you for sharing some thought leadership with us. For our other listeners out there, if you have -- you'd like to be part of Voice of the Customer Radio, you have a story, you have something you folks are doing, we'd love to hear from you. Again, the intent of Voice of the Customer Radio is all around thought leadership and sharing. Because it is a tough complex world these days when we look at the integration channels out there with customer response and there's a lot of not necessarily right/wrong answers, it's just what is the best answer based on your current situation. With the last minute we have left, Rick, just parting words of wisdom, encouragement, any predictions that you'd like to leave us with here, and again, we really appreciate having you on the show here today.

27:38 Rick Merson

And I certainly appreciate the opportunity to be joined. I think my prediction is you're gonna see more people thinking about as outsourcing matures, and it is pretty mature already, but I think we're gonna see more people taking this transformational view, maybe they'll have a different name, maybe transformational isn't right. But I see people taking a more holistic view. Even -- in the work that I've done over the past 5 years, you'd see more and more arrangements going that way because people understand that just looking at kind of an individual clause, on an hourly basis or something like that and not looking at the whole business helps them at short term but isn't really helping them obtain their business objectives.

28:24 Chad McDaniel

Very good, and that's a great final line here. The show can be downloaded as soon as we hang up here. Go to the URL, you can download today's episode to your iTunes or any RS reader seeder of choice. Rick, great having you, and thank you again everyone for listening to Voice of the Customer Radio. We'll let you know about our next show guest, and everyone, have a great day. Thank you. Thank you, Rick.

28:51 Rick Merson

Thank you.