THOUGH NOT FOR ALL, IT CAN BE MORE
INEXPENSIVE AND EFFICIENT OVER THE LONG HAUL
BY JERRY ROCHE
Certainly the main reason that business executives
choose to outsource their training function to an
external service provider is because of its
bottom-line (read financial) advantages. But another
good reason is that a training partner can provide
an organization’s employees with access to
cutting-edge philosophies, tools and practices. In
addition, outsourcing the training function can free
up or facilitate reallocation of a company’s
existing resources.
“While outsourcing isn’t right for every
organization, it is an option that should be
considered and evaluated by managers on a periodic
basis,” notes Josh Bersin, president of Bersin &
Associates. “Studies show significant cost and
strategic benefits.”
This is not to say that internal training
organizations are inferior.
“Many internal training organizations do a great job
of meeting their customers’ needs,” adds Dan Miller,
vice president of General Physics Corp. “They just
aren’t as efficient, effective or as experienced as
a company whose core business is training.”
WHY OUTSOURCE?
Bersin points to the money-saving advantages of
outsourcing the training function:
>>
LMS implementation costs: Research shows that in the
first year of LMS implementation, companies with
inhouse training spend an average of $392 per
learner, compared to $328 for companies that
outsource.
>>
Operational costs: Outsourcers can take advantage of
economies of scale and efficiencies of
centralization that are not available to in-house
staffs.
>>
Reduction in technical staff: “Research shows that
companies that use outsourced technology platforms
are able to reduce their technical staffs by almost
half, compared to companies with internally managed
systems,” Bersin notes. And don’t overlook
peripheral values to your company.
>>
Focus on core business: “After all, every company
has a limited number of human resources, ”Miller
observes.
“These resources should be focused on servicing
your customers and improving your product, not
implementing [in-house] systems.”
HOW TO CHOOSE
The first step in outsourcing, obviously, is to
determine whether your company is capable or
prepared to outsource training and if, indeed, the
move would pay off in improved performance and
efficiencies. More often than not, this involves a
thorough internal assessment of your operations.
Once you’ve determined that outsourcing is the
proper option, you must decide what activities
should be included in your model. It may involve
consolidating decentralized training functions,
identifying a leadership team and developing a
project plan.
These two initial steps are not easy. Because they
must be thorough, they are often quite involved and
usually require the attention and input from various
inhouse employees.
The next step is to identify possible training
partners best match your particular needs. This can
best be accomplished by providing vendors with a
“Request for Information” (RFI), which includes an
executive summary of the operation to be outsourced,
in three to five pages. In order to “apply” to
possible partners, you must compose a 15- to 30-page
“Request for Proposal” (RFP). Its intent is to
provide outsource companies with the information
they need to submit a comprehensive solution to your
request. The higher the quality of the RFP, the
higher the quality of proposal you will receive.
RFPs include an executive summary; a detailed
description of the process to be outsourced; volume
and value metrics for the most recent one to three
years; specific process and performance expectations
of the outsourcing supply partner; a responsibility
matrix defining expected responsibilities of both
you and your partner; and proposal guidelines.
With these two documents in hand, vendors can then
exactly match to your request the services they
offer, how they are implemented, and how effective
similar efforts have been with other companies.
The final document you will need is a “Request for
Quote” (RFQ), which you will send to your final one,
two or three choices. Its purpose is to provide you
with specific pricing and/or cost information. The
response(s) you receive from the vendor( s) will
help you finalize your choice.
FINAL PREPARATIONS
Once you have chosen a training partner, you must
thoroughly exercise due diligence before signing the
dotted line. In large and complex transactions, this
includes the legal tracking and disclosure of
specific reports, documents and databases. In
smaller transactions, the process is less formal.
If your top choice for a training partner appears at
this time to be the correct one, initial
negotiations can begin. With your new partner,
define specific terms of the agreement and devise a
formal document. This stage is often the most
strategic, most demanding and most lengthy,
depending on the sophistication, scope and scale of
the agreement.
Two forms of contracts comprise most corporate
agreements: a Master Services Agreement (MSA) that
defines generic terms to each functional area; and a
Service Level Agreement (SLA) that defines specific
deliverables and service requirements. A pricing
schedule is included in the SLA. The contract also
should stipulate a system to determine if the
employee is actually applying the knowledge and
skills and thus if the outsourcing partner is being
effective. Finally, it should spell out the
conditions under which either party can terminate
the relationship, as well as an orderly process by
which operations can be returned to the business or
transferred to another outsourcing firm upon
termination.
Contracts are executed for a period of one to five
years, depending on your demands and the
capabilities of your partner. Once the contract is
signed, there follows a transitory period.
Thereafter, you must work with the partner to
monitor and evaluate its continuing performance.
Near the end of the contract, of course, comes a
time when you must make your final decision:
continue the existing relationship with your
training partner, bring training back in house, or
seek a new training partner. At that point, the
decision may be an easy one.
MOVE CAREFULLY
Particularly if you are a small business, you have
to exercise good judgment in making your training
decisions.
“Ideally, an outsourcer will treat your business and
its data at least as carefully as you would,” opined
an article in
BusinessWeek
magazine. “But in reality, a small business is just
one of the outsourcing company’s many clients, and
probably not the largest one. Moreover, the
outsourcing company’s standard contract often
doesn’t provide for the kind of care and priority
that a small business would place on its own
operations.”
Bersin notes that the disadvantages to outsourcing
include the challenge of making and following
decentralized budgets, and limitations on the
technical flexibility of your training program.
“At best, and outsourcing company can become a ready
partner, providing access to revenue-enhancing
technology without incurring up-front training and
equipment costs,” notes a leading business magazine.
“Done improperly, it can result in delayed
operations, unhappy customers and significant
costs.”
The lesson? Move carefully!
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