Michael Montonen
Michael Montonen

Outsourced service and employee transitions are complex processes as is. Add to that the new layers of risk triggered by COVID-19, and careful, strategic transition management has never been more crucial. There is so much uncertainty, threatening rolling periods of business disruption due to schedule delays, lack of infrastructure, and overall poor planning and execution. By following some of our recommendations, the uncertainty and risk can be lowered to ensure a positive and, most importantly, rewarding transition.

Here are the top six transition risks and mitigation strategies based on our most recent engagements in the first half of 2020:

 
1. Work-from-home issues (low team motivation and quality of service)

Working from home can pose additional burdens on transition activities, especially during the execution stage. Dissemination of the collective knowledge is understandably more difficult with employees spread across multiple locations and time zones.

The transfer of knowledge from the incumbent to a new provider is a vital part of the transition process. The incoming team should be equipped with not just technical knowledge but also domain, processes, tools, infrastructure, governance, and relationships. Properly communicate the importance of the engagement, its specifications, and unique requirements to the whole delivery team, right down to the junior employee. This is to ensure that the new team is able to provide the service at agreed SLAs.

Poor knowledge transfer can lead to decreased efficiency in service delivery and additional operational risk.

Mitigation strategy:

Make the extra effort to properly motivate the staff. Establish clear expectations with the incoming team doing the work regarding the quality of the work, customer procedures, and any special considerations discussed during the sales cycle. Also establish a layer of governance, including supervisor’s communications, oversight, and quality check of work being done by the operations team. This minimizes the risk of quality of service degradation after contract execution.

 
2. Due diligence vs. reality are vastly different

There can be a mismatch with the data provided in the due diligence prior to the signing of the contract vs. the reality after. Often, data collection is done quickly, and some important detailed aspects of the operation can be overlooked.

Mitigation Strategy:

Confirm the due diligence data with the supplier to ensure that they have all the necessary information to develop the pricing and solution. Also, ensure that any uncaptured “tribal knowledge” regarding process and procedure is documented for the supplier. This might be a tall order in the work-from-home scenario, but highly necessary to ensure that all internal processes and work methods are properly documented and provide the supplier with a more accurate picture of the service demand.

In addition, develop a transition strategy that outlines a stepwise schedule approach that tests transition readiness, increasing scope, and complexity as specific criteria are met.

 
3. Not enough resources for global delivery (24/7 shift coverage)

Shift coverage in a 24/7 environment can be an issue if you don’t factor in the average volume of tickets received in your transition plan. If your staffing levels are not adequate for the Follow the Sun model, some parts of the business will be affected and will result in increased P1 and P2 escalations.

Mitigation strategy:

Review the 24/7 global coverage operations during the due diligence process by having the incoming supplier’s employees watch over the shoulder of the current team doing the work in all service locations. In the work-from-home scenario, use home on-screen mirror monitoring to document operational realities.

 
4. Lack of supplier planning and process visibility

In the work-at-home scenario, it is difficult for you to have a line of sight into all the internal transition planning and preparations in terms of transition staffing, tools, and supplier processes. This includes having visibility into the staffing for the supplier transition team (often a temporary project team) and the delivery team, which should also be part of the transition before the go-live date of ongoing operations (usually the service commencement date).

Mitigation strategy:

As the client, you should have regular insight into certain main activities by the supplier during the transition planning and execution. These activities include:

  • Ensuring essential delivery team members have been staffed and are participating in transition activities
  • Ensuring the transition team is in place and ready to perform according to the transition plan
  • Vetting of the full-time transition manager by the client
  • Developing a tools implementation plan with milestones and clear reporting lines to the client
  • Visibility into key HR or personnel escalations during the transition (for transferred personnel)
  • Visibility into any process and documentation gaps that become evident during the transition
  • Measuring and recording the success rate of HR transfer offers (percentage of accepted and retained offers after 30 days). If the success rate is less than 80%, you need to know if the supplier has a contingency plan.
  • Monitoring contractor turnover and skills quality if any incumbent contractors have been transferred to the supplier
 
5. Struggling with managing service provider effectiveness

Both the organization and the supplier must have a positive attitude going into the transition. These are uncertain times and if the partnership isn’t cultivated to be stable and trustful from the start, the outlook is not promising. Starting the relationship off on the wrong foot could lead to friction and resistance among the team. A positive can-do attitude on both sides, backed by kept commitments, will create the starting point for a trust-based relationship.

Mitigation strategy:
  • Discuss all the risks upfront and the associated mitigation strategies on both sides
  • Set up an effective transition governance structure
  • In case of rebadging, establish a clear and well-understood reporting mechanism for transitioning employees in the new supplier management structure (avoid direct communications outside of that structure with the old “friends” in the incumbent or in-house teams). Establish clearly who new supplier employees go to for issue resolution.
 
6. Getting accustomed to an all-remote associate HR process

One of the major transition risks related to HR is employee flight risk. It has always been a serious issue, but the pandemic has only amplified it; now that all communications are done remotely, you lose that in-person soft touch—the opportunity to explain and assure in a meaningful way. As in-person communications, offer, and onboarding, are not possible now due to the pandemic, there are several steps you can take to prevent employee flight risk.

Mitigation strategy:
  • Conduct virtual town halls with smaller employee groups so that the messaging can be more personal
  • Have a well-defined organization change management plan with consistent messaging
  • Provide access to executive management for individual questions and concerns that will arise
  • Conduct a well-oiled employment offer process where the employee feels that she or he is valued and has a positive future with the organization

Michael Montonen
Lead Principal

Michael Montonen brings more than 20 years’ experience in driving digital transformation and innovation in Fortune 500 companies and other leading global conglomerates based in the US, Europe, and Latin America. With a strong background in sourcing advisory, IT strategy, enterprise architecture, cloud services, and infrastructure optimization, he has helped CIOs, COOs, and CEOs utilize IT effectively to improve business performance.

Mastering the Four Stages of M&A Integration

Nov 16, 2020

How can IT prove its value and play a bigger role in M&As? Start by examining the four stages of M&A integration.

Unlock the Benefits of Remote Working

Nov 10, 2020

Best practices to guide enterprises through the remote working revolution

Have a Question? Just Ask


Whether you're looking for practical advice or just plain curious, our experienced principals are here to help. Check back weekly as we publish the most interesting questions and answers right here.

Ask Wavestone