Companies use a range of different metrics to track performance, but most have key performance indicators (KPIs) as part of the mix. Typically KPIs would be used within an organization to measure the performance of staff or processes, with targets set for levels of success and triggers for intervention if there is underperformance.
When it comes to outsourcing particular functions or tasks, KPIs can play a critical role in ensuring high performance. And reaching KPIs in the most efficient way is the answer to the question “why do companies outsource?”.
Broadly speaking, KPIs measure three different things in an outsourced environment:
- the success rate of particular work;
- the costs of that success;
- the time taken to achieve it.
And you likely have internal KPIs measuring the same things, so it’s useful to embed them in your outsourced supplier so you can report internally on progress more effectively.
So why do companies outsource? Well, when you’re outsourcing work, probably the key KPIs required to track the effects of your decision are those that focus on success. For example, when it comes to prosecution, you can set KPIs for the percentage of applications that face opposition, how many of those you win, how many you negotiate a settlement on, and so on. It’s also worth setting KPIs for the numbers of successful filings so you can track progress over time, and importantly, track the performance of the external supplier relative to how the situation was when you were managing the work in-house.
In general, outsourcing should achieve either the same performance as in-house for lower cost, or better performance for a cost (in financial or other resource terms) that is proportionately less than it would be in-house.
Similarly when it comes to counterfeiting, there are sensible success-based KPIs you can use, such as the number of cases that have been identified and solved, whether through the courts or by other means. Depending on your priorities, you might also wish to set KPIs for damages received from counterfeiters, though if your priority is to focus on non-judicial resolution, set targets that incentivise that approach.
Saving Time and Money Through Outsourcing
KPIs are critical when it comes to measuring your investment in outsourcing. To some degree it doesn’t matter if your supplier takes longer than you would have in-house to do a particular piece of work: if the price is fixed for a specific activity, it doesn't matter the supplier takes 1, 5 or 10 hours to deliver (as long as any delays don’t add risk to your portfolio).
However, it is important to set KPIs that measure what you’re getting for your investment, both in terms of hours spent and outcomes. Finally, we remind you that if a deadline is missed and there are extra costs, it doesn't matter that you have KPIs set: the supplier has to pay for that.
Transparency is Key
Managing KPIs with an external supplier can be difficult, because there’s a risk that communication challenges mean that each party has different expectations. It’s vital to be clear right at the start of the process on what your expectations are, even at contract stage.
KPIs can be made contractual, though there are risks to that approach since if your priorities change it may be a challenge to change the metrics with them. However, just as with internal KPIs, making sure that everyone really understands and accepts that the measures are important, and that they’re the right measures to ensure performance, is key to success.
As you can understand, the answer to the question “why do companies choose to outsource” is because they want to reach their KPIs in terms of costs, time, and success. If you can achieve this successfully, not only will your outsourced supplier achieve their KPIs, but so will you!