The first time I spoke to Lee Coulter, I was an analyst at the old AMR Research (now Gartner) and managed to get him on the phone, where I hoped to convince Kraft’s global überlord of shared services, IT and outsourcing to spend at day at a roundtable I was organizing. ”You’ve got 5 minutes to convince me why I should invest my time with you”, was his response. I knew straight away this was a guy who didn’t like to xxxx around.
Since then, Lee has been a great friend in helping us establish the HfS Research organization three years ago, in addition to lending his time and support helping us assemble the most irresistible community of senior sourcing practitioners. For those of you attending our dreamSource summit this Spring, Lee and I will co-host a session entitled “If outsourcing were an employee, it would be fired“. Lee, who today has built and now leads shared services for heathcare provider, Ascension Health, caught up with us last week to talk about the session and why we called it just that…
Phil Fersht (HfS Research): Good morning Lee – a pleasure to get you on the line today. You’ve been a well known figure in sourcing shared services and outsourcing world for quite a few years now. Can you tell us a bit about your background and how you got to where you are today?
Lee Coulter (Ascension Health): Sure, Phil, I guess it goes back quite a ways! Originally, I guess I was starting my career in what wasn’t really an outsourcing or shared services configuration. Actually as a delivery guy, I was a service engineer delivering services to hospitals and health systems. Twelve years, later I had moved from delivering services for diagnostic imaging equipment to delivering services for IT. And it was pretty surprising to me to find that the whole delivery process was a copy-paste, it was the same stuff. Today, I am in my sixth industry and I have managed every function in a company except marketing. And every time I come to look at these things I find the service delivery process is the same. So, shared services and outsourcing I don’t really consider them to be different. There happens to be a second set of shareholders in an outsourcing relationship, but the dynamics of establishing the service, the KPI’s, the unit of service, the unit of cost, the drive to innovate and then retransform, all of those things… they are essentially the same.
So, I had an opportunity through my career to sit on a commercial outsourcer as well as a buyer and doing so with long-shore, off-shore, near-shore, in-sources, outsources I have kind of had a chance to do kind of all the major things within the industry.
Phil: So, what’s changed, would you say, in the last decade? Do you feel that the attitudes and approaches of enterprises have shifted at all, or do you think we are still going around in the same circles?
Lee: One of the expressions I have been using lately is that the expectation of the business today is far more than simply to “successfully transact”. When you look at what typically gets included in the shared service or outsourcing scope, it is typically transactional or business-rules based work. If we look back to the 80’s and 90’s, it was really about “getting to OK”. If you got “OK”, meaning you successfully reduced the cost of delivering it and you successfully met the very basic expectation of simply “do the transactions and do them satisfactorily well”, that was the challenge. Today, that is no longer considered a challenge; those are now table-stakes.
So for every practitioner, whether they live inside a commercial provider, or inside a company, the expectation is much bigger. It is around business process effectiveness, business process transformation, business insight through analytics, the addition of certain skill-sets that are created to help manage in a shared services or outsourcing environment, like project management and quality, Six Sigma and that kind of stuff. So, all of a sudden what used to be the objective has now become the table-stake. Now businesses are expecting a whole different level of contribution – I’m not just saying performance, but contribution by the shared services/governance organization.
And now you also introduce a couple of major disruptors, namely technology and cloud. And it’s kind of funny, cloud has been around a very long time. When we go back far enough we could argue that AOL, CompuServe is where cloud and well, I guess in the strictest definition they were. In the way we talk about cloud today, where you have applications-as-a-service and cloud-based service platforms which are location-agnostic, in terms of whether resources are need to be there delivering service, it really changes the game in terms of what level of contribution you can have to an organization.
Phil: We’ve got new data that shows the desire to standardize processes is very, very strong behind an outsourcing decision. How much is that playing into the hands of the providers who have good technology? Do you think that the ability to couple good platforms with the right process is now the way to go?
Lee: Absolutely, I would even offer a little bit more, which is the level of variation in core processes is diminishing from organization to organization. What do I mean by that? Well, if we go into some of the tried and true world of shared services and outsourcing… let’s take F&A, AP – your basic hire-to-retire services. It used to be that there was a pretty enormous variation. But, over the last twenty years the adoption of things like SAP and other ERP solutions and the broadly available best practice operating models for running these parts of your organization, have resulted in less variation. Well that means a service provider can build a technology platform and it used to be it was a pretty big leap in terms of process transformation to get a client from their existing process to what we’ll call a best practice standard operating model. More and more companies, to the extent that has been possible for them, have already attempted to adopt these best practice operating models. So, it increases the speed and minimizes the amount of change and disruption from these transitions.
Phil: Lee, we are delighted to have you lead one of our core sessions at our dreamSource summit this year. And, I am going to give you credit for coming up with the title “If outsourcing were an employee, it would be fired”. How did you come up with that and what is the thinking behind it?
Lee: So, let’s say you have signed an employment agreement with someone to become and employee for seven years with some options to extend. Your employee starts and you put some objectives out there around getting control of the stuff and delivering these transactions. You have your annual review and they’re saying, “I’ve now got control of the process and I’m transacting. Pretty soon it will be stable and I will be consistently transacting these services”. You get to the next year and you ask the employee what are their objectives and your employee responds “Well I am going to keep right on transacting”. And the following year you ask “What are your objectives this year” and the employee responds “Well, I am going to try and transact a little bit less expensively”. And every year is the same conversation about “Well, I am going to meet my SLA’s, and I am going to try and not disrupt our business”. Is that the kind of employee you want working in your organization? It’s really become the longest-lived most frustrating conversations around outsourcing in the nation.
The framework of the relationship between outsourcing as an employee and the employer needs to be driven to change, and the employee needs to provoke that. For the folks that work for me, if they give me the same goals this year that they had last year, and their performance is simply a “meets expectations”, well if I keep them around that long, my expectation is that we continually increase the scope of our objectives and that we look for ways to increase our contributions to the business and force ourselves, by virtue of establishing these goals, to do that.
The vast majority of outsourcing relationships don’t fit this model. All the FTE relationships that every single year has the same expectation – “Well, I am going to transact and I am going to wrestle with you on forex and inflation to offset the price reduction you think we should get”. That’s not an employee I want, I don’t know about you…
Stay tuned for Part II where we talk about how this industry can get out of its own way to evolve these rigid relationships…
Lee Coulter (pictured above) is Senior Vice President and Chief Executive Officer, Ascension Health Ministry Service Center, LLC. As a distinguished practioner in the fields of outsourcing and shared services he has held several senior operations leadership roles at Kraft, AON and GE. Lee also serves on the board if HfS Research. You can view his full bio by clicking here.
(Cross-posted @ Horses for Sources)