Selecting the right partners to optimise service delivery

Selecting the right external service provider can be a complex decision. Creating a formal decision framework allows an organisation to bring valued rigour and structure to the decision making process.

All organisations, to varying degrees, use external service providers. For some, the partnership with others may be minimal, periodic and a support for core service delivery, such as the use of audit or legal services. For other organisations, the partnership is extensive, ongoing and central to delivering core services to customers. As examples, superannuation funds outsource many aspects of member administration and investment management, and healthcare providers outsource diagnostic services.

In some instances, the appropriate service provider will select themselves, perhaps for reasons of ongoing performance or unique capabilities. Experience suggests this is typically less common, for at least two reasons:

1. In selecting an external provider, organisations will be looking to address a number of needs, such as quality of service, responsiveness to requests, and cost.
2. Each potential service provider is likely to have a different capability set, with distinct strengths and weaknesses.

A robust decision framework is the key to success

Creating a formal decision framework allows an organisation to bring valued rigour and structure to making a complex decision ^{[1]. It provides clarity on the:}

• objectives of the decision making process
• quantitative and qualitative measures that should need to inform the choice of service prover
• relative importance of different measures.

The starting point is clarity on the goal of the decision making process. This could include, for example, ranking the existing performance of service providers to facilitate contract extension. The goal then cascades to broad factors, and for complex decisions, often sub-factors that influence performance. A broad factor could be "Ability to achieve desired consumer outcomes", with sub-factors of "Capability to respond to different customer segments" and "Speed of delivery".

A measure, or perhaps a number of measures, is assigned for each sub-factor (with ideally a mix of quantitative and qualitative measures across all sub-factors), and each measure is weighted to signify relative importance. The diagram below brings this together, showing the inputs, the decision making process and the outputs.

How it works in practice

Nous partnered with a large financial services organisation about to embark on a significant change in how it delivers services to customers. The organisation wanted to drive a substantial increase in customer satisfaction and also strengthen its long term sustainability. To help facilitate the change, the organisation wanted to reduce the number of its service providers. Nous was engaged to build a framework to assess the performance of existing service providers to help decide which to partner with in the future.

We worked with key experts across the organisation to develop a robust and evidence-based mechanism to develop the framework. The development of the framework brought a number of benefits. The people we engaged with especially cited the ability to:

develop a comprehensive understanding of the factors which should inform choice of future service provider

• determine which of the many quantitative measures of performance it tracked were truly important for choice of future service provider, and also the relative importance of those factors
• consider, develop and then incorporate qualitative measures of performance, such as around the ease of ‘doing business’ with service providers, which had not previously been measured.

Per the diagram above, the framework provided a percentage score for each service provider, allowing the different providers to be easily ranked. It also allowed the organisation to more clearly see the strengths and weaknesses of each potential partner, to help drive ongoing performance improvement.

Nous works with organisations to define their challenges and build comprehensive decision frameworks that address them. Get in touch for more information.

[1] The approach draws on multi-criteria decision making. For further information, see: Koksalan, M., Wallenius, J,and Zionts, S., Multiple Criteria Decision Making: From Early History to the 21st Century (2011).