In a recent article featured in Supply Chain World Magazine, I discussed how manufacturing innovations, specifically large-scale 3D printers, are bringing jobs back home to the US. At the same time, computer-based innovations in process automation and workforce performance management are helping companies to increase productivity of in-house workers and cut the waste of outsourced operations.
Rising Cost of BPO in Offshore
In 2005, a PWC report listed the average salary of US-based call center employees at $19K per year, while their Indian counterparts took home just $7.5K per year. With the allure of low cost of labor, outsourcing operations such as IT, financial services, and technical support have historically allowed companies to reduce fixed costs (fewer FTEs), add flexibility to scale business, and focus on core-competencies at home.
Payscale.com lists a median US-based claims processor salary of $33K/yr., and Outsource2India advertises claims processors between $15K-$22K/yr. per FTE. In a 2010 interview, Phil Fersht, CEO of HfS Research, stated that “in some cases, workers in India are making only about 15 percent less than workers in Nebraska”. Today, [in] “Bangalore many probably earn more.”
While there is still a significant gap in FTE costs between the US and offshore, companies don’t need to look much further than inflation rates to see that the cost advantage of BPO in India is quickly closing. According to World Bank, inflation based on CPI, from 2010 – 2014 in the US was 1.5% compared to 10.9% in India. The cost of an FTE in India is rapidly increasing while US worker compensation has remained fairly stagnant. To further narrow the gap, a rise in the adoption of home workers in the US is helping companies to decrease overhead by as much as 20% when compared to brick and mortar operations (Source: NPR).
As savings decrease, companies are forced to evaluate additional costs/benefits of BPO such as quality difference, lack of direct managerial oversight, frequent labor turnover, brand perception, and IT security. For health plans, the risk of a Protected Health Information (PHI) leak can be catastrophic, and large salary savings are necessary to justify threats.
One of our healthcare payer customers recently replaced 100 outsourced FTEs with 50 US-based direct hires and increased production volumes and quality of work. To maintain competitive advantage, companies need to find lower-cost BPO hubs, automate repetitive processes, or execute operations in-house with greater efficiency and quality.
Enable the Best
Outsourced FTEs are rarely incented to suggest process improvements, lack of direct oversight makes it difficult to identify performance problems, and short-term assignments mean they are not fully invested in your company’s success.
Increasing worker performance is not about adding carrots, finding a bigger stick, or working longer hours. Smarter managers know that to get more work out of a smaller workforce they focus on increasing engagement, maximizing work time, identifying bottlenecks, and training teams based on the actions of top performers.
Whether a company is looking to automate processes or increase workforce performance, the first step should always be measurement. In the AHIP webinar Improving Employee Performance Through Measurement, Ed Peters, Open Connect CEO, and Jim Sinur, formerly Distinguished Analyst Gartner Group, discuss this topic in detail.
Most BPOs provide clients with macro-level production reports pulled from core systems. These reports identify NET production levels, but meaningful workforce performance measurement explains how employees actually spend their work time. Measurement should be automated, and not require laborious self-reporting and activity log. Task-level detail, such as the time spent adding missing details to a customer record, comparing documents in an imaging system, or researching account history can help managers to identify bottlenecks and training opportunities.
Not all processes require a human, but BPOs won’t advertise opportunities to reduce FTEs. Process automation software, such as WorkiQ Automation, has seen drastic improvements over the last decade. Back-office operational tasks that are computer-based and repetitive can be automated. Software robots can now perform online research, compare digital forms, create customer records, and execute artificial-intelligence levels of process complexity. By augmenting a portion of labor force with process automation, companies can reduce NET headcount, improve cycle time, and free up employees for higher value-add activities.
A decade ago, insurance auto-adjudication rates around 90% were unheard of. Now, most of the health plans I work with are automating over 85% of their claims on first pass. Significant advancements in process automation are the result of increased form/document digitization, an overwhelming abundance of real-time online data, and detailed process measurement. Today’s software robots not only follow the steps of pre-scripted workflow, they learn from their human counterparts and build a better workflow.
Again, good automation builds on good measurement. Before companies start to automate any process, they need to have a very good sample of data points that explain how top (human) performers would complete the automated task.
Smarter work is achieved through the continuous analysis of the work activities and processes, to ensure automation and performance management outperforms BPO contracts. For more information about WorkiQ Workforce Analytics or WorkiQ Automation, please visit openconnect.com.