If you have read my previous blog post Necessary Evil Time The Raison d’Être of Knowledge Process Outsourcing, you will have seen my breakdown of a hypothetical average day of an expert from your business into four activities, like this:
I identified experts as those employees involved in core activity, whose output contributes directly to the business’s top line — people (depending on the nature of the business) such as technical salespeople, advisors, analysts, designers, editors, engineers, inspectors, planners, scientists, technicians… And, I identified two important periods of daily expert activity:
- Raison d’être time — the expert doing what he or she is employed especially to do, which adds directly to the top line
- Necessary evil time — reporting on or preparing for raison d’être time.
In this post, I explain what happens when certain functions within necessary evil time are outsourced to a knowledge worker. In short, two benefits occur for the business: the expert contributes more to the top line, and the cost of that output becomes proportionately lower. Let’s look closer at the figures. In the above chart the breakdown of expert output and cost (salary and overheads pro rata to time) is this:
|Raison d’être time||100%||40%|
|Necessary evil time||0%||40%|
|Lunch and other breaks||0%||20%|
We can express the cost per unit output here as 100% (cost)/100% (output) = 1.0 (unity). Wouldn’t it be good if the expert could spend more time on his or her raison d’être? That’s when they produce! Suppose for example that one-quarter of necessary evil time is the portion that fully supports raison d’être time (the other three-quarters might be reporting, meetings, and other internal functions). What if we could somehow transfer that one-quarter (i.e. 10% of daily time) to raison d’être time in order to increase the output? Raison d’être time would then rise by one-quarter to 50% of daily time thereby enabling the expert to produce an additional 25% within the same day! So, what about the 10% of the day moved from necessary evil time to raison d’être time? This would be taken up by a knowledge worker, engaged to pick up the tasks dropped by the expert: research, data capture and cleansing, data retrieval and organization, preliminary analysis and other tasks that form a necessary precursor to raison d’être time. Take note: because the expert is now producing 125%, the knowledge worker will work for not just 10% of daily time, but 12.5% (also 25% more) — otherwise the expert would not be supplied fully. Between the expert and the knowledge worker the worked time is over 1 day (112.5%), but this still represents a cost benefit per unit output. How so? Even if the knowledge worker costs per hour the same as the expert, the cost per unit output has dropped to 112.5%/125% or 0.9, which is very good for the business, is it not? Better still, knowledge workers have an hourly cost of the order of half that of the expert, because they are based at an offshore location. Additional cost to the business is therefore not 12.5% but 6.25%, bringing cost per unit output down to 0.85 in this scenario.
The figures are these:
|Output||Internal Cost||KPO Cost|
|Raison d’être time||125%||50%||0%|
|Necessary evil time||0%||30%||6.25%|
|Lunch and other breaks||0%||20%||0%|
Does the knowledge worker only work 12.5% of a day in this example? Of course not! There are any number of experts being supported so, with proper co-ordination, an appropriate number of full-time knowledge workers can be employed to support them. The number of knowledge workers needed is worked out according to the number and duration of tasks being outsourced, coupled to required service levels. Everyone’s figures will vary but the principle remains the same. Below we can see what happens across a range of situations assuming a 40% necessary evil time (although it could be different) and outsourcing progressively larger portions from 5% up to the full 40% — when the expert is essentially committed to raison d’être time for 80% of the day and fully supported in this. We can see that as the daily output increases, the cost per unit output goes down.
What we see here is that the necessary evil time of an expert becomes the raison d’être time of the knowledge workers! KPO is both financially advantageous, reducing cost per unit output, and liberating for the expert not simply to produce, but to do more of the work they love. This begs a question: how is a knowledge worker even qualified to pick up the necessary evils of an in-house expert? I shall explain this in the next post.
21 December 2018
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