“…It’s in society’s best interests to have the most output produced with the least inputs.”
Warren Buffet – Investor and world’s wealthiest man
Hello dear Readers, how did you feel about the ‘Utterances from the grapevine’? Perhaps for some of you it’s no big deal, while to others it was insightful. Whatever the case, it’s to let you know that a leader’s listening ear – when it is sometimes ‘placed on the ground’ – can sense a storm or volcanic eruption coming along the path. I believe that revelations from the shop-floor can help management take a second look into these functions:
Loan application management, Know your client (KYC) support, Customer support, Cash collection, Complaints management, Information technology (IT) infrastructure and technology help desk-support.
Outsourcing challenges and risks
While costs are reduced from outsourcing, it has also created new risks for banks related to their quality of service, continuity of operations, oversight over the outsourced process, and compliance with regulatory requirements.
We all know that some outsourcing has helped banks enhance the efficiency and effectiveness of their operations. Despite the fact there is operational risk in every function of banking, the main issue here is strong due diligence. Successful outsourcing requires anticipation and identification of all critical operational risks, while establishing risk indicators and monitoring them on an ongoing basis.
Regulatory & Compliance risk
The use of service providers is often an appropriate business decision for banks. If a service provider is unfamiliar with the legal requirements applicable to the products or services being offered, or does not make efforts to implement those requirements carefully and effectively, or exhibits weak internal controls, it can harm consumers and create potential liabilities for itself and the bank. In these days of cybersecurity and AI technology, many aspects of banks’ IT have been outsourced. Fortunately, all such changes need the Bank of Ghana’s approval – without which a bank cannot go ahead and sign contracts with the service providers.
Just like regulatory risk, if not done right the benefit of outsourcing can quickly translate into reputational loss for the bank. For example, lack of adequate quality-checks over the outsourced process can adversely affect customer satisfaction; thus adversely affecting the bank’s reputation. A successful outsourcing strategy should have adequate understanding by the Board and Management staff so there is proper oversight to limit any damage to their reputation.
Even though there are many schools of thought with regard to certain core activities being outsourced by some banks, balancing the risk and return is still key.
It is never too late to make amends. Whatever happens, outsourcing is a global phenomenon. Managing the effects of outsourcing is very important, since bankers can perform best while doing their core business. Every other activity should also be critically monitored to ensure no losses are incurred; and if any, negligible.
- Recruitment: A number of banks get involved in the recruitment stage for tellers, front-office and sales personnel. After the outsourced company short-lists applicants, interviews are actually conducted by the bank to decide who fits its corporate expectations. Background checks performed by the outsourced company can also be doubly checked by the bank, so as to avoid persons who shuffle between various companies. These are the dangerous ones, who easily perpetuate fraud wherever they go.
- Orientation: I would recommend that resource persons include the existing staff – some young role-models within the bank who might have also passed through the same process. I recommend that managers and heads of departments take them through the normal banking activities. Finally, external resource personnel can also give them the usual global expectations and motivations speech.
- Communication: Due to certain sensitive reasons, some banks do not include outsourced branch staff in the official e-mail group. Considering the fact that in some banks the percentage of outsourced can be more or slightly less than regular staff – and may even have been in one place for some years, I recommend that a special group-mail be created for such personnel for updates on bank communication, training material and any other relevant material they need to be current on banking developments.
- Regular Refreshers: This is a regular requirement for both outsourced and regular staff. Occasionally, one may find that the outsourced staff are the ones receiving constant training while regular staff are not updated. This creates a disjointed branch with knowledge-gaps which affect customer service in the long run.
- Reward Schemes: It is always an emotional period when bonuses are shared among regular staff. The excitement and glow from these staff sometimes dim the morale of outsourced staff. Much as the bonus policy does not include contract staff, management of this issue within branches should be done maturely. I know that in some banks provision is made for some small end of year tokens for outsourced staff. Whatever it is, it has to be managed professionally by all staff to avoid creating enmity among the staff.
- Monitoring: Can you imagine a Supervisor of Tellers saying…”I am not worried about monitoring the tellers. After all they are outsourced staff, so any shortage they incur will be replaced by their company!!!” This is dangerous talk. Any supervisor with this attitude is not worth the seat he or she is occupying. This is an avenue for sloppy work by subordinates. Efforts should be made to trace causes of mistakes to avoid repetition and customers’ loss of trust. Some outsourced staff have retreated into their shells because they feel they have no job security. Such people need career guidance and monitoring to find out their problems. Money is not everything. A lot of losses can be avoided just by some of these relationship-building methods at no or little expense to the bank.
- Total Commitment from Outsourced Companies
I cannot stop without giving appreciation to all outsourcing companies for the good efforts they are making to partner financial institutions deliver their services at lower costs, and at greater convenience to customers through cash collection, mobile money collections, account-opening and so on. I therefore encourage them to take their staff as their own, train them regularly, organise more staff durbars for them to know current developments in the banks, and offer them career guidance.
My Final Thoughts
– Lead by Example: Leaders should focus on leading by example in all aspects of their work. Be a role-model for your colleagues by projecting a positive presence.
– Communicate: Your staff will feel much more engaged if you let them know what’s happening within the company.
– Get to know your outsourced staff more: Ask them about their future plans and mentor them.
– Be watchful of any early danger signals: This can cause them to be compromised in their activities.
– Identify staff strengths and weaknesses. Harness their strengths and de-energise their weaknesses.
– Let staff appreciate the work they are doing by motivating them: Let them know that their position is temporary, but their attitude will determine how far they can move up the ladder.
– Avoid discriminatory practices: It can cause dissatisfaction among outsourced staff.
– Do not let customers know the status of staff (outsourced and regular). It is their service quality that counts.
I hope these few words will go a long way in allowing you to sit back and review your outsourcing scheme. It is never too late to consider some amendments. I pray banks and outsourcing companies will cement their partnerships in more fruitful ways. After all, this will reduce risks and losses for both institutions. Let us practice outsourcing with all stakeholders enjoying a win-win situation.
Have a good week.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch Manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.
Email:firstname.lastname@example.org or [email protected]