David Prichard – Build an effective outsourced operation

Ep 253 - David Prichard

David Prichard

We are joined by David Prichard of thenile.com.au, he is the country manager of the Nile. We were joined by David back in episode one, would you believe he was our first guest. It’s a privilege for me to have him back here.

I consider David to be an operational guru, especially in the context of the Philippines or outsourcing operations. I certainly learned a lot in this episode, and I’m sure you will too. You can also check out our article on how outsourcing can cut labor costs by up to 70% for more information.

The Nile

The Nile is a family-and-friends-led enterprise that started in a living room with two guys and a computer. It has now grown to become an employer of over 80 people in the fields of customer service, logistics, marketing, and creative design. The Nile has a successful outsourced operations center in the Philippines.

Founders Jethro Marks and Mark Taylor witnessed the dawn of online retail and withstood its tests of time. They are now beyond 15 years of online retail experience and that is not their collective experience. 15 years is how long together Jethro and Mark have been contending with the challenges of the online marketplace, while flourishing, to guide The Nile to the place it is today.

References

The Nile

outsourceaccelerator.com/252

Ep 253 David Prichard

David Prichard – The Nile

 

 

How to start outsourcing

Derek Gallimore: Hi, and welcome back, everybody. Today we have a returning guest is David Prichard of thenile.com.au and David was our very first our inaugural guest on the Outsource Accelerator podcast. Can you believe it? Hi, David, how are you? Thanks for coming back onto the show.

David Prichard: Hi, Derek. I’m great. And I’m quite honored to be back on your podcast. It was great from the first time and had I known some of the illustrious people that you’ve had on since I would have been even more honored the first time. So it’s great to be back.

Derek Gallimore: Well, that’s right, then the pressures on and you’ve got to say everything original this time. I don’t want any repeats?

David Prichard: Well, for those that haven’t listened to the previous episode that I did. So let’s see whether I contradict myself.

Derek Gallimore: Well, that’s right. And then there might be a little bit of a spoiler in there maybe. So for those that haven’t done their homework and listened to the previous podcast, maybe you just want to briefly introduce yourself and well I mean, and you are running the operations here for thenile.com.au when I say here that’s in Manila. So how did you find yourself being here in Manila running a team for the Nile?

David Prichard: Sure, so a little bit of background. So as you mentioned, I’m the country manager for thenile.com.au country manager in the Philippines and the nile.com.au is an online retailer in Australia. We sell books, toys, and baby accessories. How I found myself here was approximately five years ago, we went down the course that many small and medium enterprises do in places like Australia, where we realize that our operational costs were too high. And also, if we wanted to expand our business, we would have to expand it a more scalable way.

We naturally explored options overseas offshore and figured out the Philippines was the best option for us for several reasons. So one of my colleagues, Jethro, who I believe you’ve interviewed recently came over on a fact-finding mission and dipped his toes in this country. And I believe 2013. And we decided that we would move most of our customer support and back end operations to Manila, for about six months. And we had an operations manager that we hired in Australia to come over and lead that and then I just put up my hand I had a different role in the company, I’d been there pretty much since the founding, doing different things wearing different hats, but I put up my hand to say I’ll go and sort of helped out for the first few weeks just to get things off the ground. Just make sure everything’s running smoothly, and then fly home and get back to my usual life.

But as a common story in this country, it didn’t quite work out like that. I never ended up getting my return ticket. And I’ve now been here for five years. And it sort of gradually evolved for various reasons that I became the person in charge of all our operations here in the country. And I’m very happy with that outcome. It’s been a good change in my life. And it’s been a fascinating five years here so far, and more interesting experiences and adventures to come.

Derek Gallimore: No doubt, no doubt, and life is good. David, I don’t want to go back. And explore your mindset in terms of the first journey here, the first sort of the first efforts into outsourcing.  now you’ve been outsourcing and evolving for the last five years. And outsourcing, like business itself isn’t ever static. And everything always needs changing, needs iterating needs updating.

I suppose instead of going right back and sort of seeing your mindset compared to now, as an overview, looking over the five years, how have you seen this operation, your operation in the Philippines evolve? What are some of the kind of milestones or things that stick out as you reflect?

David Prichard: I won’t go back and take you through five years of history because that is quite, quite a dull thing to do. But as I think I touched on in our original podcast interview, one of the biggest challenges that we faced in the beginning, and that still kind of lingered for the first few years was how you dive into outsourcing and make outsourcing work when you’re a small and medium enterprise that hasn’t been built on the usual kind of best practices and industry standards that larger organizations have.

We built a much bespoke business based on what our needs were at the time, in this case, online retail. And then we had to try and transfer that into the usual methods that the outsourcing industry has in this country, which are really designed for the bigger end of town, where you have, really locked in SOPs standard operating procedures, and processes that require many hundreds of people didn’t quite work for the nature of our business for a few reasons. And so that has been the challenge that we’ve had pretty much for the last five years, to be honest.

We’ve had some successes. But if you’d spoken to me about 12 months ago, I would have said to you that that is still the biggest thing we have to conquer is to how to move our business model and translate it into what people are used to hearing and finding a way to make outsourcing work. When outsourcing has been developed for a very different kind of environment or nature of business?

Outsourcing offshoring

Derek Gallimore: After five years, to what extent does it become outsourcing? I mean, you’re based here and from what I understand your team, just another part of the Nile. They’re not outsourced, they’re not a separate team. They are a part of the culture and a part of the core of the company. And to what degree is this any more outsourcing? And why? What is the crux of the issue in terms of feeling that it’s slightly putting a square peg into a round hole? What are some of the fundamentals or fundamental points of friction that you see with outsourcing?

David Prichard: Two really interesting questions, I’ll go to the first one. So you mentioned how sometimes the lines can be blurred, and you don’t think of yourself as an outsourcing operation. After a while, we had some conventional wisdom that we applied in the early years, which have now changed quite significantly. And I believe Jethro touched on this also in your interview with him.

We figured that the best way to get loyalty out of our employees and to get them focused, and to get them really passionate about what they were doing was to say, Hey, you guys aren’t just outsourced employees fulfilling a contract for some offshore operation, you’re actually part of our global organization, you work for the Nile, you’re not just part of an outsourcing operation, we thought that was a key thing that would change their mindset in a positive way.

Because most outsourcing as you know is usually for larger companies. And normally, you’re working for a large outsourcing provider, like Convergys or Teleperformance, or whoever it is. And they, they just think of themselves as employees for that BPO company. And then the actual company they’re doing the work for that is just a client or the campaign. So we’ve because we’re small and medium enterprise, and because we have staff dedicated to us, we can avoid that and say, Hey, guys, this is much better. You’re working for the Nile, you’re working for an Australian company, and we’re all part of the same team, think of your counterparts in our Sydney office that you’re talking to as just your colleagues. And we thought that would be a great approach. And we thought that would possibly avoid some of the communication and lines of operation problems that people have encountered.

It did work in some respects but we made a significant change about 12 months ago. Previously, we’ve been partnered up with an outsourcing provider here, where we had staff that was 100% dedicated to us, but they were employed by the outsourcing provider. And so we said, just ignore your contracts that says you’re hired by this company. You’re part of our team and it’s just purely for legal reasons that you are, you have a contract saying somebody else, the various sort of cost and operational reasons we decided no, we’re going to move our employees to our Philippine corporate entity.

So we have a company set up in the Philippines and we moved our employees, we left that provider and went to a different facility. As part of that change, all of our employees were moved to our Philippine entity the Nile PH outsourcing services. Now it’s called an outsourcing company because it effectively provides outsourcing services to our parent company, even though we actually own it and it’s exclusively for us. Now, the thing that went against the conventional wisdom for us, and we’ve been thinking previously was that suddenly we now had this entity in the Philippines, and we could forge a sense of identity that was linked to that Philippine entity.

We could say, right, this is Nile PH. That’s the company you work for. And we were able to create a company culture, it’s currently it was just in the Philippines. And it wasn’t sort of dependent on whatever was happening in Australia or elsewhere, we still kind of, we kind of say you’re part of the Nile. But it made a remarkable psychological change for our employees that I could not have anticipated previously, with a now actually sort of have a local entity that they belong to.

That was part and the other part was that it clarified very clearly that. Okay, so we are effectively doing outsourcing. It’s for the same company. But the kind of blurred lines that existed previously, were no longer there. Because we said, right, we’re fulfilling contract specific lines of business for the parent company. That’s what we do. That’s our mission. That’s what we focus on. And that clarity has had very positive outcomes for performance and productivity. So, interestingly, it’s worked out that way. And it’s kind of a variant on the one big family approach that we previously were focused on. And I believed Jethro also mentioned, but I have to point that out as a major success over the last 12 months.

Derek Gallimore: Incredible, isn’t it? Do you know? And do you think the clarity, I assume the clarity hasn’t necessarily come from the different corporate entity, has the clarity was sort of born from that process, but it’s born from just like changing the SOPs changing, just building clarity in terms of the processes?

David Prichard: Well, exactly. The clarity doesn’t come about just because you’ve got a different document or a different name on your contract. But it did trigger a kind of a psychological change of approach. Our employees previously had sort of been told, oh, well,  as I said, You’re, you’re effectively working for us, even though you work for a different company that only went so far, in their mindset.

They thought ‘oh we work for this BPO provider, which was a third party.’ Suddenly, they had a greater sense of ownership in the business, when they realized they work for our Philippine entity, that then triggered a lot of changes both at an employee level and at a management level, where we did clarify our SOPs and made various actions and things that made it clearer and more in line with what we were supposed to be delivered. But a catalyst was the actual psychological change by our employees belonging to a Philippine entity.

Derek Gallimore: Incredible. And imagine I’m just sort of trying to dig a little bit deeper in here and figuring out the mechanisms, I suppose, if, and the Nile is a fantastic company spanning many countries already. But how do you feel this might play out? If you were in also in Northern America and Europe? And you had these different offices all contributing towards, one brand, one name?

Do you think there would be the same difficulty in terms of identity and the struggles for role clarification and things like that? Is it something specific to outsourcing and or the Philippines? Or is it potentially due to the tyranny of distance having people in different offices, slightly different cultures? Whereas the kind of crux?

David Prichard: I would say the answer to that is, it’s the latter. Primarily, it’s not fundamentally limited to outsourcing or the Philippines, although there possibly is a significant cultural component in that thing I mentioned about the sense of belonging and identity by having your contract belonging to a certain company, I think they could be a Philippine aspect to that. But overall, I think now, it’s just part of the challenges of operating a larger organization.

I think the model to think about if  software is kind of like the API model, where  you have like a central node, and then you have different units that have fulfilling different tasks, then you need to define a protocol between those units so that they communicate according to certain standards and certain frameworks. And that means you can sort of operate separate units and have them standalone. And then they can interact very effectively, because they are communicating according to certain protocols and guidelines, as opposed to more sort of scattered model where you have all these different lines of communication and sort of blurred.

Amazon, for example, is a larger organization that operates on that model. And for us, I think, we work that way, we develop much more organically. And so there were a lot of blurred lines. But we changed that and became more effective. If you want to compartmentalize a little bit more, it’s like you mentioned sort of standard operating procedures, we might have a certain line of business where we have a team that is updating our product catalog, so they’re adding products to our catalog so that we can sell them online.

Previously, it would have just been sort of a case of us somebody in Sydney saying, Hey, we need this work done. Here’s the rough way you do it, here are some instructions, please go and do that. And then we would have had that team busy doing that. But we wouldn’t have had any real really clear sort of KPIs or guidelines in place, we change that to say no, okay, so you want us to fulfill this particular requirement, you have a certain output you need.

Therefore, let’s have an internal contract, right and internal service level agreement. This is exactly what you need. This is how you need it done. And this is the level of productivity you expect. And this is the metric to measure that productivity, our job is to fulfill that contract. And that instills a degree of discipline on both sides. If the other side comes and asks us to do something that doesn’t fit in with that service level agreement, will go back to them and say, Well, wait for a second, that’s not covered here. So if you want us to do it, we need to define redefine our SLA so that it’s clear.

Otherwise, you’re asking us to do something that’s going to distract us from our program, which is to fulfill this mission. So from an operational level, I think having had it that way. So you have those clear lines of communication, those clear, agreed-upon objectives. And metrics between the units is very effective. And so we have been moving, we’re not perfect, we still have a lot of blurry lines, but we’re moving towards that model. And then there’s a second aspect to it, which is about the corporate identity.

I went and visited another company recently in the Philippines, I won’t say which one, that it was a different industry, it was in the manufacturing industry. So nothing that obviously in terms of what they did, would mirror or, or we expect to be similar to our business, which is online retail. But that undergone some major cultural changes in their organization. They had implemented a mindset and problem solving and a productivity-improving mechanism called Kaizen, which I’m sure you’ve heard.

They also were a Philippine entity and they sit at their parent entity had not implemented any of these cultural changes, and some of their biggest frustrations with dealing with the parent entity. Because that entity wasn’t applying that methodology to their work. And yet, by thinking of it as a separate unit, they had the freedom to go and implement that in their organization, and they weren’t constrained by whatever was going on in the head office, or whatever limitations they might have been with head office.

So by having an autonomous unit, it gives you a far greater degree to do what you want to do in this country. That’s relevant for anybody that’s in a position like mine.

Why outsourcing fails

Derek Gallimore: Yeah, and there’s probably some fundamental lessons to be learned from that, because they say here,  generally, when you fit into tribes and groups, people fundamentally can’t work with groups much bigger than about 100 people, and maybe,  just things need to be broken down into individual business units. Those people are relevant, they have autonomy so that they can build the processes that suit them and their specific culture.

If you try and aggregate everyone together, then nothing works, you know. So maybe you’ve just found your sweet spot in terms of size and efficiency and identity. And, and yeah, maybe the geography is a distraction from having that core identity.

David Prichard: You reminded me of something there. I think its Amazon or somebody that has the rules for teams that no more than two pizzas. Do you remember that one Derek? Where they like it so big that you can feed the 2-3 person, I think Amazon has a rule that a team can’t be bigger or larger than what you can feed with two family size pieces. And that’s how they limit it to manageable says, interesting principle.

Derek Gallimore: It’s fascinating, isn’t it?  and I try and tell people to know that I’m any sort of business guru myself. But, outsourcing is no different to just general business or management or, any of these business philosophies. And there are endless books, thousands, infinite number of books on how to manage teams, how to manage efficiently, how to build efficient running businesses. And it’s something that never ends, is it?

Now, it sounds like you’re almost reaching a stage of operational bliss. If I may David, everything is it now seems that things are becoming smooth, what you’re dealing with? And it’s now just about ironing out the final wrinkles? Do you think this is consistent with a business?  The Nile is now maturing slightly, you’ve been going nearly 20 years? Is it the sign of a maturing business? When nothing is that new anymore? And what if you would radically change or grow by 600%? Or, or something radical?

Do you think that would then just introduce a lot more hubris? Or now that you have the systems down in place?  the systems would then accommodate for the change and the growth and things like that?

David Prichard: Well, I would think it would be heuristic to say that we’ve reached some mature stage. And it’s also a boring thought. I think you master whatever challenges you have, and then they’re always going to be larger challenges. It’s a constant process. And, yeah, I mean, the business has been running 20 years, in Australia and New Zealand. And of course, it’s evolved a lot of change, a lot of the direction has changed.

It looks very different to it to how it did in those early years. I don’t think we’ve ever been at a point where we’ve said that we’ve become mature and just settled into certain ways. I think it’s always just about finding a new challenge, which is the approach we have. We certainly haven’t reached a ballistic point, there’s a degree of satisfaction, that we’re starting to see some of the original objectives we had. And we’re seeing levels of productivity that are much better than we had previously.

Not talking about the context of the Philippines. Now, that’s great that they’re always going to be new challenges, and we believe in constant continuous improvement. So as soon as we master one thing, if there isn’t a new challenge that presents itself, we go out and find another one.

Derek Gallimore: And if you were to do this again, start your outsourcing journey from scratch. I’m sure you could shave off many months or years of frustration and learning and maybe, going down rabbit holes. And what are the key things though? Because I think all so even if you don’t, I’m sure you could write an incredible book on how to master this. If people are then starting their outsourcing journey.

It can’t be mastered by writing a book, reading a book, and maybe it’s a little bit like, mastering martial art and you just have it, it’s the practice. But what are some of the core fundamentals you think that you’ve taken away over the last five years that you think would kind of refine a newbies journey into outsourcing?

David Prichard: Yeah, it’s a fascinating question. And I often just fantasize about going back five years with the knowledge I now have, of course, that’s just an intellectual exercise. But yeah, there are certain things that if only, I often wish to myself, if only somebody had just told me this and sat down with me in those early months and explain this to me.

But the reality is, some of it, you just have to experience but a key thing that I would say to any person starting, especially if they’re in the kind of situation that we’re in that where your company that,  we’re talking about a scale of four years of having less than, less than 100. In our case, we’re somewhere between 30 and 50 employees, and you don’t have established. SLA lines of business already in your parent company, you need to start thinking about the line of business approach from day one.

Now, what I mean by that, just to give you an illustration, is that we figured that we had a department called customer service. That’s what we called the AUS Department in our original onshore office in Australia. And we thought like customer service just deals with anything to do with communicating with customers. And that includes a wide range of things includes answering email also includes taking calls, it includes taking communication through a few other channels, as some of the third party marketplaces, we deal with have their channels, and includes dealing with returns that come in from customers.

It encompasses quite a few different things that we just said, right, we are going to wrap down our customer service department in Australia, and we’re going to transfer it over here. And so everything that falls under customer service, we’ve hired some people in the Philippines, right, we’re going to give you all that work,  we’ll write up a few instructions and guidelines that you need to learn that and you need to deliver that. So our thinking was right, customer service needs to be transferred across.

We tried to do that. And for the first few years, we had that and we transferred all of those different things, some of which were well defined, some of which weren’t. And then we had a team that was struggling to get through it all. And they weren’t delivering the kind of productivity that we expected. Suddenly, I realized that there’s a different way things are done. And in outsourcing, what we need to do is to identify each task and think of that as one deliverable that you devote people to. So for example, the team should not be called customer service, what are they doing?

Well, the largest single task we have is answering email, inbound email from customers. And so I said, Wait for a second, we need to have an inbound email team, we need to have a team that is focused on just doing inbound email and call them that inbound email. And that’s what they deliver. And then build an SOP around that and build a deliverable about that don’t distract them with a whole bunch of other stuff, just get them doing that and you don’t miss in our case, it needed to be in order to take that approach, you probably need a task that requires at least one full-time headcount.

If it’s smaller than that, then it’s a challenge. But in this case, we know we’re even at our slowest period, we needed a few people to do that. So I create I transferred it, transformed it, I should say, around about 12 months ago, and I created in that email team and I created a strict service level agreement, which defined exactly what they’re supposed to do and the output is supposed to have.

Then I made people focused on justifying that one thing. And then I had team leads that were focused on purely that thing as well, rather than trying to juggle all these different tasks that we previously put under the banner of customer service. And what the output has been? Probably at least, it’s hard to measure exactly. But I would say you hit at least 25% improved productivity on that.

Derek Gallimore: How does it work when I understand if you have enough volume to, whatever, cover one full person, but what happens if you have then, like 20 sub-tasks, each person needs, to tend to a subtask. And then you must have a lot of like loose ends and odd amounts of work leftover some people are overworked, some people are under work. How do you deal with those individual silos?

David Prichard: Well, first of all, you want to try and simplify, do you need those 20 different tasks, can you consolidate them, uncertain ones we eliminated. And that, of course, needs to be a process to go through with it’s not just in your outsourcing operation, you need to get input and buy-in from your, from your counterparts and onshore to work through that. So work through that list and get it as simple as possible.

I imagine that most companies that have that list of 20, things that you’re talking about if they focus their energy into it, that it can probably reduce it, certain things maybe can be consolidated, or we can just eliminate them. So first of all, try and rationalize and make that a smaller list as possible. So once you’ve got that in place, right, and then if you’ve still got a list of things that can’t be broken up into individual headcounts, each task is not big enough for one, one full-time employee, then you have to take the approach where you find, consolidate them according to what sort of area they fit together.

So if you’ve got something that’s really an accounting process, and something else that as a fulfilment process, or procurement process, put those apart so that they’re all sort of linked down to the same heading, and then get an individual or a team devoted to that, and then get people that are innovators and people that are focused on being as productive as possible, and then you KPI them based on getting through all of those tasks on time.

As long as they abide by that, and you give them the right support, and you have the right people in place, then their focus simply is that they have a task list which has to be completed with certain deadlines for each task, and just drive them and incentivizes them to be as productive as possible. And that’s the best approach you can have there. But it, it still involves having some pretty clear guidelines in place. But that’s what we’ve done with those tasks.

Outsourcing roles and responsibilities

Derek Gallimore: Fantastic. So instead of having an org chart, as most people have an organization chart with, with sort of people’s names, you’re flipping it around and having roles or functions, and then attaching the team members under them, which are responsible for those tasks.

David Prichard: Exactly. And I’ll just the earlier part that I mentioned, I can’t stress the importance of its working and getting buy-in from your, from your onshore office to try to simplify those tasks. Because the more complexity there is, the more mess you’re going to have those desirable outcomes.

The other thing is to avoid that trap of thinking that outsourcing is some kind of panacea, and you can just Excuse My French, but you can just export all your crap work across to some offshore office where the labor is cheaper, and then they can deal with it. That is the worst possible result, the need for simplicity, the need for efficiency, and clarity, as a business requirement does not disappear when you transfer, work over to a cheaper location. And so you need to work very actively.

In our case, we had certain tasks that were having, leading to dysfunctional outcomes. And we investigated that we looked into it. And we realized that the source of some of that dysfunction was problems with processes that were happening in Sydney. And so we went to Sydney and say, hey, you guys need to change the way you’re doing things. Because we’re getting this, we’re getting this work that is incredibly labor-intensive and messy, and it’s not leading to outcomes, but the actual source of it is dysfunction in your processes in Sydney.

That was a major thing that’s happened over the last 12 months with the capital of fairly large parts of work that we do here, I got buy-in from some key people in Sydney and got them to make major changes, including and in one of our fulfillment centers that lead to better outcomes for the business on the whole. And then the work that we get in Sydney that sort of comes downstream from those processes, sorry, the work, we get a Manila that comes downstream from those processes is much more manageable and more efficient. So it needs to be a company-wide buy-in approach to that task list, to try and make it as effective as possible.

Derek Gallimore: Incredible,  it is, and you’re talking a lot about clarifying the roles, and just by you clarifying this, and going into the depth of what it means to clarify roles, I think it’s super, super valuable. You know I look to you as being like the process king or the operational guru in this stuff, because, and I think this is what’s needed.

One thing I want to put back to you, and I want to get you back to so we can deep dive more into general, operational performance. But to close this off, the silo-ing you mentioned that clarification of roles. Sounds like a fantastic operational protocol generally. Do you think this is just a protocol suited for the Philippines? Or is this an ideal protocol for a worldwide organization?  is this specific to the Philippines? Or is it just how to run an efficient ship?

David Prichard: It is how to run an efficient ship. It’s the latter. Every time I come across a eureka moment, every time I have come across one of those light bulb moments over the last five years, the initial immediate context for me is outsourcing in the Philippines. But ultimately, it always comes back to something that is simply a basic principle of management that is not limited to this environment. I always come to it through the route of outsourcing in the Philippines, but almost always, it is a basic principle of organization and good business management.

Derek Gallimore: Fantastic. We shall end with that, David. It’s been an absolute pleasure. And I want to get you back, of course, and talk more broadly about operational fundamentals. So people should join in for that. But in the meantime, if anyone wants to get in touch with you or know more about the Nile, how should they do that?

David Prichard: Well, you can check out our retail website, which is the Nile like the river in Egypt, the nile.com.au if you want to get in touch with me, I think David Prichard Philippines should probably find it. I’m on LinkedIn, reasonably easy to find through various channels.

Derek Gallimore: Fantastic. Thanks so much, David.

David Prichard: Thanks, Derek.

Derek Gallimore: That was David Prichard of thenile.com.au. If you want to get in touch with David or see any of the show notes, go to outsourceaccelerator.com/253 and as always, if you want to ask us anything, then just drop us an email to ask@outsourceaccelerator.com. See you next time.

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