Successfully managing international outsourcing projects: KPIs, quality and performance

Significance of KPIs in outsourcing projects

The basis for effective quality and performance management is systematic monitoring using key performance indicators (KPIs). These indicators make performance measurable, create transparency and allow trends to be quickly identified.

Targeted KPIs tracking allows operational weaknesses to be identified, improvements to be developed and well-founded strategic decisions to be made. In addition, regular reviews and structured feedback processes ensure that defined standards are not only kept but continually examined and optimised.

This not only ensures quality but actively increases it – in the interests of the clients and of the company itself.

Service level agreements as the formal framework for KPIs

A central instrument to ensure quality and performance in international outsourcing is a service level agreement (SLA). These contractually defined performance agreements lay down what specific results the contractual partners must perform and what KPIs they are based on.

SLAs do not only define the relevant KPIs, however, such as service quality, availability and customer satisfaction, but also lay down the consequences when the agreed standards are not kept. This creates a binding basis for monitoring and valuing the supplied services.

However, to remain effective, SLAs should not be viewed as a rigid but rather should be regularly reviewed and adjusted to match new project developments or business goals. They thereby make a crucial contribution to long-term quality assurance and improvement of performance. At the same time, they form the basis for KPI tracking. Performance can only be systematically measured based on clearly defined performance.

Spoilt for choice – choosing the right KPIs

Choosing appropriate KPIs is often more complex than you think and requires taking various factors into consideration. It is not only the definition of the indicators that is important but also being able to measure them using the available data as well as the work involved in collection and evaluation being realistic.

Responsibilities, the frequency of evaluation, target values (incl. acceptable thresholds) and determining measures to be taken on non-compliance must be laid down – an SLA offers an ideal documentation framework to do this. 

Informative KPIs can serve as management instruments in international tax and compliance outsourcing projects. But which KPIs are relevant is also always determined by the processes and requirements of the business in question and the goals of the outsourcing project.

Examples of practical indicators include:

Service quality (right the first time)
This indicator measures how many deliverables are correctly generated on the first attempt – without the need to make subsequent adjustments as part of a review or audit.

Timeliness
This records the keeping of statutory deadlines and deadlines agreed with the client individually. In the highly regulated environment of tax and compliance processes, keeping deadlines is a crucial factor.

Availability & ability to respond
The reliable and prompt processing of client’s queries is a central characteristic of quality. Indicators such as first call resolution rate (FCR), which measures the proportion of queries resolved directly, or average handling time (AHT), which gives the average processing time per query, may be drawn on as supporting indicators.

Customer satisfaction (net promoter score – NPS, customer satisfaction score – CSAT)
Surveys involving these indicators show how satisfied clients are with the provided services and how willing they are to make a further recommendation.

Cost-effectiveness (total cost of ownership (TCO) and cost benefit tracking)
This compares the total costs of the outsourcing project with the use that results from it. In this way an objective basis is created for decisions on continuing, adjusting or terminating the collaboration.

KPIs by themselves are not enough – governance is crucial

Simply compiling KPIs is only of limited use to businesses because qualitative aspects often go unconsidered and because this can favour short-term thinking or potential manipulation.

Too many KPIs can also impair the overall view. KPIs only prove their worth as an effective management tool when the indicators are regularly reviewed, consistently tracked by a central coordination team and implemented in concrete measures. KPI tracking should therefore be an integral part of a structured governance process; otherwise, a substantial contribution to quality, efficiency and customer satisfaction will be missing.