BPO (business process outsourcing) should not fundamentally alter the strategic quality management plan of an enterprise. BPO should be thought of, generically, as any outsourcing partner anywhere, not limited to the special case of India or other developing economies. BPO may fundamentally alter the structure of a firm and the lives of the people within it, but the strategy for delivering extraordinary quality experiences to clients should not be altered. Correlative to this, the tactics required to hold the strategy on point must be altered dramatically, in some cases. It is critical to understand this interplay of strategy and tactics around major BPO efforts to ensure that the client experience is maintained or enhanced.

Let's get on the same page by differentiating quality strategy from tactics to clarify the argument. A firm's "mission" identifies the goal or objective. For example, the mission might be "we're going to obtain a 5% share of the Chinese payment products marketplace over the next ten years." Naturally there are various business strategy statements that support this mission, but let's isolate the quality strategy component.

Broadly speaking there are only three alternative quality strategies (and hundreds of slight derivatives) that could be considered. First, "we're going to achieve the strongest client loyalty in our industry by delivering the best customer experience." Second, "we're going to achieve the highest customer satisfaction by reducing cycle times, eliminating waste, and minimizing process errors. Third, "we're going to minimize the costs of bad quality."

The first is suitable for a world-class brand appealing to the upper segments of the market. The second is appropriate for approaching a broad consumer segment with acceptable risk profiles. The third is perfect for a sub-prime lender maximizing profits by gouging high-risk segments with few alternatives.

Any of these three can achieve superior shareholder returns. The choice of quality strategy must match the company's culture and product/brand positioning, but it is primarily the match that is critical, not the approach. Many paths can be taken as long as you wear sensible shoes.

Here is the critical point relative to BPO: The BPO organization chosen must also match the quality strategy. Just as there are three broad quality strategies, there are three broad categories of BPO partners. Some BPO groups delivery extraordinary client experiences, some focus on efficient and effective processes and some crank through high volume service interactions for the lowest possible price. It is impossible for any one firm to deliver some measure of each strategy they can only do one well or all poorly. It's not a law of physics yet, but someday it will be.

You can never, never, never, raise a BPO firm's quality outcomes beyond the upper limits of their current control charts within a determinant time period. Given unlimited time, of course, anything can change, but you won't have your job that long. If you need special considerations or abnormally stringent requirements then purchase from someone who is already doing it better than your own resources. Speaking from disastrous experience you cannot raise the bad to good or the good to better. Quality outcomes are impacted by the way people breathe, the way the restrooms are cleaned, the CEO's smile or frown as they walk past the desks. Nothing in your contract, no matter how lucrative, is going to alter those irreducible elements in the short term.

Once this strategic match has been established the tactical management approach must also be aligned.

Those brands and BPO partners that are targeting extraordinary customer experiences should be managed as if the BPO were an integral part of the host company. There should be no difference in the response to a customer's emergency situation at the BPO location or the host company's service center. Any differences highlight a lack of alignment on principles, values, and culture. These relationships take into account the total cost of quality but also include, albeit tacitly in most cases, the value of the brand over the long term. In many cases the BPO vendor is not chosen strictly on cost, but because of a unique capability that commands a value premium in the market.

Those companies (note the deliberate elimination of "brand" from this second tier) and their BPO vendors (note the deliberate use of vendors and not "partners"), aiming for high levels of satisfaction and efficient processes, are tightly integrated around service contracts and measured outcomes, but typically do not link at the level of principles, values, and culture. These relationships take into account the total cost of quality at the process level and attempt to optimize enterprise costs over the near term.

The low cost producers who have outsourced their service to a commodity BPO establish a tactical relationship primarily around price and complaints. The host company often manages complaints through various escalation mechanisms and the contractual relationship is the principle governing mechanism. The BPO's job is to reduce the cost of transaction processing irrespective of the total cost of quality. This is never stated explicitly because of the tacit assumption that there will not be an adverse impact on the cost of quality; however, this is rarely the case. These relationships still make good economic sense overall, but they are almost always calculated in a manner that optimizes the appearance of local savings versus considering the true enterprise-level savings.

By carefully aligning quality strategy and tactics with a BPO relationship that supports the company's market segmentation there is an attractive opportunity to gain flexibility, expansion capacity, and value-added capabilities. The risk premium associated with BPO, if done well, should be value neutral to the shareholders, worst case, and offer significant opportunities best case.