Say you’ve just received a promotion and your company is moving you from New London, Connecticut to London, England. Many companies will outsource this complicated and detail-ridden process to experts like Prudential Real Estate and Relocation Services, which has been managing relocations since 1969.
“We service domestic and international assignments,” says Teresa Santangelo, Vice President, Cost Management Services. Relocation is complex because “every client tends to have a different relocation policy.” That means one client will cover a certain expense while another will forbid it. “We have to keep track of each client’s reimbursement parameters,” Santangelo explains.
In addition, the relocation business is cyclical. Many families like to move during the summer months, getting settled before the kids go back to school. Then, everyone wants to process their expenses before year-end. That means May-August and November-December have much more work than the other months.
The Outsourcer Outsources
Prudential, being a supplier itself, understands the economics of outsourcing. It now outsources part of its cost-management services to EMR Technology Ventures Pvt. Ltd. (India) so it can offer its clients the best price and service.
Before outsourcing, Scottsdale, Arizona based Prudential Relocation handled all these expense reports in-house at its offices throughout the United States. To create efficiencies, it centralized the function in Scottsdale. But that still didn’t wring enough cost out of the process. “We are faced with the ongoing challenge of doing more with less. When we looked at where we could reduce costs, we entertained the idea of offshoring,” the Prudential executive explains.
At the outset in 2002, Santangelo says, “there was a lot of rumbling at the entry-level positions” when the Arizona staff heard the company was offshoring to India. “We involved them in developing the training materials for EMR. That seemed to help,” she explains.
She says the noise level quieted down when employees stopped worrying about their jobs. No one at Prudential lost their job because the company sent work offshore. The company managed its staffing strategy by training and placing associates in other positions and through normal attrition.
The Transition Period
The first step in the transition process was developing “a rigorous and detailed training program” for the Indian supplier. Prudential is an ISO and Six Sigma company, so it had all its operating procedures already documented in a quality-management database. Being an ISO-certified company helps to ensure the company employees follow documented processes consistently, which leads to better service experiences for clients and customers.
Santangelo says Prudential enhanced and elaborated this documentation during the transition. Offshoring clarified the processes further.
EMR created a dedicated phone line; it’s an Arizona number that Prudential associates use to call India. “It’s very easy to call them internationally,” says Santangelo.
In 2003 Prudential sent two subject-matter experts to India, training everyone at every level. At first, the two sets of employees seemed like they were oceans apart when it came to cultural differences because there is no such thing as relocation in India, notes Akshay Saluja, Senior Vice President, Operations for EMR. “This was a huge challenge educating our people about moving goods, temporary living quarters, even US time zones,” he says.
Another challenge: many of the relocation parameters said they would cover meals “at a reasonable expense.” Dinner for two for $150 didn’t seem reasonable to the EMR employees. “So we had to make sure they understood what reasonable meant,” says Santangelo.
She was impressed the Indian team researched restaurant costs throughout America and created guidelines for the team. Today EMR has links to tables on the Web that tell them reasonable costs for hotels, meals, and cars throughout the US.
Two Prudential subject matter experts gave the 40 Indians on the initial team a 90-day immersion in American culture and relocation; they spent three months in India during the training and transition period.
Then, the trainers remained in India while EMR set up two clients. EMR in India and the local staff in Scottsdale both processed the work for these two clients. The two compared notes while the EMR staff learned the processes.
Gradually, Prudential increased the number of clients EMR processes. By November 2003 EMR was processing expense vouchers for over 100 clients, which represented approximately 85 percent of Prudential’s Cost Management expense voucher transactions.
The Day-to-Day Process
EMR averages 1,000 pieces of mail a day. At the start of a move, Prudential receives a move authorization from its client. Transferring employees can submit their expenses via regular mail or online; they receive email notifications with payment disbursement details and can also view the status of their expense reports on the Prudential Web site.
EMR has 10 employees working at Prudential’s office in Scottsdale. One is a former Prudential employee who was already well-versed in its systems and processes. In addition to day-to-day support for the process, they prep the images by masking all confidential information like credit card or social security numbers before processing.
EMR employees in India then audit the expense reports to help ensure they follow the company’s specific policy. They code all expenses to keep track of the tax aspects of the transactions. They also work with Prudential if there are exceptions or mismatches.
Prudential and EMR work together to identify and develop pre-audit exercises and controls to drive quality and reduce rework during the review and approval process. This increases EMR’s quality and Prudential’s productivity, driving customer and client satisfaction with timely and accurate expense processing. This approach continues to be in line with Prudential’s quality and cost-efficiency initiatives.
Generally, EMR’s front-end team working in Arizona scans the documents during the day while the Indians sleep; the Indians work while the Americans sleep. Together, someone is working on the documents 24 hours a day. There have been challenges on both sides. A continuing challenge for Prudential is the typically high attrition rate in India. In 2005 Prudential experienced a high turnover rate of 40 percent in India, mostly at the entry-level positions; last year it improved. Santangelo says. “Attrition affects us because we have to do more training and answer more questions from the new people,” she notes. “All the managers are chartered accountants and the retention rate for this level is much more stable,” she continues.
The Prudential executive says EMR has adopted some of Prudential’s programs to slash the attrition rate. Prudential has a strong reward and recognition program; she says “EMR has adapted some of those processes.” Also, Prudential has “payday huddles.” An EMR executive was in Scottsdale during a payday huddle and then started them in India. The Indians are also sharing overall company strategy with its employees, which is “something they saw me do. They are also looking to make people feel they are part of the team as opposed to just having a job,” says Santangelo.
On the EMR side, Saluja says it’s been hard to wean some Prudential employees from paper. “We introduced an imaging solution and they still print out the images. We had to explain the benefits of a paperless system,” he says.
Today, Prudential employees are still involved in the relocation transactions, but at a higher level. They do the second-tier review of the work to request payments; EMR’s work does not go directly to Prudential’s Accounts Payable Department without a review by a Prudential associate.
Visits between Scottsdale and New Delhi remain frequent. EMR typically sends two managers to Scottsdale twice a year and two Prudential executives from Arizona go to India. “When our team goes to India, they actually sit with EMR employees. They see the dedication and expertise they really have,” says Santangelo.
Business Benefits
While Prudential has not received the aggressive cost savings promised at the outset, it did garner significant expense reductions. Part of the reason for the shortfall is Prudential’s unwavering commitment to quality. Prudential associates audit all transactions performed by EMR to help ensure 100 percent quality to their clients and customers.
Prudential and its clients are also enjoying faster cycle times. “We now have a 24-hour operation which can better serve our clients,” says Santangelo. Prudential’s goal has been to process expense statements in five days–from the day the expense report arrives in Scottsdale to the day the Accounts Payable department disburses the funds. EMR gets one day of those five.
Prudential has been successful in consistently disbursing funds in an average of three days to over 95 percent of its customers globally. Saluja says May 2005 was the first month that Prudential hit the target with over 95 percent of its expense reports processed within the standard cycle time. In addition, EMR delivers the service level agreement of 98 percent accuracy.
And the relocation company is relying on its supplier’s technology expertise. Prudential was developing a new system; Santangelo asked EMR to help gather the business requirements for it. “They were very valuable because they use the system more than we do. They were able to articulate the system enhancements we needed to have both of us work more efficiently,” she says.
Governance
The two set up a routine of weekly phone calls to review progress during the transition period and address specific transactional issues. These operational calls still continue today on a bi-weekly basis. In addition, the bi-weekly management calls were also put in place, which review performance metrics and higher initiatives.
How does Santangelo feel about offshoring? “My experience has been much more favorable than I expected. EMR hired very bright individuals who are eager to learn. They take pride in their work. I’m impressed with their creativity and their understanding of technology,” she explains.
Lessons from the Outsourcing Journal:
- Outsourcing suppliers are good candidates for offshoring because they understand the benefits and the economics.
- When cultural differences are an issue, sending Americans to India to train the staff at the outset is a good way to ensure they understand the underlying issues.
- Suppliers can improve the process. Here EMR added an imaging system.
- Having a 24-hour operation helps Prudential keep its clients happy because it reduced cycle time. That meant relocating people got their money faster, which causes increased comfort in a time of general disruption.