From Outsourcing Problems to Effective Service Management

Additionally, service management requires a drive towards efficiency according to a recent doctoral dissertation.

Continuing needs to make savings are increasing pressures on public organisations to be more efficient. Resources are sorely put to the test as services should be provided at ever-lower cost. Outsourcing services to the private sector has become a trend in municipalities.

One of the stumbling blocks in this regard for municipalities is poor visibility of service provision. While private companies monitor service provision continuously, public organisations typically do not react until problems occur.

'Outsourcing is initiated only when the internal service quality or availability has been poor for a while and no solution for the problem seems to be found in-house', says Suvituulia Taponen who will be defending her doctoral thesis at the Aalto University School of Business.

In her doctoral thesis, Taponen looks for answers as to whether outsourcing is the best means for improving the efficiency of public service delivery. The core areas of the research were health and social services and sources included 17 public and four private sector organisations.

Improving management efficiency

Instead of outsourcing services, public organisations could improve their efficiency by stepping up the efficiency of their internal service management. Internal service provision should be better measured than it currently is and should be monitored as closely as outsourced contract-based provision is.

'It was surprising to me how little information public organisations collect on their activities and service provision. Regular monitoring of operations and measuring service quality and impacts would help to address risks through internal service management.'

Outsourcing is a viable option under certain conditions, municipalities should consider outsourcing especially when the service demand varies greatly.

'Public organisations already manage outsourced services fairly effectively. The key is to use service contracts as a developmental tool for management and operations. The contract must be known on both sides.'

Most significant risks linked to outsourcing are political risks, in addition to risks associated with the quality of service, and market risks.

'In local politics, outsourcing may be rejected or reduced on ideological grounds, even if it is justified, for example, due to a shortage of doctors for local health centres. The service quality may deteriorate and the service may become more fragmented as the number of providers increases. Risks may also arise from a poor situation regarding competition in the market.'

The importance of procurement specialists and health care professionals

Before starting her thesis work, Taponen gained practical experience by working as a public procurement consultant.

'I got to practice, and explore the benefits and challenges of outsourcing. To complete my doctoral research I took one year’s leave of absence from my job. The practical knowledge and experience was a big advantage in conducting the research.'

The research also took Taponen to England at King's College in London for half a year where she became familiar with the UK National Health Service and their organisational restructures.

'Based on my experience in England, in addition to cost management and analysis abilities, I would like to see health care professionals who take their own responsibility for monitoring and developing services in the purchasing organisations. Procurement professionals are also needed for managing service contracts based on tendering.'

Further information:
Suvituulia Taponen
suvituulia.taponen@aalto.fi
tel. +358 (0) 40 7629508

Suvituulia Taponen will defend her dissertation in the Chydenia building (address: Runeberginkatu 22-24, Helsinki, Finland), Saastamoinen Foundation Hall, H-324 (3rd floor), starting at noon on 31 March 2017. Welcome.