24 June 2019

Managing the changing staffing needs post-outsourcing

By Prashant Singh

Switching from insourcing to outsourcing your investment operations functions brings a whole different set of staffing requirements.

The idea is that all those non-core, resource-draining middle and back-office functions (and potentially even some front-office ones too) can be handed off to a specialist third-party service provider. Which means you no longer need all those staff who used to calculate and publish your NAVs, tick and tie your reconciliations, manage your data needs, and process those client and investor reports, right?

Wrong.

The tasks may have changed, but your employees still have a vital role to play. The big challenge is ensuring they—and you—are equipped for the job.

Ensuring a smooth outsource implementation

Execution risk can be huge when outsourcing. So first priority will be to achieve a smooth and seamless transition from your in-house to an outsourced environment.

Attitudes and atmosphere will be vital in this. Distrust can kill an outsourcing relationship.

We see this manifest in several common ways. For instance:

  • Disaffected staff who resent the functions being outsourced.
  • Management who don’t feel in-house teams have been up to the job, and so put all the onus on their service provider to dictate how the tasks should be carried out henceforth.
  • Management who don’t fully trust the outsourcing provider to do the job, and so nullify the potential relationship benefits by striving to maintain too much hands-on control, or by creating too restrictive service level agreements.


To ease the transition and maximize the benefits you can gain from outsourcing therefore requires communication and partnership.

Clearly, the immediate need is to ensure no one drops the ball.

Your in-house team, with their experience and understanding of your business, can serve as a valuable guide to the outsourcing provider in how and why processes work the way they do. They can also provide initial support and training where appropriate.

Employees can be effective agents of longer-term change as well. By furnishing the service provider with the knowledge and understanding they need, the outsourcer will then be better placed to rethink what has been done before, and so streamline those functions and/or introduce innovations going forward.

Redefining staff roles in an outsourced environment

Maintaining a strong partnership approach is vital over the longer term too.

Just because you’ve outsourced doesn’t mean you can wash your hands of those processes. Outsourcing relationships need to be properly managed—which requires particular skillsets.

Take reconciliations. Once that role is outsourced, employees’ responsibilities may change from handling each stage in the process to guiding the third-party provider and managing exceptions. The knowledge may be similar, but the skills involved in overseeing the tasks, supervising the relationships and ensuring SLAs have been met are different.

These capabilities don’t just materialize. How staff’s roles will change has to be planned and communicated. New monitoring technology may be required. Training will likely be needed.

Redirecting employees to more profitable activities

One of the key attractions of outsourcing is it can free up staff from mundane, often manual day-to-day operational duties, providing opportunities to redirect them towards more core, revenue-boosting tasks.

Think of the portfolio manager who no longer has to spend hours collating data and generating reports, but can now focus on actioning that information to identify investment ideas.

Or the relationship manager who can focus on providing more responsive service to clients and bringing on new prospects, rather than wasting time on admin.

Other staff though—particularly those who have seen their more direct responsibilities outsourced—may face a greater change in their roles.

To ensure they remain productive, happy members of the team might take some organizational rethinking and new training. What is crucial is to recognize that these employees, through their corporate knowledge and developed skills, possess value that can be productively tapped.

Working with them on a shared vision of the company’s future and their role in it will ensure everyone benefits.