Balance Scorecard for Business Process Outsourcing (BPO) Companies in Pakistan

Business Process Outsourcing in Pakistan

The phenomenon of Business Process Outsourcing (BPO) is growing at a rapid pace. As the profit margins are squeezing and the competitive dynamics are changing rapidly in the developed countries, more and more companies are looking to outsource their business processes to countries like India and Pakistan.

According to Pakistan Software Export Board (PSEB):

Pakistan IT Industry exports are estimated at US$ 1.4billion while the industry size is estimated at US$ 2.8 billion. It is significant to note that Pakistan IT exports growth in each of the last few years has been more than 50%

The above statement is a clear indication that the business process outsourcing industry growing at a rapid pace. Initially, the primary outsourcing activity in Pakistan was software development (As the name “Pakistan Software Export Board” suggests itself) but now more and more companies are focusing their attentions to other areas like customer service, medical transcriptions, financial services and many more.

In order to sustain this growth of the BPO industry in Pakistan, we need to take a holistic approach towards BPO management. An approach which is linked with the vision and strategy of the company; an approach which not only concentrate on the financial perspective of the company (as most of the times the short term financial benefits are the driving force in company policy making decisions) but also concentrates on customer, internal business processes and employee perspectives; An approach which provides a rational ground for decision making.

The Balance Scorecard Approach

The balance scorecard provides the framework to make sure that you are measuring and improving the Critical to Quality (CTQ) aspects. It ensures that people and procedures within the organization are aligned with the both the short term and long term objectives of the company. By doing this, everyone in the organization is more aware of his/her responsibilities and contribution thus the motivation level is higher as compared to organizations where ad-hoc and short term decision making is part of the daily grind.

The balance scorecard concept was introduced by Robert S. Kaplan (Professor at Harvard Business School) along with David P. Norton in 1992. Since then the concept has gained a lot of popularity in the developed countries and more and more companies are implementing this as a mean to gain competitive advantage. This concept mainly focuses on the following four perspectives:

• Financial

• Customer

• Internal Business Process

• Learning and Growth

The financial perspective concentrates on shareholder wealth maximization after all that is the main reason for setting up a company. The customer perspective is concerned with the image of the company in heart and minds of its customers. The internal business process perspective is concerned with efficiency of the company’s internal business processes and the learning and growth perspective is concerned with continuously improving the intangible asset of the company (i.e. the employees) so that the company is always providing value for money to its customer and shareholders.

The above mentioned perspectives are generic and can be customized to the needs of the BPO organization but for now let’s assume the above mentioned perspectives.

Once you have outlined the perspectives, the next step is to identify leading and lagging indicator which will be used to measure these four perspectives. Leading indicators are those which provides an early indication while the lagging indicator are those which provides the information about the past performance e.g. increase in customer satisfaction index could mean rise in the company profitability. Here customer satisfaction index will act as a leading indicator for company profitability. Most of the financial measures (e.g. profit margin, sales growth) are lagging indicators as they report on past performance of the company.


For financial perspective, the typical leading and lagging measures for a typical BPO could be:

• Return on capital (lagging measure)

• Cash flow (lagging measure)

• Customer payment window (leading measure); measuring the payment delay from the customer side. It can be very important when you are receiving a Lumpsum payment at the end of your project as delay in receiving payments can impact the cash flow of the company.

• Risk rating of Pakistan (leading measure); different websites like prsgroup.com, euromoney.com provides risk ratings (political, economic, etc...) for different countries. Any change (either positive or negative) can impact future business opportunities for the BPO companies in Pakistan.

For customer perspective, the leading and lagging measures could be:

• Per service market share (lagging measure); one can use this to measure local as well international market share for each service category. By measuring both at local and international level it will give the company an idea about the nature and strength of competition in these two markets.

• Per service customer satisfaction index (leading measure)

• New customer acquisition rate (lagging measure)

For internal business process perspective, the leading and lagging measures could be:

• Project turnaround time (lagging measure)

• Number of complaints received from the customer (lagging measure)

• Number of defects detected during review (leading measure); this will particularly be useful in service areas where the work done is reviewed internally before sending it for client review like software projects, financial outsourcing.

• Service down time (leading measure for customer satisfaction index); e.g. call center operations

For learning and growth perspective, the leading and lagging measures could be:

• Employee satisfaction index (lagging measure)

• Number of employee training (leading measure)

• Average number of complaints per employee (leading measure)

• Average number of suggestions per employee (leading measure)

These are only selected set of measures as there can be many more which fits the particular needs of a BPO organization.

It is important to realize that a right order should be followed i.e. vision, mission, strategy and then performance measurement. Failing to follow the right order can result in poor post implementation performance of the balance scorecard initiative.