Study On Performance Evaluation Based On Balanced Scorecard And Incentive Mechanism For BPO

As the market competition become more and more fierce, more and more companies outsource their uncore business function. But at the same time it is not without risk. BPO (Business Process Outsourcing) is actually a Principal-Agent relationship. During the process of outsourcing, ownership and management right are separated leading to dissymmetric information, and further causing moral hazard of service provider and business out of control. In order to tackle these problems, effective performance evaluation method and incentive mechanism are urgently needed. Through performance evaluation, outsourcer can be clear about the operation process, and monitor, control, improve the process. Through incentive mechanism outsourcer can avoid moral hazard of service provider, increase efficiency, and maintain performance level.Based on the study of Supply China performance evaluation method and Balanced Scorecard, together with the characteristics of BPO, an improved BSC method (Trust aspect is added to the existed four aspects) is used for BPO performance evaluation, and 23 key performance indicators are designed. At last AHP is employed to assign weight to each KPI and performance result is obtained. Besides, traditional Principal-agent incentive model has an inherent problem: incentive distortion(Financial result is used to determine service provider's payment, service provider may give up the long-term objective in order to maximize short term financial return).An improved BPO incentive model based on performance evaluation result is designed to tackle this problem. This innovative model not only emphasize financial result but also other related key factors leading to victory of BPO project, thus avoid the incentive distortion problem and provide some reference for outsourcer on signing BPO contract.