Tribune Company is a top U.S. media company, with revenues of $5 billion annually from assets in publishing, interactive and broadcasting. The company owns and operates eight major dailies and manages more than 50 Web sites.
On the publishing side, advertising revenue is critical. Tribune ran its advertising customer credit function on a partly centralized, partly distributed model. It had 240 full-time employees conducting credit, collections, customer service, billing, contract and systems. They were responsible for collecting more than $3 billion in revenue.
“We had a group located in Chicago that oversaw advertising accounting for four of our newspapers,” says Harry Amsden, Senior Vice President of Financial Operations, Tribune Company. “The other papers had local representatives, which created process duplication with our central location. So our large customers that advertised across multiple publications ended up being serviced differently by each newspaper even if they had a common buy.”
Outsourcing as a strategic alternative
To improve service and cut costs, Tribune evaluated options for standardizing advertising accounting. Amsden was adamant about keeping the top 30 percent of high-revenue customers in-house, but was open to outsourcing lower-revenue ones.
Amsden created a partner selection committee, and began evaluating outsourcing vendors in the fall of 2006. HP became part of the discussions after meeting Tribune employees at an outsourcing seminar. That led to several meetings where Tribune and HP shared data, evaluated processes and visited HP’s outsourcing sites.
HP’s facilities in Costa Rica intrigued Amsden and his team. “There were a lot of advantages about Costa Rica—good product knowledge, impressive English language skills, quality operations and management, reasonable travel to get there and time zone compatibility with the U.S. And from a technology perspective, everything was in place, from ISO 9000/Six Sigma certifications to excellent telephone call reception to Sarbanes-Oxley controls.” Amsden was also impressed with HP’s Get Paid software solution and the reliability of the HP infrastructure hardware.
HP designed the solution to include Tribune’s facility in Chicago and the outsourced capabilities in HP’s Costa Rica and India facilities. The goal was to minimize customer handoffs. HP set up the outsourced operations in both India and Costa Rica to mirror Tribune’s shared services center in Chicago.
HP implemented the Get Paid automated collection workflow tool to enable both Tribune and HP agents to improve customer interaction. Get Paid includes correspondence, audit trail and follow-up, and sets priorities for each collector based on Tribune-developed strategies.
Using the software, advertising accounting representatives can accelerate cash conversion by reducing Day Sales Outstanding (DSO). Management gains visibility into all areas of the process from collector performance to detailed customer notes. The software also enables consolidated reporting of all accounts receivable.
“It was critical for HP employees to understand our business and become part of us,” says Amsden. “We achieved that with site visits to Chicago and Costa Rica, a buddy system, good relationship building and process mapping and redesign. We also made sure to promote as many opportunities as possible for both formal and informal communication and camaraderie.”
The Accent Neutralization Program was a key component of training. It incorporated classroom- and computer-based training and ongoing monitoring. In the classroom component, employees received face-to-face training with native American English speakers. They then had access to computer-based training from Carnegie Mellon for three months.
Tribune and HP continue to use the application in the hiring process, ensuring candidates possess a minimum level of neutralized accents. Tribune uses call monitoring tools to improve call handling skills.
Achieving savings and improving service
Tribune has completed three of four conversion phases, achieving a seamless transition for customers. Since the first phase in January 2008, Tribune has completed planned reductions in the number of full-time employees, standardized processes and passed an internal audit for Sarbanes-Oxley controls.
Amsden estimates that Tribune will save 20 percent of original costs in advertising billing and credit once the total conversion is complete and it achieves a steady state of operation using the new model. “We weren’t organized optimally to have the process efficiency and cost savings we needed to battle the revenue pressures in our industry. Now we are. Beyond the anticipated 20 percent savings, we’ve made it easier for customers to do business with us, which will lead to better DSO outcomes in the long run. Customers that advertise in seven of our papers can now make one call and speak to one person for all of their inquiries.”
In standardizing through centralization and outsourcing, Amsden learned much that he feels is beneficial for other companies contemplating a similar transformation. He stresses the importance of building a partnership, not choosing on low cost alone. Other key considerations include the partner’s expertise, its focus on customer service and how willing the team is to learn your business and share its knowledge.