Knowledge Center: Outsourcing Governance – Going from Good to Great
By: Brad Killinger, CEO of Sapience Analytics
Outsourcing can support significant cost savings and improvements in productivity. However, many companies experience higher costs and pain points as they attempt to manage their outsourcing programs. A survey by a leading consulting company found that of 250 enterprises interviewed, 50 percent suffered from value erosion in their outsourcing engagements.
In our work with Fortune 1000 companies to support improved operational efficiency, our analytics experts have identified four factors that can transform and optimize outsourcing arrangements to deliver greater value. Implementing these four measures – and revisiting them on a regular basis –promotes improved operational visibility, predictability, value and program appreciation.
Organizations have typically performed outsourcing governance in silos – often with teams that are understaffed, undertrained, and lack the tools to collaborate and manage engagements effectively. This fragmented and archaic approach results in loss of value for the program and personnel, as individuals aren’t engaged or motivated to lock arms to support the greater purpose. To combat this outsourcing trap, consider co-management of outsourcing governance efforts.
The intent of governance is to build a strong relationship and align strategies, goals and objectives through collaboration, mutual respect and continuous communication. By designing governance models with a joint relationship management structure, processes can be put in place to support a cooperative, trusting working environment that encourages mutually beneficial decisions.
The following are key considerations when building out this structure:
- Tier management structure with peer-to-peer alignment
- Clearly define decision-making and authority rights; ensure each is understood by both the organization and its outsourcing partner
- Secure commitment and sponsorship at senior levels (this is critical!)
- Recognize governance is successful only when both the buyer and provider are successful
Co-management creates a partnership that ensures transparency between both sides on strategic and operational levels. Customers and service providers work together in a more cohesive manner – giving both a vested interest in the direction and success of the program. To ensure success, establish active and ongoing leadership interactions with senior management — across both organizations.
Right Technology, Right People
The right technology must be in place to guide efforts, as well as top-level executive guidance with the right skill set and appropriate authority. To complement co-management, enlist a sophisticated, proven technical tool that automates the outsourcing governance function. Look for a solution that meets the following six requirements:
- Ensures accurate and automated data is captured to gain visibility into outsourced team operations
- Captures data that is highly accurate and can be used to create benchmarks, SLAs and metrics to run governance
- Creates a data-driven engagement and governance model
- Ensures real-time visibility into activities to predict outcomes/deliverables
- Links data captured back to current metrics and SLA in contracts
- Frees up bandwidth on the governance team to focus instead on increasing value from outsourcing engagements
All-too-often organizations simply assign outsource management to the individual(s) who previously handled the function in-house. This is a mistake because outsourcing is distinctly different from an in-house service model.
Outsourcing governance requires experienced, senior-level executives who can develop and maintain relationships with all stakeholders – many of whom are located halfway around the world. Governance should be positioned high enough within the business to have the appropriate level of influence and authority to maintain strategy and operations alignment at all levels, and specifically between the two organizations.
Proactive Problem Solving
Another error that should be avoided is managing outsourcing governance programs in a reactive manner. According to a Deloitte 2016 Global Outsourcing Survey, 46 percent of companies found providers to be reactive rather than proactive in solving problems. Unmet business expectations erode relationship value among suppliers and clients. Management teams on the vendor side must proactively plan to ensure deliverables arrive on time and aligned with set quality levels and other requirements.
A practical way to support a proactive management approach is to leverage technology designed to deliver straightforward automated outsourcing governance support. Software designed for this purpose helps forward-thinking organizations address ongoing challenges before they strike by:
- Reducing workload – migrating overly manual processes to an automated system
- Supporting the creation of new SLAs and metrics that can auto-manage the engagement
- Enabling every stakeholder to have the right level of data to manage relationships and predict outcomes proactively
Shifting to a proactive mode will help prevent headaches and instill new levels of appreciation and value among team members and partners.
Technology that offers real-time visibility offers valuable insights. This supports solid working relationships among in-house and outsourced vendors from the start through a fair and data-driven approach to team performance and productivity. Real-time data can be used to co-manage the team as information collected is accessed and shared immediately both internally and externally with various team members and stakeholders to drive continuous improvements.
For example, teams can leverage analytics to decipher how time is being spent by individual employees, groups or business units. Organizations can then identify unproductive pockets that may reflect underlying issues relating to manager oversight, team morale, slow or incomplete provision of information from customers, misunderstood requirements, etc. This data is incredibly useful in myriad ways. But at the most basic and foundational level, it can reveal how much time is being spent (or not spent) on core activities, since an extensive amount of time is often consumed in non-core or even unproductive work activities such as emails or meetings. Organizations using this information to reset the focus can enjoy productivity gains of 10-15 percent a day.
Focusing on these four measures will help organizations transform their outsourcing governance experience into a rewarding, productive program. Aligning the right team with the right technology to measure performance in an automated, real-time manner can help organizations attain new-found improvements in collaboration and engagement, visibility and transparency, and provide clarity into performance and productivity levels, to support best-practice management and governance to attain the full return on investment from outsourcing engagements.
About the Author: Brad Killinger is the CEO of Sapience Analytics, a vendor of “people analytics” solutions to help companies better organize and use employee time to be more efficient. Sapience Analytics technology is used by more than 120,000 users in over 85 enterprises across 18 countries to move the needle on employee engagement, organizational productivity, and business profitability.