Outsourcing - contracting partners to perform work on your behalf - has become a strategic and tactical success. Through leading three separate large outsourcing transformations, I’ve learned a few things and offer some guidance that you’ll hopefully find helpful as you either consider or improve your own relationships. There are few right or wrong answers, so you’ll have to adjust and adapt to your own situation. And I don’t consider these fully comprehensive, just representative of some of my experiences. Good luck in your journey!
Answer The Big Why. Know the answer to this key strategic question because it will be asked, and the answers will be scrutinized frequently.
Regardless of your reason, you must be succinct, clear and consistent with this answer – this will give your teams a rallying cry, keep your partner focused and serve as a reminder for your organization’s leadership.
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There may be multiple key reasons: cost nearly always plays a part, for example. And all of the rationale accumulates toward your decision and needs to remain visible throughout the process. But don’t lose the answer to The Big Why in a myriad of legitimate and important – but secondary - considerations.
Understand Your Culture.
Is your organization’s culture innovative and risk taking? Or is it conservative? Write down these attributes and their implications as you prepare your framework for approaching change management, leadership alignment and staff motivation.
Understand your candidate partners and their cultures and how they stack up working with your culture. Their transition depends on the type of culture you cultivate. Determine Your Evaluation and Selection Criteria Early. Evaluation criteria and weightings must include operational performance, solution approach, management team, governance structure, cultural fit and cost. Depending on your situation, also consider language compatibility, speed to delivery, project management skills (especially for transition), capability to deliver value-added capabilities or standardized processes.
Be cautious about the lowest bidder – you will only be successful if both parties benefit from the relationship. Low cost could translate to fewer or lower skilled resources, less flexibility, higher potential for performance risk, and limited management attention. The rate card looks good at contract time, but may not necessarily reflect your needs for future flexibility
Visit delivery sites. These can be long and arduous journeys, but well worth the knowledge of seeing your type of work in action and asking off-script questions. We’ve also used half-day presentations (our version of speed dating) to gain a high level understanding of a potential partner’s approach, experience and culture.
Setting up the relationship for success
Prepare for Some Big Changes.
Generally, outsourcing of any size has a meaningful impact on your organization’s staff, processes, technology. Prepare your teams for how this could impact each individually specifically and how they can contribute to the success of the change. Be transparent with the organization about the intent of your initiative, your progress against your milestones and the potential for impacting staff – by communicating more, you build trust in the process, which is a key asset to build.
The intimate details of how work is performed needs to transition to your partner, so allow plenty of calendar time and resource allocation to enable this process to occur. Assume process documentation has to be created, reviewed and updated multiple times. The face-to face transition process will take longer than anticipated and creates productivity loss - so build contingency into your schedule. Skimping on various project-related aspects such as cost and skill has yielded disappointing results.
Consider your partner’s standard work as an improved replacement for your own. In many cases, we have become entrenched in “how” we perform our tasks, where our partners can excel at efficiency based on experiences gained from multiple engagements.
When sending messages, use names, not the anonymous “Program Management Office” or “Initiative Team.” Avoid hiding people behind their team, company or country. Keeping your communications points refreshed and visible will aid you in selling outsourcing work through Develop Clear & Realistic Contracts and SLAs. The master services agreement needs to be hashed out by your legal teams and the level of detail and engagement with the initiative teams will vary. The operational work definitions center around the statements of work (SOWs) – critical documents that require the utmost attention by both parties. Determine the level of activity detail and relative priorities; performance expectations (Service Level Agreements or SLAs) and how they are prioritized, measured and managed; the tools, software and accesses required to perform activities; the level of staffing required to complete the volume of work at the expected performance levels; and the costs. Keep the SLAs outcome focused, not activity focused.
Partners always seek to adhere to SLA’s to avoid the financial penalties. Take time to right size the SLAs to match your cultural and actual business needs for mutually beneficial outcomes. Managing for mutual benefit
Apply Multiple Levels of Governance
Employ a governance strategy that keeps both parties in sync at all levels. Successful governance includes executive level engagement down to weekly or bi-weekly joint team meetings. At all levels, encourage explicit truth-telling so that the real issues, concerns, risks and roadblocks can be raised, escalated and resolved quickly. We have a tendency to focus on the challenge areas, so make the effort to highlight the successful outcomes and accomplishments.
Go out of Your Way to Encourage the Staff.
Visits to partner locations are valuable, as they demonstrate your organization’s commitment to the operation and the people. Use the opportunity to recognize contributions, bring branded trinkets, walk the floor and ask questions to demonstrate that you’re aware of the activities they are performing and visit with the partner’s executives to relay the strengths and development needs of the relationship. Know the partner’s high potential employees. Make an effort to recognize and encourage these folks by offering an opportunity to work on-site, lead or participate in important projects or innovations and gain visibility to your executives.