In outsourcing, whether it is business process or IT or manufacturing outsourcing, it is prudent for both the customer and the supplier (hereinafter referred to as the outsourcer) to ensure the existence of a strong governance function. Sometimes this function is also known as vendor management. I do not like the use of the term vendor management because often the work involved is not only managing the outsourcer but more often than not involves managing internal customer expectations. Having the right governance function is very important; it can often make or break a deal or an outsourcing relationship.
The role of Governance (dare I say this) is like the role of a banker. A banker is an advocate for the investor and the borrower. A banker brings both the parties together by ensuring that the investor gets a "fair" return for his / her money and charges a "fair" rate of interest to the borrower for using the investor's money. In the process the banker makes a "fair" spread for his / her efforts. Unfortunately, as we all know from the events of the recent past, we lost confidence in the banker as the banker strayed away from his / her core responsibilities and duties of being an advocate, by peddling exotic products largely driven from greed.
This has become a "teachable event". This is especially true for the outsourcing business as we institutionalize the governance function. As the outsourcing industry matures and as its stakeholders identify new areas of off-shoring, let us not forget the lessons we have learned from the banking industry debacle.
So what makes an effective governance function? The following elements are my lessons learned from leading the governance function for a Fortune 50 company for their domestic back-office work. From trial and error, in my opinion, my team and I significantly enhanced the relationship between the outsourcer and the customer, ultimately improving customer satisfaction. So allow me to share my lessons learned so that others embarking on this journey may not have to face a similar trial and error transition:
1. Create an effective governance function from day one - First and foremost, the company outsourcing the work has to recognize that they may have outsourced the work, they have not outsourced their responsibilities. The company outsourcing the work is still responsible to its stakeholders; be it the shareholder or the employees or the customers or the suppliers. It is the responsibility for the company who is outsourcing the work to ensure that an effective governance function is put in place from day one. The governance leader and the governance team must be an advocate for both the internal customer as well as the outsourcer.
2. Service the ultimate end customer - Even though the outsourcer’s team and the governance team may report to two separate organizations with perhaps differing business cultures and objectives, they still serve one end customer. The end customer is not the one who has contracted the outsourcer; however it’s the one who is ultimately benefiting from the services. The end customer could be an employee receiving payroll service or a supplier receiving accounts payable service or an external customer receiving credit and collections’ service.
3. Alignment of goals and objectives – To serve the end customer, both the outsourcer and the governance team must be aligned in their objectives. Goal alignment can be accomplished in a variety of different ways; though the best approach I have seen is for the respective leadership teams to have periodic joint team meetings, including joint team building events. These events cannot just be “one hour beer summits” where the teams meet, have a couple of beers and depart. Both the teams have to address the harsh realities of the business and be ready to deal with difficult situations collaboratively. The respective organizational leadership must carefully and jointly articulate the mission and the vision to their team members so that both the outsourcer’s team and the governance team can work collaboratively in the service of the end customer. Annual goals and objectives must be established, including identification of key areas of importance and focus.
4. Give and take – Both teams must work with a spirit of give and take. Outsourcing is not just about green light stop charts at any cost. Successful outsourcing will result from the customer and the outsourcer working hand in hand in the best interests of the end customer. It requires dedication, perseverance, a focus on operational excellence and last but not the least faith and mutual trust in the extended team.
5. Recognize mutual obligations – Both teams must recognize their mutual obligations and responsibilities. The governance team must be focused on governing the relationship and must give up the work to the outsourcer. The outsourcer must diligently execute and perform to the contract and the service level agreements.
6. Communicate – Finally, both teams must establish a very effective and frequent communication protocol that includes internal communication between the governance and outsourcer teams. The governance lead must also have periodic communication with the internal customers and give the outsourcer’s team a seat at those meetings. An effective approach is to form a customer council representing all the appropriate stakeholders and process partners to discuss issues, challenges, and opportunities.
The bottom line – the outsourcing team is an extension of the customer. This is evolving into a complex corporate and interpersonal relationship. Over time, you can take the art of managing the relationship and make it into a science by continuously applying the principles I have highlighted above.
These principles will also work in a shared service environment where the work is being done through a captive center. Even within a captive center, there is a strong need for a governance function.
If you would like to learn more about this relationship opportunity, please contact me via Email.
0 comments:
Post a Comment