The key is to begin preparing for OM/G as early as possible in the initiative — long before the deal goes live. Adequate investments in governance can preserve the intent of the deal by mitigating risk and ensuring value. Some of the examples are:
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Alignment. Frequently, the buyer selection team and the provider team trade-off so many terms throughout the negotiations, that the deal ends up in a different place. The buyer’s expectations may get lost through compromise, and the final contract loses the intent of the deal. Role of OM/G: Ensure the two parties remain aligned with the deal’s objectives.
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Continuity. Once the deal is ready to begin, execution can be difficult when the provider-pursuit team isn’t the one that will deliver the services, and the buyer-selection team isn’t the one that will manage provider performance. Role of OM/G: Ensure continuity and knowledge transfer from the start of the deal to delivery.
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Communications and change management. Organizations often fail to consider what the new environment will look like after the deal goes through, and they fail to communicate that future state to stakeholders. In one such instance, a company official walked into work and wondered where everybody was, only to learn that they were busy on-boarding and re-badging with the service provider.
In another instance, one company asked its service provider to develop a self-service, Web-based payroll system whereby managers could process promotions and other payroll functions. But managers were upset that instead of calling their longtime co-worker Liz, they now had to call a service center or do the work themselves on the Web. To overcome the resistance, the company spent a lot of time educating managers on the benefits of the technology and how to use it — a task that should have been started long before the process was outsourced. After all, if outsourced services aren’t adopted, a buyer can end up paying for them twice through redundant effort. Role of OM/G: Envision the future state and educate the organization.
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Performance management. In an outsourcing arrangement, buyers often see the costs associated with certain services for the first time — they were previously perceived as “free” because they were in-house and allocated annually. Consequently, organizations often don’t have the discipline or metrics to ensure they’re getting the service levels for which they’re paying. In one such relationship, the buyer-side team signed its deal and then spent the next six months cobbling together something in Excel that could be used to monitor service delivery and report results. As a result, the would-be relationship managers spent their valuable time becoming “spreadsheet jockeys” instead of making strategic business decisions. Role of OM/G: Long before the deal goes live, think about what the future state will look like, and how performance will be managed. Then, develop appropriate tools for measuring service levels and reporting.
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Governance Tools
Such tools - combined with people and processes — are critical components of the OM/G structure. Buyers should think ahead: What are the processes who will achieve the outsourcing objectives? Who are the people that will execute those processes? And what governance tools do we need to support those people?
In our study, respondents ranked management of service quality as the most important capability for OM/G tools. This was followed by the other five capabilities of OM/G, ranked by respondents in order of importance: Issue and problem management, change management, compliance management, finance and commercial management and communication management.
Not surprisingly, respondents said the most compelling attributes of OM/G tools are their value for money and their ability to deliver timely, actionable data. But ironically, most organizations rely on their service providers for OM/G tools, which is a little like letting the fox guard the henhouse. Once a deal is complete, an organization has a legal, fiduciary responsibility to consult that three-inch binder full of terms, penalties and deliverables that were negotiated — and manage the relationship to ensure the deal achieves its objectives. A service provider simply has little incentive to help clients monitor their services better.
Final Thoughts
Outsourcing management and governance are strongly linked to outsourcing success and satisfaction. Yet, organizations continue to struggle to implement successful OM/G programs. Some underestimate and under-invest in the challenges, skills and resource requirements of OM/G efforts while others assume that existing staff are capable of managing the relationship, when in reality the management of an outsourcing service provider is far more complex than managing an internal process. Due to a plethora of reasons that are usually seen in hindsight, some outsourcing deals don’t live up to their promises, leading to a valley of despair where buyers work through transitional pains that could have been mitigated through OM/G.
Our study shows that the marketplace is planning future investments in outsourcing including more complex, multiprocess engagements. The organizations that adequately invest in people, processes and tools required for outsourcing management and governance will realize the most success.
