Here’s the not-so-secret word for outsourcing success: governance.
And a proper governance framework can prevent disaster.
A global service provider recently shared a story with me that I’ve heard many times. The provider has had a ten-year relationship with a client to perform all their facilities management services across their portfolio and the contract was coming up for renewal.
The service provider was confident the contract renewal was a slam dunk. Why? Performance was strong, the scorecard was green and the team enjoyed a positive working relationship with the client. So when the team heard the client intended to go to the market seeking a competitive bidding process rather than renewing the contract, they were blindsided. The explanation was that despite the green scorecard, there was dissatisfaction with the service provider’s performance.
The service provider was perplexed to find out this information and the client was frustrated that the provider didn’t have a clue about the dissatisfaction. So what happened? Where was the disconnect? How did the relationship breakdown and how could it have been avoided? Can this relationship be saved?
Circle back to the word of the day: governance, something that everyone knows is vital, but that is also difficult to establish and implement. This is precisely where the relationship broke down.
Governance is the framework of people, processes, tools and infrastructure that enables an organization to preserve and achieve the intent of an outsourcing effort. Traditionally, a governance structure is developed at the outset of a relationship, then rarely reviewed again through the duration of the contract. Generally, it has limited flexibility, and is often viewed as a system focused on compliance and service provider performance rather than collaboration, regular communication, innovation or improved outcomes.
There is a better way. What if governance is structured as a collaborative, win-win framework for all of the parties involved? What if the goal is a flexible, transparent and adaptable relationship that enables a results-oriented operation?
Getting to that “win-win” outlook requires a governance structure that includes five elements that align companies and their service providers around common goals and expected outcomes. A strong governance program leverages trust, open communication, a shared commitment, a focus on performance, and accountability. The elements are summarized further:
The Foundation of Trust
Trust depends on the service provider’s ability and willingness to meet and exceed contractual obligations. This not only creates confidence in the service provider’s ability to perform, but also releases the company from tactical oversight: it is able to go back to focusing on the core business. Building trust relies on good two-way communication and fact-based performance reviews.
Candor and healthy conflict are essential to identifying and resolving issues quickly. Ensure that communication is bidirectional and focused on facts, not subjectivity. Companies and their service providers should set the tone and cadence of communication early in the process so that as misunderstanding, conflicts and discrepancies arise, they can be dealt with quickly. When communication is collaborative rather than directive, it allows issues to be addressed immediately and openly. When an ongoing dialogue is maintained, a clear and cogent understanding of desired outcomes is revealed. Misunderstandings hinder process and impact business outcomes. Open and transparent communication enables everyone to trust the process.
A shared commitment to collaborate drives improved results and puts the focus on continuous improvement. Jointly-developed action plans cultivate high performance and lead to a tighter alignment of business objectives. A shared commitment built on transparent and open communication enhances process effectiveness and allows performance issues to be identified and resolved quickly. Timely resolution of problems can also limit performance review surprises.
Develop and apply performance measurements that facilitate a results-oriented operation. Jointly develop scorecards and other tools; they are valuable for tracking progress and moving forward toward future targets.
A structured, unified approach with clear goals, objectives, KPIs and performance measurements provides a framework of accountability understood by the parties. Establishing clear expectations early in the relationship helps to address and move beyond discrepancies. Accountability occurs as needed and not at a later performance review meeting.
Implementing these key governance concepts elevates the relationship, allowing the parties to focus on strategic issues for improving collective performance.
Open communication between the parties is vital and worth emphasizing. Some organizations opt to have a third-party consultant or mediator participate in the governance and performance management of the relationship. Doing so ensures that the relationship remains healthy and on course by focusing on the changing goals and objectives of both organizations.