Taking this “corporate physical” can help identify some pressing deficiencies.
By Atul Vashistha
How do you know that your global operation is still best in class? How do you know what went wrong or what to optimize? Your offshore operations may need a “ health check” to evaluate their status.
A health check can address all aspects of an engagement—from corporate strategy, HR policies, infrastructure, and quality of the management team to the financial health of the company, security, disaster recovery, and the efficiency of processes. Let’s take a look at the steps you need to take to analyze your global operations and how to navigate through a process that will help you understand the problems and progress of your current operations.
Questions often asked are: Why do global operations not provide the expected return or fail? What can you do to ensure success? How can a health check help you analyze your global operations and put a process in place to optimize performance?
As the outsourcing industry continues to make headlines, global failures will continue to surface. In fact, despite the rapid expansion of globalization strategies, most companies are unsure if their global services operations are meeting expectations. We expect more than 25 percent of global operations are failing to meet expectations. Why do so many deals have the inability to reach expectations? The shortcomings can be attributed to five main areas:
- Lack of executive sponsorship;
- Failure to invest in the global operation (money and other resources);
- Poor governance planning and implementation;
- Too much, too soon (no road map); and
- Mismanaged and/or misguided expectations (not understanding the market).
When companies choose to ignore any of these, they find the reality of their global operations to be far from their original objectives. Clients are frustrated that they are not able to substantiate the five common goals of outsourcing: financial gains, quality improvements, process efficiencies, competitive advantage (faster time to market), and innovation. More companies are realizing that the global delivery model requires executive time commitment and monetary investment.
Companies need to be able to see the big picture when analyzing the success or failure of their services globalization strategy. Poor transition practices; failure to achieve process maturity; weak transition practices; internal resistance to outsourcing; low employee morale; low productivity; employee attrition; internal sabotage; lack of supplier understanding of client business environment; inadequate performance management—the list goes on. All of these are mere symptoms of the neglect and contribute to the overall health of the strategy.
So, how can companies analyze the health of their local and global operations? Quite simply, perform due diligence on global operations—whether a captive center, a third-party relationship, or a joint venture. The health check helps companies understand the underlying issues that could prevent outsourcing engagements from achieving their true potential. It can also help other companies salvage troubled operations.
During this process, it is important to dig deeply into all aspects of an engagement, from corporate strategy, HR policies, infrastructure, and quality of the management team to the financial health of the operation, security and disaster recovery policies, and the efficiency of processes that have been outsourced.
Health check involves a deep dive into the global operations. The key areas that need to be evaluated as part of a health check include: strategy; people; operations; technology; and compliance.
Each has specific topics that need detailed evaluation. The approach to leveraging this framework includes a current state review; comparative review to best practices; a gap analysis; ideal/future state recommendation; implementation; and monitoring and remedial work.
To receive a truly objective opinion, an independent party should perform a health check. However, it is possible to conduct the review internally. When considering whether to use an internal resource, make sure that a rigorous process is established and that the team has global operations experience. Regardless of the internal or external choice, this type of exercise will need buy-in from executive management as well as the delivery location heads. The result of a well-run health check will lead to companies being left with a thorough analysis of the global delivery location’s strengths and weaknesses, a gap analysis with industry norms, best practices, and a strategic and tactical road map for the future. A health check carried out properly can lead to insights into how to get a significant return on investment from your global services partnerships or operations.
Atul Vashistha is chairman and CEO at neoIT, a management consultancy focused on offshore and global sourcing. He can be reached at atul@neoIT.com.