BenefitsEngaged Workforce

The Outsourcing Competency

To possess this new skill set, consider all you must invest in services globalization. Eight percent in governance costs will likely result in more success.

by Atul Vashistha

As Carol Burnett once said, “Only I can change my life. No one can do it for me.” To succeed as a leader in business today requires keeping pace with rapid changes in our business environment.

Two of the key changes and opportunities today are outsourcing and globalization. So increasingly, the responsibilities of CFOs, HR executives, procurement executives, and others are dependent on successful management of third-party partners. This requires executives to add a new skill set: the outsourcing competency.

An executive today must also be able to govern third-party relationships and ensure delivery from outsourced or globalized operations. Whether the service provider is delivering a project that has a fixed timeline or delivering services for ongoing operations, the ability to seamlessly integrate service providers with an internal team is becoming a critical part of an executive’s resume.

Managing third-party deliverables sounds simple but is wrought with challenges and difficulties. Deliverables must be defined properly, aligned with business objectives, delivered on time, and, of course, within the defined budget. So, how does one integrate an outside partner or remote location into the process?
Whether outsourcing information technology, HR, finance, or procurement, executives must understand the core processes, objectively assess the current operating level of the internal organization, and orient the service provider or globalized operation toward the service levels.

Our experience in outsourcing and global services consulting and research shows that successful executive establish the processes as shared and then pay attention to the following factors:

• Life-cycle Commitment.
Organizations tend to launch services globalization initiatives rigorously and with the appropriate management involvement in
governance. However, senior-level involvement and attention dwindle in the second year. Despite comprehensive plans or contractual clauses to enhance
productivity, such obligations are neither proactively monitored for positive results, nor pursued. It is important to ensure that the attention stays strong throughout the entire life of the project.

Internal Commitment. Organizations wishing to benefit from services globalization should undertake a realistic internal assessment of their ability and readiness to pursue such complex initiatives. Aside from cultural and skill differences, other aspects such as internal communication structures, resistance mapping, and cultural sensitization need to be adequately addressed prior to commencing such initiatives.

Decision Making. Organizational hierarchy and culture play important roles in defining the decision-making authority within an overall governance organization. Executives needs to ensure that bureaucracy is not built into this governance structure. The structure should be able to clearly delineate responsibilities across the strategic and tactical, while ensuring that it is flat enough to encourage timely decision-making and appropriate controls. At the same time, not enough structure and staffing can lead to problems.

Staffing of Governance Teams. Most global corporations have delegated initiatives to a sourcing division and let it manage the offshore piece, regardless of the complexity, geographic spread, contractual commitments, etc. By doing so, organizations are yielding to a restrictive approach towards continual and effective program governance. For example, management commitment to a simple, single-site offshore delivery initiative has been similar to a more complex, multi-site, multi-country, and multi-vendor offshore delivery initiative.

Leverage Role of Influencers. Another important facet is to ensure that while nominating managers/individuals to staff appropriate governance teams within the structure, their ability to influence others should be taken into account. Such individuals can become vocal champions and ambassadors of the initiative, resulting in increased, and more importantly, consistent attention throughout the longevity of the project.

•  Investment in Time and Effort. For governance to be effective, operating staff and managers will need to budget anywhere from 15 to 28 percent of their time and effort dealing with ongoing offshore initiatives. The CXO level should budget approximately five percent of their time on governing services globalization initiatives year-on-year. It should be recognized that more time is needed during the beginning phases of the initiatives.

Adequate Governance Budget. Based on our experience, we recommend companies budget governance at approximately eight percent of their overall initiative expenditure, spread across the life of the entire program.

Successful executives recognize the need for the above steps and elevate their outsourcing competency accordingly.   

Tags: Benefits, Engaged Workforce

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