Supporting your global initiative with the three pillars of strategic, functional, and project governance is critical to outsourcing success.
I’ve written before that while good governance alone isn’t sufficient to ensure an initiative’s success; it is absolutely necessary for it. So, what distinguishes good governance—the kind we see in the most successful global sourcing initiative—from mediocre or even bad governance?
Good governance is a pillar with three supporting beams at the strategic, functional, and project levels.
Strategic Governance. Strategic governance is about high-level, overarching management of global sourcing initiatives. It doesn’t involve overseeing day-to-day operations of the initiative, but it does involve making sure the strategy is (and remains) on target. That covers five broad considerations:
• Program-level execution, which is about guiding the execution of enterprise-wide global sourcing initiatives.
• Strategic alignment, which requires aligning the organization’s business strategy with its global sourcing initiatives (and ensuring that they remain aligned) as well as engaging strategies to achieve common objectives.
• Executive sponsorship, which is required at the strategic level. The role of executive sponsors is to provide leadership for the initiative, empower lower-level decision makers, drive the need for—and definition of—a common goal, and ensure global buy-in for the project.
• Risk mitigation. Some executives make the mistake of thinking that governance equals risk mitigation. Risk mitigation is an important part of strategic governance, but it is only a part. The purpose here is to identify organizational risks—internal and external—and to develop mitigation strategies and controls.
• Global organization, which is about creating a platform to share knowledge and best practices within divisions of the initiative and even among different initiatives in the organization. It’s also about managing change across the organization.
Functional Governance. Functional governance is more hands-on than strategic governance but still doesn’t really involve day-to-day operations of sourcing initiatives. Instead, it’s more the role of the conductor—the broker between strategy and program management. That involves three responsibilities:
• Demand management, which is about creating and identifying demand for global sourcing across the organization. It involves rationalizing, prioritizing, and aggregating that demand to create a ranked “to-do” list so that synergies are leveraged in global sourcing across the organization. It also reinforces a shortened learning curve as lessons learned are shared throughout the firm.
• Cross-function learning is about creating platforms to share best practices, assessing the impact, optimizing cross-functional learning, and cross-pollinating learning across multiple service providers.
• Coordination between business units and geographies is about managing program execution when the initiative involves multiple units and multiple geographies; it’s the role of the air traffic controller. It involves managing service delivery to ensure that it supports overlapping applications and processes across the business and leveraging service providers’ global delivery locations to best serve the different geographies.
Project Governance. Project governance is operational. Within this supporting beam, there are five responsibilities:
• Resource management, including managing onshore and offshore retention, training, onboarding, resource transitions, and knowledge transfer.
• Performance management, which involves monitoring and reporting service levels, managing quality issues, offshore workload management, and process flow for onshore/offshore delivery.
• Financial management, which involves reviewing invoices, mapping budgets to actuals, expense allocation, and change management to the base model.
• Contract management involves managing key personnel, staffing, attrition, background checks, insurance, disaster recovery, and business continuity plans, and reformulating service levels for relevancy.
• Relationship management, which involves managing the relationship between the organization and the client, spearheading client-of-choice initiatives, integrating onshore and offshore groups as one team, tracking issues to closure, and bridging culture gaps.
For organizations that want their global sourcing initiatives to succeed, good governance as a pillar with the three supporting beams of strategic, functional, and project governance is not optional: it’s mission-critical.