Clarity of structure and responsibility are the keys to any outsourcing engagement.
By Paul Cevolani and Olen Pepple
Governance is often a critical ingredient in the success or failure of a human resources outsourcing (HRO) or recruit process outsourcing (RPO) arrangement. This relationship is the “business glue” that binds partners while creating the organization and guiding principles necessary for a productive long-term engagement.
Thus, a governance model must properly define the roles, responsibilities, authorities, reporting, objectives, and controls to support success at each level of operations in this relationship. Properly implemented, governance enables organizations to communicate requirements, align team members and objectives, review contract and operational performance, and provide risk management and mitigation. Creating this relationship in a timely way is extremely key, as the process will be the foundation for all communications and collaboration.
The first phase of governance is developed during project planning and transition. This foundation defines the specific roles and responsibilities required to support the success of the short-term transition project team. As the project matures toward the “run model,” the second phase of governance begins. This is where the responsibilities of the long-term resources become further defined and the resources start to move into long-term roles.
Note that governance can be structured in many ways; from a two-person model, to a complex design with multiple levels of responsibility and authority. A popular approach is a four-layered pyramid, which illustrates authority and meeting frequency. The top level of the pyramid reflects the highest responsibility and the fewest meeting requirements. Here, the most senior individuals manage the performance, alignment of the organizations, and health of the relationship, as well as review changes to the contract. The bottom level symbolizes operational groups. This level meets the most frequently and is responsible for managing the tactical operations.
As one example, transition governance can be modeled on the division of labor below. However, time is a factor as a transition is a project phase, which by definition has a finite timeline. Thus decisions must be made quickly.
Joint Review Board. This group meets monthly in the beginning of the relationship and then quarterly as the relationship stabilizes. This board includes senior ‘C’ level executives from all parties and several senior members of the management committee. The ultimately responsibility of this group is the strategic health of the relationship. Some of its tasks:
- Ensure business alignment between the parties and the analysis of client and vendor business plans.
- Ensure any changes support and are in accordance with client goals and objectives.
- Review periodically the authority of the management committee, and resolve issues escalated by the management committee.
- Approve the management committee report and recommendations.
- Approve changes to the contract, including adding, modifying, and/ or removing any services as needed.
- Provide operational, technical, financial, and general management oversight of the contract.
Management Committee. This group meets weekly in the beginning of the relationship and then monthly as the relationship stabilizes. It includes several senior members of the service delivery committees and the executives from all parties directly responsible for outsourced operations. Their responsibility is the ongoing success of the outsourced operations. Some of its regular tasks:
- Ensure ongoing analysis of client and vendor business plans.
- Ensure that changes to processes support client goals and objectives.
- Review periodically the authority and makeup of the service
- delivery committees.
- Vet, approve, and forward service delivery committees reports and
- Recommend changes to the contract as needed.
- Provide operational, technical, financial, and general management
- oversight of the contract.
- Resolve issues escalated by the service delivery committees.
Service Delivery Committees. These groups meet weekly at the start and then biweekly as the relationship stabilizes. They include senior individuals from all parties who are directly responsible for designated areas of operations. Their responsibility is day-to-day operational success. Some of their tasks:
- Review and approve plans for services delivery.
- Review performance metrics.
- Resolve service delivery issues.
- Give upward notification of all issues that could modify services or contracts.
Ongoing Operational Forums. These are created by service delivery committees to solve operations issues, and they meet as needed. They are composed of the leaders of the defined forums. Their typical tasks:
- Review performance against SLA’s.
- Identify service issues improvements.
- Review service variations in service delivery.
- Review operational trends.
- Document demand-flexing recommendations.
- Resolve technology and delivery issues.
The governance pyramid defined above is a guideline, not a rigid framework, which will establish a more transparent—and successful— engagement between clients and vendors. Remember: the proposed structure exists for one reason—to define (and refine) the relationship of the client, and the vendor of the services being outsourced. Ultimately, the key to a healthy client/vendor relationship involves open communication, because fully vetting a variety of issues will resolve any questions and guarantee a seamless exchange of information.
Paul Cevolani and Olen Pepple, are the CEO and COO, respectively, of Novus Origo. For more information, visit www.novusorigo.com.