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Barbara Beller, Author at Everest Group

Dec 03

Outsourcing Governance 101: Playbook | Sherpas in Blue Shirts

By | Blog

Governance obligations are typically well covered in outsourcing contracts, and select governance documentation developed before the outset of the engagement. But even when both parties are committed to mutual success, conflicts can, and often do, arise between clients and providers.

To help ensure issues don’t raise their ugly heads, every outsourced relationship should develop, maintain, and bi-directionally enforce a governance playbook that is aligned to overall business goals. The playbook should include the governance framework, operating model, processes/procedures, contract, and documentation. A dedicated governance playbook repository for the outsourced relationship enables an overall view, inventory and access to all documentation related to governance processes, tools/templates, training for effective relationship management.

Critical components of the playbook include: 

  • A detailed outline of all key contractual obligations, such as reporting requirements, metrics, and documentation
    • Both the buyer and provider must clearly understand the contractual obligations and confirm a consistent understanding of their respective obligations
    • All the dashboards and reports in the world mean little if neither party understands the metrics being measured
    • To avoid misaligned expectations and continual delivery issues, ensure that both organizations have a clear understanding of the metrics and how each SLA will be captured, collected and monitored. SLAs are foundational to any services agreement.
  • Clear definition and alignment of problem resolution processes to business needs
    • Build governance processes that go beyond quality of services and contractual obligations
    • Focus on operationalizing joint governance to support accountability and oversight of the outsourced relationship, aligned to desired outcomes
    • Instate a process whereby unresolved issues are addressed at appropriate levels to preserve delivery continuity and prevent escalation of every item to the executive level for resolution.
  • Consider aligning metrics to documented processes
    • Develop process documents and metrics that matter most, and leverage the contract language, but also include concepts related to leadership objectives
    • Include these as part of the management review process to ensure alignment throughout the contract
    • Develop and maintain a joint Master Training Guide for all things governance to align expectations
  • Conduct training from the leadership level down to reinforce management commitment
  • Incorporate training to existing meeting agendas to complete training in real-time. 

What are the key components of your company’s governance playbook? 

For more insights on governance, please see the Proficiency and Partnership blogs in this three-part series.

Dec 01

Outsourcing Governance 101: Partnership | Sherpas in Blue Shirts

By | Blog

Governance balances the competing interests and needs of the buyer, end users, and the service provider. The intent of governance is to build a strong relationship, and align strategies, goals, and objectives through collaboration, mutual respect, and continuous communication.

Governance models should be foundationally designed with a joint relationship management structure and processes to build a cooperative, trusting working environment that encourages both the buyer and provider to make collaborative, proactive, mutually beneficial decisions. This requires active leadership by senior management in both organizations, including hands-on sponsorship, ownership, coaching, mentoring, influencing, and intervening, when necessary.

A true win-win partnership, as enabled by effective governance, is one that motivates the provider to do satisfy not just the contract but also all parties, and deliver value beyond the metrics and the original contractual expectations.

Following are the key principles behind setting up a partnership type of relationship with a service provider.

Tiered management structure with peer-to-peer alignment

With a tiered management structure, effective communication, responsive and efficient decision-making, and resolution are supported across three distinct levels to ensure alignment between executives and delivery teams. This keeps the focus on day-to-day service delivery without either party losing sight of strategy goals. The three tiers and their associated responsibilities should be:

  • Executive Committee – enterprise view of outsourcing strategy and provider relationship
  • Management Committee – ensure outsourcing performance is meeting internal and external objectives
  • Operating Committee – manage performance reporting, provider-driven changes, escalated issues, and out-of-scope requests

To ensure objectives are met and the spirit of the partnership relationship is maintained, the people engaged at each level must view their role as working with the provider, rather than policing its activities.

Decision-making and authority rights must be clearly defined and understood by both parties at each level

Defined and documented decision rights will help organize decision-making and execution by setting clear roles and accountabilities, and by giving all those involved a sense of decision ownership. In addition, the executive, managerial, and operational levels must aligned across both parties. While this may seem obvious, governance models often break down due to misalignment of these levels.

Commitment and sponsorship at senior levels is critical

Sponsorship should be evidenced by the commitment of sufficient resources and management time to nurture the relationship at both the tactical and strategic levels. All communications, formal and informal, must make it clear that senior management views the outsourced relationship as a true partnership, and will work together to provide joint oversight to achieve the desired outcomes. Moreover, commitment and plans for strong change management, training, and communication need to be rolled out, reinforced, and managed. 

Governance is successful only when the both the buyer and provider are successful

Buyers must make significant investment in standing up and staffing the governance organization, and management must be aware of the potential impact of the joint governance on current policies, processes, budgets, skills, competencies, and relationships, etc.

To help ensure mutual success, a proactive feedback loop should be developed, and periodic reviews by buyer and service provider stakeholders with progress reported to senior management should be instilled. These regular reviews enable both parties to process feedback, make required changes to the governance model, and proactively manage expected deliverables throughout the contract. They can also present a strategic opportunity to improve buyer and provider organizational capabilities, operational resilience, and competitive analysis in the longer-term.

Has your company experienced misalignment among the executive, managerial, and operational levels? What did you do to rectify the situation?

For insights on two key guiding principles to consider when building your governance team, please read the Proficiency blog in this series.

Nov 30

Outsourcing Governance 101: Proficiency | Sherpas in Blue Shirts

By | Blog

Some organizations – particularly first time outsourcers – tend to think that outsourcing engagement success ends with carefully dotted I’s and crossed T’s on the contract. Unfortunately, they often overlook governance, which is critical to ultimately driving the value captured from the relationship.

What is outsourcing governance? While definitions abound, one Everest Group particularly appreciates was cited in The New Global Services Governance executive point of view written by several of my colleagues:

Governance ensures that stakeholder needs, conditions and options are evaluated to determine balanced, agreed-on enterprise objectives to be achieved; setting direction through prioritization and decision making; and monitoring performance and compliance against agreed-on direction and objectives.

With that stage setting, the blogs in this series looks at three key components of good governance…proficiency, partnership, and playbook. They’ll be refreshers for some readers, and provide new insights for others.

First up is proficiency.

Outsourcing represents a significant change in the way an organization provides its services. Governance of this new service delivery model requires a considerable effort to implement and optimize, even if guided by an experienced team.

A common pitfall is staffing the governance function with personnel that were previously responsible for managing the functions internally, without ensuring they receive the guidance and training required to operate in the new service delivery model.

There is a big difference between knowing what needs to be done and actually implementing and executing it effectively. Understanding governance models, frameworks, and documentation alone will not capture the full value of the relationship. Allocating resources with experience managing service providers and the nuances of outsourced services is critical to achieving the positive results desired.

Here are two key guiding principles to consider when building the team that will play key governance roles:

  • The retained functions (those that existed prior to outsourcing and will continue to be owned by the buyer) are not the same as the governance functions

    • The governance model is the set of functions that exist as a result of the outsourced services
    • The over-arching goal of governance is to keep the relationship on track by owning key functions related to governing the buyer/provider relationship
    • Governance should be positioned high enough within the business to have the appropriate level of authority and influence, as it is responsible for maintaining alignment of strategy and operations at all levels between the two organizations
    • Those in the governance model maintain a broad set of stakeholder communication channels, which include buyer/provider executive and functional leadership, regional units, Finance, Legal, HR, IT, etc.

  • The skills needed to manage an outsourcing partner are not the same as those needed to run an in-house organization

    • Governance should be designed and staffed separate from the function outsourced; the functions required of a governance model are distinctly different from an in-house service model
    • Defined roles and responsibilities should be based on governance core competencies/skills and accountability for the governance organization, (including issue management, contract and financial management, committees, service performance/monitoring, communications, and administration), and those selected to play a governance role should be carefully reviewed to ensure that they have the competencies/skills for the job
    • Once defined, joint awareness and training sessions with internal/external stakeholders are key to ensuring that all stakeholders know what to expect in the new landscape.

What best practices has your company implemented when building its governance team?

Next in this three-part series: Partnership. Be sure to read it for key principles on establishing a partnership-oriented relationship with your provider.