Managing Outsourcing Relationships

Managing Outsourcing Relationships

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Regardless of the complexity of work to be transitioned offshore, managing relationships is an often overlooked yet extremely vital part of the outsourcing process. For those who are about to forge a partnership with an offshore vendor in 2013, here are some key factors to consider.
 
Setting Realistic Goals and Expectations
 
Set GoalsIdentify cultural, social, and geopolitical differences. Explore capabilities, manage expectations, and determine possible deficiencies. Agree with one definition of a mutually beneficial relationship and assess whether such kind of partnership can be established and nurtured.
 
Contingency Planning
 
The best time to develop an exit plan is at the beginning of the outsourcing process. Despite both parties’ best intentions to make the relationship work, some unforeseen circumstances may cause the partnership to break. Anticipate and address all legal, financial, and change management requirements in your contingency plan right from the onset.
 
Evaluate the Vendor’s Management Team
 
Get to know the members of the provider’s management team and check if their values system is aligned with yours. Get to know their personalities and their ways of doing business with other partners. It’s advisable to select those with tactical and strategic general management capabilities. Some of the key factors necessary to the success of the partnership include structured meetings with clearly defined agenda, seamless communication, and open teamwork across all levels of the organization.
 
Measure and Focus on Performance
 
Performance metrics should be clear, realistic, and manageable, data should be easily accessible. Performance must be benchmarked at the beginning of the contract to establish a baseline for continuous performance evaluations. Make sure your metrics are flexible as circumstances may change over time and performance indicators may need to be modified.
 
Create Incentives and Penalties
 
Exceeding expectations rest on the shoulders of the provider, but incentivizing such effort based on the value they add to the outsourcing arrangement must be considered. This helps both parties build a foundation conducive to productivity and success.
 
Establish Good Governance
 
According to authors Amy L. Girst and Robert J. Schleyer, governance is defined as the set of roles approved by both parties that clearly specifies the rights, accountabilities, values, and escalation processes among others that guide decision making. Effective governance helps minimize confusion, inconsistency, and ineffectiveness linked to ad hoc responses of different individuals with diverse skills and dissimilar manners of operating.
 
Preserving Relationships
 
Restore faltering relationships the soonest time possible. Deteriorating relationships lead to inefficient projects. It’s costly and damaging to the business in the long run. Conduct regular meetings to identify unresolved issues and address growing concerns. Communication and collaboration also make great hedges against misalignment and project inefficiencies.

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