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Outsourcing’s Hidden Career Opportunity
Remember: Be Like Tommy
InfoManagement Direct, November 2, 2007
Tommy was like every other kid who ever swung a baseball bat. He dreamed of hitting the winning home run in the World Series. Tommy even made it to the big leagues, but after two uneventful seasons, he was dropped by from his team. He was crushed.
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If your company has outsourced the work your department does, you probably feel like Tommy. If you are lucky, you are like Tommy. Why? Because after losing his position as a player, he began one of the most successful coaching careers of all time. “Tommy” is baseball Hall of Fame member Tommy Lasorda, who managed the Los Angeles Dodgers to two World Series championships and led the 2000 U.S. Olympic baseball team to a first-ever gold medal.
So why be like Tommy? Because outsourcing programs absolutely require in-house managers who are focused on team building and guiding the new outsourcing relationship to success. Managing outsourcing relationships is a new and unique challenge that few companies have yet mastered. Defining and executing on this new discipline of outsourcing relationship management (ORM) is a significant new career opportunity for those that recognize the opportunity and meet the challenges.
Challenges
The relationship with your outsourcing provider is different than the other important relationships your company manages. Your providers are not an employee, although by definition they do the work that your employees used to do. Your providers are not contractors, because they are not specifically under your direction as to how or even where to perform the work. And your providers are not just vendors or suppliers; they are much more intimately involved in the day-to-day operations of your business and may even talk to your customers directly. The tried-and-true methods for dealing with employees, contractors and suppliers are not going to work with your outsourcing partner. But what will work?
The fact is that know one really knows, yet. The pace of adoption and the scale of responsibilities which many companies have outsourced is unprecedented. What might have been managed with intensive hand-holding when outsourcing operations were small will not work as they grow in size and complexity. If you are not convinced, check the Web site of the advisors your company used to help plan your initial outsourcing strategy. Chances are they now also offer services to help you define your ongoing outsourcing relationship management strategy. They might label it as a “outsource vendor governance” or “outsource management and governance” or even “business service management” strategy, but in whatever guise, it is a new category of service which almost all advisory firms now offer as part of a more end-to-end outsourcing approach. They know that companies are struggling with this type of operational problem, and they are eager to offer their experience and assistance.
Opportunities
However, whether or not your company hires a consultant to provide guidance and a beautifully constructed PowerPoint presentation that explains it all in living color (and if you are lucky, entertaining clip art), someone at your company must ultimately take the reins of this new relationship and make it work after the contract signing is done and the transition teams have moved on. That someone could be you. This is an opportunity to take on a new and vitally important role in your company – if you recognize the need and can match your abilities and qualifications to the job.
How do you know if you are qualified? What will an outsourcing relationship manager have to do? There are three primary, high-level challenges:
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Defining a successful relationship;
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Developing a methodology for monitoring and maintaining a successful, healthy relationship; and
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Building the team, processes and infrastructure required to implement your methodology.
Define Success
What does success mean to the outsourcing relationship manager? Defining success is more difficult than you might think. It is not necessarily best articulated in the lofty success criteria that were in your outsourcing vendor’s original proposal. For example, the dollars saved (or not saved) will undoubtedly be debated. Winning this debate is not your job and will not help your company build a successful outsourcing relationship. Rather, your task is to define success in terms of observable and manageable day-to-day objectives. You must set goals and track associated metrics to hold your outsourcing provider accountable, but do so in a way which doesn’t lead to an adversarial relationship. This will undoubtedly include the service level agreements negotiated in the original contract, but should also include appropriate leading indicators, performance measures and relevant qualitative metrics. The ultimate measure of success, of course, is whether the operations of your company continue to run smoothly. Projects must get completed on time, quality must be high and customers must be happy. These are the criteria that will make your company and you as a relationship manager successful. You will need to define a handful of quantitative and qualitative metrics that define day-to-day success and build your approach around them.
Develop a Methodology
How will you manage your providers? In almost every outsourcing contract, there are a set of service level agreements (SLAs) which must be met. But in almost every case, managing to SLAs is not enough. Keep in mind that SLAs are typically created before the work ever begins and are developed during a protracted contract negotiation that usually ends when both sides are too exhausted to disagree further. As a relationship manager, you must build the methodology that will achieve success and realize that success will require more than just meeting baseline SLAs. In some cases, success can come in spite of SLAs. You must motivate your vendors to achieve your definition of success, whether or not it completely aligns with contractual SLAs. The motivational techniques you use form the foundation of your methodology.
Some key questions to ask:
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Do you make providers compete with each other or trust that a single provider is doing the best job possible?
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How will you provision workloads across multiple providers?
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What, if any, benchmarks do you use?
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How much do you need to know about the details of your providers’ operations?
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Do you deal only with the CEO of your provider, through mid-level managers or by direct interaction with the employees that are doing your work?
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What will your incentive structure be - will you shift more work to the best vendors, and will you employ bonuses and penalties?
Motivation of your vendors is an art that you must embrace. The “right” answer to these questions, of course, is the one that produces results for your company.
Build the Team and the Infrastructure
Managing outsourcing vendors requires a unique set of skills. You’ll need a functional understanding of the processes that are outsourced, strong project management skills, statesman-like negotiation and dispute resolution skills, and as we discussed above, a deep understanding of motivational techniques and appropriate incentive structures. It is unlikely that you’ll immediately have a firm grasp of all the skills necessary, but you must know the basics. And, more importantly, you must understand the breadth of skills which you must master and diligently work to build your repertoire. It’s advisable to inventory your skills and build your knowledge in all the critical areas before you put together a team. When the time comes to develop the team, keep in mind that the ideal team member will have complementary expertise in at least one area and the capability and desire to develop the additional skills your team will require. With your guidance, the team will develop into well-rounded outsourcing relationship managers.
Outsourcing presents another significant new challenge: when your company outsourced, the information infrastructure that supports effective management was instantly broken. Your operations are now being handled by an even more dispersed network that is working together for the first time. This is a completely new organizational structure built by groups which have never before needed to communicate. It will be your job to fill in the gap – and applying appropriate technology to the problem is key. Fortunately, the proliferation of inexpensive, reliable high-speed networks has made it possible to very quickly and cost-effectively implement a solution. A new breed of software tools has arisen to meet the challenge. These tools provide the ability to integrate with enterprise data and the power to manage and analyze it – capabilities that typical desktop productivity tools lack. And they are custom designed for outsourcing managers, providing functionality that exactly meets the requirements for successful outsourcing relationship management. The best solutions are offered as software as a service (SaaS) tools, providing low initial cost, minimal internal IT overhead, universal availability via standard desktop browsers and the security and scalability required to manage your data. The SaaS model makes it the ideal platform for infrastructure that you’ll need to manage and communicate with your outsourcing vendors. The set of tools required is an interesting topic in and of itself, but the basic capabilities required are: a shared infrastructure that enables structured communication, quick and easy integration with multiple data sources, security and access control, quantitative and qualitative scorekeeping (metrics), powerful yet flexible report generation and alert management, contract reference and change management, issue resolution (tracking, reporting, escalation) and a means to track qualitative measures of overall customer/provider relationship health.
Outsourcing relationship management is a new discipline. You won’t find any senior executive role models for this new position. Leading university business schools are only now starting to develop specialties in this area. You probably won’t find a standard job description on Monster.com. And your own organization will probably be slow in institutionalizing the role of you and your team. In short, the path to success is not clearly marked, so this one is up to you. It will take initiative, guts and determination. Are you like Tommy? If so, ORM could be your gold medal opportunity, and those who develop the requisite skills and experience will be far ahead of the curve and in a strong career position in the coming years.
Matt Chittle is a veteran of outsourcing and business transformation. Formerly with Accenture, he is now VP of Product Management at Outsourcing Relationship Management (ORM) software provider Janeeva Inc. He can be reached at matt.chittle@janeeva.com.
Matt Chittle is a veteran of outsourcing and business transformation. Formerly with Accenture, he is now VP of Product Management at Outsourcing Relationship Management (ORM) software provider Janeeva Inc. He can be reached at matt.chittle@janeeva.com.
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