Blog | 12.02.2014

Outsourcing Governance & Outsourcing Management

Outsourcing began to achieve large-scale notice in the early 1990s, largely as a cost reduction measure for troubled firms or as a bottom line fattening practice of so-called corporate raiders. In the 2000s the practice has evolved into a worldwide labor market for everything from support functions to manufacturing. However, outsourcing is not a cure-all or a quick fix for entrenched organizational problems – a mindset that leads to customer dissatisfaction and a degradation of the relationship between outsourcing suppliers and customers. Computer Weekly notes that this is a problem for clients who are not actively practicing outsourcing governance, but are rather going through the motions without really understanding the basics of governance. Outsourcing management has evolved into a set of standards and a three-level governance structure, however, this does not address anything more than surface problems. The answer to organizational problems within outsource management is not holding meetings and generating reams of data, but a vigorous reality check.

Principles of governance should include attention to five key points.

  • Organizational relationships within the management structure need to be firmly delineated
  • Defined authorization levels that specifically set financial limits, authorization limits, and to whom these limits are given
  • Project planning should include governance tasks such as meetings covering project delivery, invoice review, and other functions
  • A communication framework should be set firmly in place detailing what information is needed when, by whom, and how this information should be delivered
  • Escalation processes are needed to give warnings about delivery problems, whether it is on a project or for physical supplies. No one likes to be taken by surprise, and with proper governance procedures in place, no one should be

Perhaps most importantly, these functions cannot be undertaken by someone who is not experienced in outsourcing governance management. This type of corporate governance takes an experienced senior-level executive who can be trusted to develop relationships with all stakeholders, and maintain them accordingly. This is in no way a project to hand to anyone without the education and experience it takes to reach not only across geographical distances but cultural differences. Communication and organizational skills are vital not only to mediate disputes, but also to ensure that they do not arise in the first place. Choosing an appropriate outsourcing consultant with the experience and individual team members capable of facilitating, analyzing, and negotiating the concepts and complex relationships within a governance structure should be a priority.