Those that have understand that outsourcing does not necessarily mean sending the work to a far off exotic place, nor that a buyer of services can "wash their hands" of all responsibility.
Since veteran outsourcing companies have "blazed" the trail over the last couple of decades, most have found their own way by trial and error, but a common thread they share is the consistent need for education and training on the outsourcing agreement.
Retained organization training is preferred to occur in the initial stages of outsourcing.
However, it is common within the industry that training occurs after the initial period, based on observed abnormalities and the frequency of the occurrences.
It is not an easy task to understand what causes events to occur (sometimes referred to as root cause); however, there are some factors that can be observed.
Outsourcing advisors assess the current organization's behaviors by quantifying events that are not necessarily tangible.
In the outsourcing machine, "metaphorically speaking," a good outsourcing advisor diagnoses problems based on the relationship of events.
We lift the hood and diagnose three common events that reinforce the requirement for educating the retained organization: change orders and the relationship to the change control process, reports, and governance.
Change Orders and the Change Control Process When change orders need to be made, the outsourcing agreement stipulates a particular process in which to request those changes and have them made.
It's fundamentally important that the individuals who are creating and approving the change orders understand the baselines services within the Statement of Work.
Significant amounts of change orders can be indicative of a poorly-crafted SOW or that the person submitting the change order is not fully aware of what is contained within the base services.
This is especially true when the net benefit of the change order is not benefiting the company.
At some point when assessing the change orders, identifying similarities in the work performed is mandatory.
If the consistency is there and not part of the current baseline services, this requires incorporating the changes into the SOW to become part of the baseline services.
It is equally important to understand the impact of not following the agreed upon change control process and the implications of hallway conversations.
Not informing or educating the retained organization about the change order process can foster predatory provider behaviors, such as taking advantage of client knowledge, manipulating the process, and creating an ambiguous environment.
Agreeing to have the work performed outside of the SOW without submitting a proper change order will present repercussions.
When the provider is asked to perform an unapproved and undocumented change by someone in the hallway, the agreement mechanisms that have been put in place to track all changes to the environment now become void, leading to dismay and relationship problems for failed audits and invoice discrepancies.
Reports Provider real time data is an important component that is often under constant analysis.
Using the data effectively becomes necessary and quantifiable.
Interpreting reports requires a "knack" and "finesse" to understand how they are applicable to the overall agreement - this is a learned activity.
Every agreement contains mechanisms associated with timing of these reports.
But if the question is asked how much notice must be given to adjust service level agreement percentage allocations, responses will vary.
Poor comprehension of the reporting cycles and notification periods create ambiguity in the operating space, which leads to inefficiency and inevitably failed objectives.
Notification requirements are one of the single most overlooked components of an agreement.
Retained organizations should become familiar with these definitions and why they are used.
Some of the topics covered may range from changes to the service level category allocation to how to make adjustments to baseline volumes to preparing for the yearly cost of living adjustment.
Governance Governance usually happens in one of two ways: 1) it is a natural evolution based on client/provider relationships - things happen and people adapt or 2) it is documented in the agreement with the structure and expectations of the organization.
The second method is preferred and is commonplace.
Companies emphasizing the importance of governance in year three of the agreement typically derived the governance model from natural evolution.
Those that included governance in the agreement have a tendency to place their efforts toward operational effectiveness and relationship management during the same time frame.
Assessing the organizations maturity and the effectiveness of the governance model can be discovered by asking questions on where the emphasis is placed.
Operationally effective organizations have stronger governance models that are contained within the agreement and the retained organization is well-trained, whereas ineffective governance models hinder operational effectiveness because of untrained and inexperienced retained organizations.
The benefits achieved from training the retained organization yield higher maturity levels and effective outsourcing agreements.
Those that have trained the retained organization on the agreement are much more likely to achieve their outsourcing objectives.