Rule# 5 Governance Structure Should Provide Insight, not Merely Oversight

Any Vested relationship flourishes best in a culture in which participants work together to ensure their mutual success. In essence, Vested buys desired outcomes, not individual transactions. The service provider is paid based on its ability to achieve the mutually agreed desired outcomes.

Success in Vested requires engagement of five rules. Here we examine the fifth of those five rules: Governance structure should provide insight, not merely oversight.

In the early days of outsourcing, many companies made the mistake of simply throwing the work over the fence to the outsource provider, with poorly defined requirements and often no performance metrics or service-level agreements. As scary as it may seem, we have seen some companies with a high percentage of outsource agreements operating under no formal contract agreements. Fortunately, most companies that jumped into outsourcing have fixed this problem. The downside is that many have gone to the other extreme, as witnessed by companies experiencing “measurement minutiae,” described in Blog No. 9. Today’s outsource providers often have a small army of program managers who micromanage the outsource provider.

In an effective Vested partnership, a company contracts with service providers that are real experts. Such partnerships should be managed to create a culture of insight, not oversight.

Let us look at the meaning of both words to get a better understanding of the difference.

  • Insight: Power of acute observation and deduction; penetration, discernment, perception.
  • Oversight: Watchful care; superintendence; general supervision. Escape from an overlooked peril.

If a company has done a good job picking the proper outsource provider, a trusted expert in its field, why does it need a small army to conduct general supervision? Our experience has shown that companies tend to go overboard and micromanage outsource providers as a result of the “junkyard dog factor” (described in Blog No. 4).

A properly designed governance structure should establish good insight, not provide layers of supervisory oversight.

Following Vested Rule #5 prevents the Outsourcing Paradox and the Measurement Minutiae ailments.

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