A key thing to understand about any outsourcing endeavor is that once the decision is made to outsource the work, the work definitely is not done.
In fact the real work at each end of the outsourcing equation is just beginning, particularly in a Vested Outsourcing relationship. Establishing a proper, flexible governance framework, setting systems for monitoring and measuring desired outcomes and keeping the right people in place all take on vital significance.
The latter point applies from the top down.
Once the decision to outsource is made – “Do what you do best and outsource the rest!” – a natural temptation in upper leadership echelons might be to disengage and let the outsource provider worry about it. Guess again!
Some disengagement is healthy and necessary: let the experts exercise their expertise without continuous micromanagement. But there is just as much danger in becoming too disengaged, too complacent, too unaware.
A good case in point was cited in a recent Harvard Business Review blog item by Susan Cramm, “Outsource the Work, Not the Leadership.” Cramm is the founder and president of Valuedance. A former CFO and CIO, she is an expert on IT leadership, and she’s the author of 8 Things We Hate About IT.
In her post Cramm writes about a software company that decided to implement some packaged software to streamline its financing operations, and also decided to outsource that work. The company did “a great job working through a disciplined process to define requirements, solicit bids, evaluate vendors, finalize the scope of work, and negotiate the contract.” It hired a “brand name” consulting company to make it all happen and the project apparently hummed along until it crashed into a wall just as the delivery date approached. It turns out the users disliked the software.
About eight months of delay and tense scrambling ensued; the project was delivered “but not without a significant amount of organizational angst — it exists today and will continue for the foreseeable future,” Cramm writes.
She continues: “The software is late and not accepted by its users. The search for the guilty party settles on the vendor. Everyone agrees they are at fault and resolves to pick a better one next time. Clarify the scope of work and relative responsibilities, they chant. Hold them accountable.”
So is the case closed? Blame properly levied and lessons learned? Well no, not hardly. Maybe the company’s “disciplined process” was not so great after all, and then when things went south there was no process to determine mutual accountability. I’d submit that without a vested partnership that follows the Five Rules this type of thinking and action is almost destined to occur, and recur. Agreeing together on clearly defined and measurable outcomes from the outset, as stated in Rule 3, likely would have avoided the situation that the company found itself in.
I agree with Cramm when she says that this is a typical case of the difficulties inherent in outsourcing, where the work and the leadership of the work are outsourced. “When outsourcing, you can’t manage through the contract, you have to manage through the people. Delegating to a vendor is no different, on a day-by-day basis, than delegating internally.
“You have to stay close in the beginning to ensure that objectives and success measurements are well understood, the approach makes sense, accountabilities and roles are clarified and the team jells.”
This hits the sweet spot of Rule 5, implementing a governance framework that provides insight and flexibility from the start and throughout the term of the outsourcing arrangement, not simply Statement of Work oversight that might not address or catch fundamental problems.
With the proper framework the work will be outsourced properly and credibly without abdicating essential leadership.