About eighteen months ago, at the SIG Global Leadership Summit in Seattle, we concluded the event with an evening at "Lucky Strikes," an upscale bowling alley and billiards hall. For those of us who work for SIG, most of the heavy lifting for that event was behind us. It was Thursday night, which made it time to enjoy the fruit of our labors with our members. I don't know about most of you, but I for one become a better bowler as the night progresses. Liquid courage, perhaps...or maybe it's that I put too much pressure on myself to do well and if I don't, I embarrass quickly. Against my better judgment, I joined a few members and colleagues in a game. Yet, imagine my horror when in the first frame I threw not one gutter ball, but TWO. Mortified beyond belief, I removed my bowling shoes and walked away from the game without looking back, even with my colleagues encouraging me to stay. Having grown up with a pool table, I moved on to the billiards room where I knew I could build my confidence. After playing a few rounds, I went back to check on my friends who had continued bowling without me. One of our members — a fairly athletic guy, I might add — was not doing too much better than how I imagined I would have done if I'd had the courage to continue. And yet he did what I had been unable to do — he stuck with it and had fun despite his low score. Again I found myself being talked into joining a game one lane over. I did so fairly reluctantly, as I was still reeling from my earlier failure...but only agreed to play because the bowlers in that lane had the bumpers up, and I knew it would be nearly impossible to throw a gutter ball! With the confidence I had lacked in the game that I'd abandoned like a coward, I bowled my first ball straight down the lane, knocking down eight pins. Phew. The idea that I would fail again was looming over me, and yet I bowled not just decently, but with gusto, throwing spares, strikes and respectable scores frame upon frame. And ironically, not one of my balls hit the bumper that was blocking the gutter. So I asked myself...was it the bumper I needed...or just the idea of it? I think of governance in much the same way. It's not that you need a strong governance structure in order to have a successful outcome with your outsourcing service provider. But when you do, you are more likely to have the outcome that you desire with more confidence, assurance and, well, less gutter balls. Many organizations fail to invest resources in a strong governance plan until it's too late to actually do any good. In a game of bowling, I could walk away with no real penalty other than being chastised by my peers for giving up so easily...but in an outsourcing relationship, every decision has long-term consequences. It is for that reason that the governance part of the outsourcing relationship should be defined before the transition begins. A good governance plan allows the buyer — and their service provider — to keep their eyes focused on the things that really matter. The devil is in the details...and the details must be carefully considered...but from a high level, a good governance plan should include the following:
- Organizational structure: In addition to formal governance boards, steering committees, project teams, and executive stakeholders, this should outline the relationship between the buyer and service provider, as well as the authorities each person and/or group has for critical decisions. The organizational structure might even include a Center of Excellence, where consistent standards for change management, communication and governance can be archived and shared across the organization.
- Stakeholder involvement: Yes, you need formal support and executive sponsorship...but the informal component is just as critical. Don't underestimate the importance of networking with key stakeholders outside of the executive team. Informal gatherings can go a long way towards increasing buy-in and acceptance.
- Milestones, deliverables and goal linkage: A project plan should be created that outlines the service level agreements (SLAs) and associated deliverables. Well-defined SLAs spell out the expectations on BOTH sides of the relationship and provide metrics to assess performance. A two-way goal linkage where compliance is measured on both sides of the contract, motivates the right behavior and can better ensure success. Regular "check-ups" that monitor financial viability in addition to program performance are an important part of that. The plan should also outline contingencies in the event that any SLAs are not met. And perhaps most importantly, make sure everything is spelled out BEFORE the contract is signed.
- Communication, communication, communication: This holds true in any relationship and with the long-term nature of outsourcing contracts, it is especially important. At a more formal level, it includes scheduling meetings with key stakeholders, outlining escalation processes for potential service delivery issues, and ensuring proper feedback mechanisms for effective communications between all involved parties. Informally, buy-in and acceptance is important outside the formal governance structure as well. Change is not only inevitable...it is hard. Communicating some of the changes associated with the outsourcing contract helps people feel good about the reasons the organization is pursuing it.
- Cultural alignment: Choosing your service provider is a lot like choosing a marriage partner. You need to make sure there is a strong cultural fit because you'll be together for a long while. Outsourcing transactions are not short-term projects, and when you enter into it knowing that the contract could take 5+ years to implement, you'd be wise to ensure that you like the people you'll be working alongside. When I was in consulting, I once worked on a project where the client (a global bank) decided the relationship with their current provider wasn’t working. Even though they felt like the consultants could "talk the talk," it was clear that they had never "walked the walk." Our firm brought in a project team staffed completely with former bankers — we didn't just fit well with them culturally as their service provider...we had been in companies like theirs with titles like theirs, and it made all the difference!
- Trust: Good governance requires trust—but it is not a right — it has to be earned. You can have all the rules, stipulations, escalation processes, service delivery meetings and authorities in place, but unless all parties stick to the commitments, consistently follow through and hold each other accountable, it's difficult to be truly successful.
So are the bumpers really required? Not really — I didn’t need them to bowl a good game. But knowing they were there allowed me to feel more comfortable. I knew I was less likely to fail because of their presence. And in much the same way, good governance can have the same effect. It's not critical for an outsourcing transaction...but having a strong plan in place will keep all stakeholders on track and is more likely to result in the successful outcome that everyone desires. A longer version of this article was recently published in Outsource Magazine online. If you’d like to read it in its entirety, click here and while you are at it, sign up to receive their free monthly subscription for the latest in outsourcing news.