How to organize offshore and nearshore collaboration: Lessons learned in offshoring and nearshoring (The Art of Managing Remote Teams) by unknow

Author:unknow
Language: eng
Format: epub, mobi
Published: 2014-04-07T21:00:00+00:00

Chapter 5 - Basis of Success - Good Governance and Multi-Level KPIs

By: Erwin de Bont

Introduction

After an intense period of successful negotiation and a new contract, you will realize that this is just the end of the beginning of what you tried to achieve when you made the decision to outsource. Soon, you will discover that the contract is not flexible enough to meet your ever- changing requirements. You may realize that the supplier is optimizing his profit to deliver only the agreed services against your smart performance indicators. Your suppliers stick to the contract, the atmosphere between you and supplier is getting vitiated, and in the end, you are unhappy. This is not what you hoped for! How can you make sure that the changing business goals are met, that the supplier is doing more than agreed, and that your expectations are being fulfilled?

Tightly written contracts can work against success if they inhibit the ability of businesses to adapt to evolving and highly complex market conditions. When it takes months of renegotiation to modify contract language, the moment of opportunity could be long gone. Should your agreements be radically different? Shouldn’tthey be designed to accommodate continual change? When written correctly, there is effectively no ‘FINAL’ contract. Terms and conditions are designed to accommodate flexibility in order to adapt to unexpected situations. Governance systems are in place to address circumstances that require creative, out of the ordinary resolutions. Measurement reporting should allow for aberration and unique events.

The fundamentals to start at are governance and performance indicators. However, in my experience, the majority of conflicts between suppliers and customers are based on bad governance and performance indicators. Your contract must at least covera governance and reporting structure that accommodates flexibility from both sides. Yes -flexibility for your supplier because when there is a single way of enforcement, you will discover that your expectations will not be met.

Where Do You Start?

Before you decide to outsource, you have to think about what you want to achieve by outsourcing. What is your company’s objective? Is it convenience, cost cutting, improvement in quality, joint go-to-market, innovation, etc. If you outsource, it is useful that your potential supplier understands your objectives and ismotivated to contribute to your business objectives. The supplier’s proposed contribution should be a part of the contract.After signing the contract, you should be able to measure the contribution of your supplier against your objectives. Moreover, you should be able to change your objectives because your market conditions will keep changing.

Governance & Performance Indicators

Your contract should enable flexibility. So, whenever you start thinking about outsourcing, start thinking about your objectives, create flexibility for future changes, and ensure that they are a part of the RFP and contract.

Of course, you have to make sure that all the objectives are measurable (performance indicator) and that the governance offers you the possibility to change the objectives and KPIs. But realize that in the end, it is not about how many widgets are promised or the speed with which calls are answered.

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