Outsourcing is on every affiliates mind and is truly the way to reach your full potential. I've been researching heavily on this, and here are some key factors I think everyone should consider when they plunge head first into outsourcing!
Begin with a Shared Vision A shared vision is the first step to managing an outsourcing relationship. In the early days, cost or headcount reductions were the most common reasons to outsource. In today’s world, as explained earlier, the drivers are often more strategic, and focus on carrying out core value-adding activities in-house. These strategic objectives mean that outsourcing initiatives must come from the top. Senior executives must express the purpose and aspirations of the outsourcing initiative and convey how the course will benefit the organization. The goals of the outsourcing initiative have significant consequences for the selection of the outsourcing vendor and the prospective management of the partnership.
The vision saturates every stage of the outsourcing process, from the earliest establishment of goals through the construction and monitoring of the contract. In a shared vision, both the outsourcing buyer and seller contribute to the success of the partnership. A vendor can help def ine realistic requirements and added benefits for the buyer. There should be a key investment in getting to know and understand each other. This begins by way of initial negotiations and meetings on an unceremonious basis to learn about each other and to obtain views on the scope of the contract.
Establish Effective Performance Measures When you establish performance measures, you have an effective way to motivate performance and to ensure high-quality service in the form of incentives and penalties for over- or underperformance, respectively. You’ll want to specify requirements in terms of outcomes rather than inputs and attach a service standard against which to measure performance. Make performance standards realistic, or they won’t be effective. There is a tendency to over specify requirements. For example, are turnaround times for payables of 48 hours required if the approach process takes seven days? In addition, standards evolve over time, and normally become progressively tighter.
Establish Clear Communication Mechanisms How partners communicate depends on the outsourcing contract and the complexity of the services being delivered. Simple, well-specified services, such as cleaning, catering, or fleet management, require day-to-day operational contacts and formal performance reporting and invoicing. As the services increase in complexity, more in-depth communication is essential. In particular, this may include joint planning of service delivery and problem resolution, discussion of proposed innovations or changes in approach, consultation on staffing changes, and so on. This will be supplemented by regular monthly reporting, to show performance against standards, pricing, and problems encountered.
Expect the Unexpected Despite your best efforts in establishing effective partner communications, the relationship between your company and its outsourcing partner may break down, so drawing up a well-defined contingency plan is an absolute necessity. Keep in mind, outsourcing is not an end in itself. It is a management tool, nothing more or less, and should be used as such. In the course of the outsourcing process, management must address several critical issues in order to achieve success.
These issues include identifying potential organizational problems, factoring in human resources and behavior, considering asset transfers and authorities, establishing and negotiating contracts, and overcoming political obstacles. Successful outsourcing vendors are keenly aware of how these issues affect both the buyer prospect and their own operations.