How to Ensure Quality and Financial High-Performance From Outsourced Providers

First and foremost an organization must understand why they want to outsource and what it is they are trying to accomplish through outsourcing.

Many organizations gloss over or skip this step entirely believing that they already have most of this information and/or a mandate to move forward with the project. That may very well be true – but to skip this step of due diligence is inviting disaster.

Not only is it critical to understand where the organization is today and where the organization is required to go in the future, but this is the time to begin tracking assumptions, dependencies and risks associated with the project along with appropriate mitigation strategies. Above all else, the senior leadership of the organization must be fully onboard with the effort. If executed properly, this step in the continuum may produce alternatives to outsourcing that are more efficient and cost-effective.

Activities that represent core competencies cannot be outsourced and non-core activities are candidates for outsourcing. Outsourcing decisions rarely fully examine the expected benefits, seldom fully understand the risks of outsourcing and the costs that these risks impose, and almost never are based on a sound trade-off of risks and benefits. That would imply that many poor outsourcing decisions are made. Risks include the risk of overpaying, the risk of damage to reputation resulting from inferior service, and risk of loss of control over vital assets.

Before an organization begins building an outsourcing framework it must first decide that outsourcing is a viable alternative and that all other options have been thoroughly reviewed. Click To Tweet

Outsourcing is complex and time-consuming to establish. There is no single approach to outsourcing that will guarantee success. Every situation is unique in one way or another. These unique elements are what keep clients, vendors and advisors up at night as no one can see into the future and anticipate every potential outsourcing challenge.

The key to success is preparation and experience. Just as a sports team would not walk onto the field of play without a meticulous playbook and a coach to lead them, nor should an organization that is contemplating outsourcing move out of ideation without an experienced outsourcing advisor and a strategy to ensure success.

The first requirement in building a strategy for success is to develop a framework that will guide the involved parties. This strategic framework for success must be based upon years of hands-on experience to avoid the obvious and customary crises and pitfalls. Also, the framework must be detailed enough to ensure stability and consistency yet flexible enough to be adaptable to the uniqueness of each client/vendor situation.

Here is a high-level five-step system for outsourcing: assessment, contracting, transformation, transition, and management of the outsourcing process.

These 5 steps provide a framework to ensure that all major phases and processes are addressed, and identify any gaps or missing processes that need to be included for proper planning of an outsourcing engagement.

In the next part in this series, we’ll cover critical questions you must answer prior to outsourcing and other key activities for success.

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