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Free of charge: 12 Best Practices in Managing Outsource Relationships

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This excellent paper by the Everest Group's Outsourcing Centre, describes best practices regarding the communications methods component of a governance agreement. The structure of informal and formal communication methods employed by 63 highly successful outsourcing relationships, each nominated for the Outsourcing Journal Editor's Choice Awards, were studied for this paper. From that research, both common patterns and innovative approaches were culled to determine the 12 best practices presented in this paper. (PDF file, 16 pages, 353 KB).

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Unformated preview of the document: '12 Best Practices in Managing Outsource Relationships' (Part 1):

Governing Attitudes
12 Best Practices in Managing Outsourcing Relationships
White Paper
by Kathleen Goolsby
©Outsourcing Center. All Rights Reserved
12700 Preston Rd., Suite 190, Dallas, TX 75230
May 2002
Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
2
Synopsis
This paper describes best practices regarding the
communications methods component of a governance
agreement. The structure of informal and formal
communication methods employed by 63 highly successful
outsourcing relationships, each nominated for the Outsourcing
Journal 2002 Editor's Choice Awards, were studied for this
paper. From that research, both common patterns and
innovative approaches were culled to determine the 12 best
practices presented in this paper.
May 2002
Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
3
Introduction
In any outsourcing relationship, it's important to start well, with mutual
understanding and agreement as to objectives, service level performance,
responsibilities and fair pricing. But long-term relationships inevitably will be
affected by external situations that can cause the parties' interests to no
longer be aligned and, thus, place pressure on their attitudes toward each
other.
Building a governance agreement into an outsourcing contractual
arrangement is a crucial component of ensuring a successful relationship
over the long term. Such an agreement reflects the components of how the
parties will interact and communicate at various levels of the organization,
handle changing business requirements and new objectives, strategically
plan for the future and continuously improve the value they wish to achieve
through their relationship.
Instability or inequity and mistrust are as dangerous to an outsourcing
agreement as cobra venom is to a human body. Without an effective
governance module to establish how the parties will work together on an
ongoing basis at a level beyond day-to-day operations and metrics, longterm
success is a dicey proposition. When challenges occur, the
agreement governs the parties' attitudes and reactions, preventing
misaligned attitudes from governing the relationship.
May 2002
Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
4
Best Practice Strategies
Best Practice #1: Empowerment and Escalation
In the business process outsourcing relationship for accounting services
provided by Accenture to BP, the buyer appointed one of BP's senior
financial individuals as its day-to-day relationship manager. He is
responsible for working through all of the operational issues that arise. He
works jointly with Accenture's manager in problem solving, budgeting and
performance review.
Although he reports directly to BP's vice president and CFO for
downstream business, he is empowered to make decisions to work through
operational issues. In fact, the degree of success in his performance is
judged on using that empowerment to ensure that few problems escalate to
the CFO level.
In Glasgow, Scotland, where the City Council has outsourced some of its
IT processes for all of the city's schools to Mitel Networks, the council has
structured its problem escalation plan on four levels. Level one takes place
in the individual schools. Level two is based on geographic areas, and level
three is across the entire city. The fourth level is the City Council's project
director for the outsourcing and senior staff members of Mitel. The buyer's
goal is to solve problems while they are still at level one; and the service
provider is responsible for being responsive to problems while still at that
local school level.
May 2002
Governing Attitudes: 12 Best Practices in Managing Outsourcing Relationships
©Outsourcing Center. All Rights Reserved
5
Best Practice #2: Peer Relationships
In long-term relationships where members of both parties' management
teams have stayed in place throughout the duration of the relationship, a
key component of success often cited is the development of peer
friendships and in-depth understanding of one's counterpart in the other
company. BP's vice president and CFO, for instance, now

Unformated preview of the document: '12 Best Practices in Managing Outsource Relationships':  Part 2, Part 3, Part 4, Part 5, Part 6

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