Five Common Governance Mistakes, and How to Avoid Them

We’ve established so far that weak governance is one of the big threats to outsourcing success. Implementing good governance is challenging no matter what the location, and is made even more difficult in Latin America since many of the countries are still emerging as destinations, and do not have as much sourcing experience as India. That leaves a lot of slack for the buy-side client to pick up, and many go at it entirely the wrong way. I’d like to reference an article on Nearshore Americas by Pablo Velasco, Director of CIO Services at TPI, called “The Five Most Common Governance Mistakes”. TPI found that over many cases analysed, buyers make five basic mistakes over and over. Here they are, make sure you avoid them: 

1. Understaffed governance teams 

Many firms outsourcing  a project don’t even have a governance team – just one individual who’s supposed to do a balancing act between the client and provider. As Velasco says, “The most common mistake we see is for a company to designate someone as responsible for managing the contract, but providing insufficient resources for that individual to succeed”. It’s important to have a team of experts each monitoring the project from the perspective of tech, HR and finance. Governance is a job usually too large for one individual, but if you really can’t spare the resources for more, make sure that individual is senior enough to involve the C-level of your company in decision-making. 

2. Lack of executive sponsorship 

That leads to the second point – representation of, and support from senior management is crucial to strong governance in outsourcing. As Velasco says, “outsourcing does not eliminate the need to manage the function being outsourced; it only changes how it must be managed”. Providing additional resources to the governance team, and resolving disputes with the vendor are only two of the many good reasons senior executives must be involved. 

3. Lack of formal training and processes 

We hear a lot about process automation these days, and while the technology doesn’t apply here, the words definitely do. Governance processes need to be formalized and clear steps must be developed for as many scenarios as possible during the outsourced project. And then your team needs to be trained in those protocols and how to follow them. 

4. Insufficient communication between client and service provider 

I discussed this at length in my last post below, but the new insight that Velasco brings out is that chatting with your vendor must become a regular thing, even if it’s as mundane as getting an update on the project, or day-to-day issues. “Communication should be consistent and scheduled, not initiated only when there’s a question or problem”, he says. “It’s effective for preventing small issues from escalating into big problems”. 

5. Governance blind spots 

Very simply, firms must focus on governance as a skill in itself, and see any issues with the outsourced project as issues that could have been caused by shortcomings in governance. Companies almost never do this. They usually remain hung up on service metrics and pricing numbers. As Velasco says, “By focusing on governance, many of the problems that relate to it can be avoided”.