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I hope I was convincing in my last post that good or bad governance of an outsourcing relationship can result in the success or failure of your project. However there are many indicators along that road that show you whether your governance initiatives are up to the mark. Let’s break them down here:
Effective communication is the cornerstone of a well-run sourcing partnership. So if you find yours starting to deteriorate, make a conference call happen. The best governance model is not one where you’re ordering your vendor around and micro-managing, but one in which there is a high level of trust, and a free flow of information. That latter part is critical because if there are issues with an aspect of development, or with a deadline, you want to know about it well beforehand. This is why understanding the culture you’re sourcing to and how its people respond to workplace issues is necessary training for your governance team. Responsiveness and mutual respect is something you must ingrain in your communication and in your vendor’s right from the beginning.
This is not to say that disputes won’t come up. Issues will continually be arising even in the best run sourcing partnerships. In fact, if you’re working with lean or agile software development, they’re almost to be welcomed as evidence that the job is getting done. But how those disputes are resolved tell you everything about the strength of your governance initiatives. Ineffectively governed relationships will see both parties excessively relying on and turning back to the contract, while effectively governed projects will include more collaborative planning, change control and structured dispute resolution.
Work quality and risk-taking
This should be quite self-explanatory. If you’ve been clear about what you want accomplished, then whether or not those expectations are met depends on your governance model. The quality of the work of course depends on the abilities or the provider, but whether the results are delivered on time and on budget is up to whether you stayed involved in the interim.
The same goes for risk-taking behaviour. Decisions must be made involving you, and be fully transparent with easy access to all necessary data.
Most importantly, be realistic about costs. Effective management of the vendor is expensive, and many outsourced projects fail because firms don’t take that cost into account. Good governance usually comes out to 8-12% of the potential savings from that project, and this needs to be included in the equation.
In my next post we’ll be discussing the Five Most Common Governance Mistakes that firms make. Stay tuned!