| Many companies undergo some form of | | | | perform an unapproved and undocumented |
| outsourcing within their business at some point. | | | | change by someone in the hallway, the |
| Those that have understand that outsourcing | | | | agreement mechanisms that have been put in |
| does not necessarily mean sending the work to a | | | | place to track all changes to the environment now |
| far off exotic place, nor that a buyer of services | | | | become void, leading to dismay and relationship |
| can "wash their hands" of all responsibility. Since | | | | problems for failed audits and invoice |
| veteran outsourcing companies have "blazed" the | | | | discrepancies. |
| trail over the last couple of decades, most have | | | | Reports |
| found their own way by trial and error, but a | | | | Provider real time data is an important component |
| common thread they share is the consistent need | | | | that is often under constant analysis. Using the |
| for education and training on the outsourcing | | | | data effectively becomes necessary and |
| agreement. | | | | quantifiable. Interpreting reports requires a "knack" |
| Retained organization training is preferred to occur | | | | and "finesse" to understand how they are |
| in the initial stages of outsourcing. However, it is | | | | applicable to the overall agreement - this is a |
| common within the industry that training occurs | | | | learned activity. Every agreement contains |
| after the initial period, based on observed | | | | mechanisms associated with timing of these |
| abnormalities and the frequency of the | | | | reports. But if the question is asked how much |
| occurrences. It is not an easy task to understand | | | | notice must be given to adjust service level |
| what causes events to occur (sometimes | | | | agreement percentage allocations, responses will |
| referred to as root cause); however, there are | | | | vary. |
| some factors that can be observed. | | | | Poor comprehension of the reporting cycles and |
| Outsourcing advisors assess the current | | | | notification periods create ambiguity in the |
| organization's behaviors by quantifying events that | | | | operating space, which leads to inefficiency and |
| are not necessarily tangible. In the outsourcing | | | | inevitably failed objectives. Notification |
| machine, "metaphorically speaking," a good | | | | requirements are one of the single most |
| outsourcing advisor diagnoses problems based on | | | | overlooked components of an agreement. |
| the relationship of events. We lift the hood and | | | | Retained organizations should become familiar with |
| diagnose three common events that reinforce the | | | | these definitions and why they are used. Some of |
| requirement for educating the retained | | | | the topics covered may range from changes to |
| organization: change orders and the relationship to | | | | the service level category allocation to how to |
| the change control process, reports, and | | | | make adjustments to baseline volumes to |
| governance. | | | | preparing for the yearly cost of living adjustment. |
| Change Orders and the Change Control Process | | | | Governance |
| When change orders need to be made, the | | | | Governance usually happens in one of two ways: |
| outsourcing agreement stipulates a particular | | | | 1) it is a natural evolution based on client/provider |
| process in which to request those changes and | | | | relationships - things happen and people adapt or |
| have them made. It's fundamentally important | | | | 2) it is documented in the agreement with the |
| that the individuals who are creating and approving | | | | structure and expectations of the organization. |
| the change orders understand the baselines | | | | The second method is preferred and is |
| services within the Statement of Work. Significant | | | | commonplace. Companies emphasizing the |
| amounts of change orders can be indicative of a | | | | importance of governance in year three of the |
| poorly-crafted SOW or that the person submitting | | | | agreement typically derived the governance |
| the change order is not fully aware of what is | | | | model from natural evolution. Those that included |
| contained within the base services. This is | | | | governance in the agreement have a tendency to |
| especially true when the net benefit of the | | | | place their efforts toward operational |
| change order is not benefiting the company. At | | | | effectiveness and relationship management during |
| some point when assessing the change orders, | | | | the same time frame. |
| identifying similarities in the work performed is | | | | Assessing the organizations maturity and the |
| mandatory. If the consistency is there and not | | | | effectiveness of the governance model can be |
| part of the current baseline services, this requires | | | | discovered by asking questions on where the |
| incorporating the changes into the SOW to | | | | emphasis is placed. Operationally effective |
| become part of the baseline services. | | | | organizations have stronger governance models |
| It is equally important to understand the impact | | | | that are contained within the agreement and the |
| of not following the agreed upon change control | | | | retained organization is well-trained, whereas |
| process and the implications of hallway | | | | ineffective governance models hinder operational |
| conversations. Not informing or educating the | | | | effectiveness because of untrained and |
| retained organization about the change order | | | | inexperienced retained organizations. |
| process can foster predatory provider behaviors, | | | | The benefits achieved from training the retained |
| such as taking advantage of client knowledge, | | | | organization yield higher maturity levels and |
| manipulating the process, and creating an | | | | effective outsourcing agreements. Those that |
| ambiguous environment. Agreeing to have the | | | | have trained the retained organization on the |
| work performed outside of the SOW without | | | | agreement are much more likely to achieve their |
| submitting a proper change order will present | | | | outsourcing objectives. |
| repercussions. When the provider is asked to | | | | |