Consider the Source

They Who Dare Win, Or: Gainsharing, Part One

My colleagues and I have worked for more than a year on what we believe to be the essential next step for the outsourcing industry: defining the principles for employing so-called gainsharing.

I’ve decided that this topic is one that I’d really like to work through via the blog as a means of widening the community helping us to set a stake in the ground. So please consider this the opening of a dialogue on the concepts we are deploying. Please respond – publicly or privately – and expect to hear more about the topic in TPI’s public-speaking engagements.

At the outset I want to thank the clients, service providers and law firms that have been helping us develop our gainsharing concepts. Their input has been innovative and essential.

To further set the stage, some definitions are in order.

In the context of outsourcing, “gainsharing” is meant to refer to the rewards ($) earned by a service provider for creating value ($) for a client under terms agreed to in advance and that directly derive from the expertise and acumen of the provider.

Gainsharing differs from traditional outsourcing in that both parties are looking for derived business benefits. If a prospective client is mainly cost oriented, gainsharing is not the way to go: A focus on percentage of savings is not true gainsharing.

That’s the formal definition. Now add some important nuance: Gainsharing is value created for the client that is “outside the box” of the provider’s scope of responsibility.

So, yes, providers must be expert at delivering the service they were hired for, but they also must be willing and able to partner for derivative benefits to the client.

These benefits do not include process improvements for managing IT. That ought to be part of the core services agreement. What we’re talking about is using technology management to generate more revenue or profit for the client.

I know what you’re thinking: Great, but can that really be done?

In the weeks ahead we’ll review some of the ways that my colleagues and I think it can. But the net of it all is that ambitious organizations should select services providers based on two filters: ability to deliver core services at favorable prices AND willingness to take on the extra risks and rewards of creating value outside the box.

Phoning it in (the Right Way)

More from the IQPC confab. This blog is by Doug Utley, a Raleigh, N.C.-based partner for management consulting firm ScottMadden.

Telecommuting continues to spread across the business world. Now it’s arriving in shared services.

Thing is, shared-services centers often are staffed by non-exempt employees accustomed to close supervision. Allowing these staffers to telecommute presents both positives and negatives.

Before even considering such a set-up, companies need to nail down some prerequisites. You need responsible employees, obviously, but also policies in place governing the telecommuting, with the first one being that it’s a privilege, not a right. Remote software capabilities need to have adequate bandwidth and probably ought to be facilitated by VoIP systems. You’ll also need remote monitoring and training software.

Got it all? Then consider the advantages of allowing your shared-service employees to telecommute. They include: the chance for improved productivity because commuting time goes to zero, better work-life balances and morale, a larger pool of potential employees and less reliance on “face time” to measure employee achievement.

The negatives are manageable but real: Scheduling challenges, virtual workers not set up to “team” well with at-the-center employees, less flexibility in moving employees from job to job and, of course, a lack of direct supervision.

A further word on the teambuilding aspect: Service centers are built to spark team work. So employees need to be there long enough to become part of the team before being granted the privilege of telecommuting. That could take as much as a year or longer.

Organizations also need to take a look across the whole operation and ask: “How much telecommuting should be allowed? What’s the max? What’s the ideal?” The answers to those very important questions will be influenced by the corporate culture and the past experiences, if any, with telecommuting.

I’d love to hear about your shared-service telecommuting experiences and impressions.

Shared Services Governance: It’s Alive!

Greetings again from the IQPC’s 11^th annual Shared Services Summit. Here's another guest blog from my colleague Don Flores, a TPI partner focused on service management and governance. 

Good news from the Shared Services Confab: Many servicing professionals are as passionate about the governance of shared services as I am.

Now, to paraphrase Paul Harvey, the rest of the story: Governance is a living, breathing thing that needs to change as your organization does, and not everyone gets this. Just coming up with a bunch of checklists is not going to do it.

For shared services, oversight boards and committees need to make both control and enablement equal partners of their charters. Those may seem like somewhat conflicting mandates – “controlling” overseers may not be thought of as “enabling” change – but this goes to the fact that governance truly is (or ought to be) a profession, not a punch list.

Your governance should flex and morph depending on what stage you’re at in the establishment of your shared services.  The priorities will be different as you move from initial implementation to a steady state or to a big change or overhaul such as adding scope to the work or outsourcing another function.

What shared-services governance issues do you find yourself or your clients struggling with? I’d like to hear from you.

Successful Innovation in Shared Services: Know Thyself

Live from the Strip: Colleagues and compatriots – and maybe you, too – are attending the 11^th annual IQPC Shared Services Summit in Las Vegas. I’m asking some of them to guest blog to bring you a variety of news and views from the summit. Up first: Bill Frech, partner and practice leader for multi-function services advisory at TPI.

The dictionary definition of innovation is “the act of introducing something new.”

That we can all agree on. But what constitutes “new” is going to be different – sometimes radically so – from organization to organization. That’s certainly true for shared services, too, which is why the topic of innovation is getting such a workout here at the IQPC Shared Services Summit.

Each company’s circumstances are different, and it’s up to that organization, its service providers and its advisors to define innovation. It may be the moon – or something much closer to earth.

For example, I have a client who has non-standard business processes in place and allows each to operate independently. When innovation goals came up in conversation, the client said, “Where we are in our evolution, I cannot imagine anything more innovative and far-reaching than getting standard processes and shared services implemented across our organization.”

So for this company, things like using RFID chips for inventory tracking and moving to e-invoicing are actually beyond innovation. Just executing on these improvements would allow the client to have more control over information and costs.

We have found that combining shared services along with selective outsourcing is one of the best ways to innovate. Shared services can provide you a platform with direction, control, clear goals and the mandate to make the changes needed. Through outsourcing you get the skills of a service provider to help you standardize and streamline your processes.

How do you tackle innovation, whatever it means to you? 

Firefighter Quits, Takes Job as Innovator

The pundits are everywhere espousing evidence of the failure of outsourcing. Look at all the “failed” relationships, they say.

These same commentators don’t seem to have the numbers to back up their pronouncements, but let’s agree that much smoke has been created around this topic. There’s even some fire. Except it doesn’t always – or even frequently – start where you might think. And it doesn’t have to burn down the house.

Conversations with many experienced client executives – the people who manage active outsourcing arrangements – do reveal some ongoing “fire fighting” in their relationships. The causes and severity vary, but one theme typically emerges: Most clients just aren’t equipped to manage all the dimensions of commercial outsourcing arrangements.

In fact, the skill sets and nuances required go well beyond what you need for standard contract management. And even if a client has the DNA for the job, he or she may not have the tools to stay on top of the relation and make it produce results beyond the basic service being provided.

Service providers heartily agree. They document how clients and providers enter into a relationship whose complexity may not be understood up front. That builds up stress over time as expectations don’t match and the stuff that really matters – and that may not be in the contract – gets ignored.

We recently were asked to measure several client governance teams to see how well they performed the essential activities that contribute to a healthy buyer-provider relationship. Participants were able to benchmark their organizations with those of their peers. At the risk of fanning flames, here are some results: 

• Only 19% of clients feel they provide enough training for members of their governance organization
• Only 25% of clients did a formal assessment of the skills and capabilities of their original governance team members against a defined job description for the new role
• Only 10% of clients have intra-company best-practice forums for outsourcing management (suggesting that most activities are "stove piped" and re-created multiple times across a company)    
• 60% of clients believe their internal organization is as much to blame or more so for root causes of outsourcing dissatisfaction (versus dissatisfaction caused by the service provider)
  
  

What this tells us is that the time has come for the science of governance over outsourcing relationships to become more prominent. We all know that service providers sometimes don’t measure up. But we also are learning that clients need to be accountable in managing their relationships if they want to move from the role of fire douser to a position of leadership supporting innovation.

TPI’s Governance Excellence Program, including the benchmarking facet, is described here [http://www.tpi.net/knowledgecenter/governanceexcellence/] for anyone interested in learning more.

New Breed: Today’s CIO Must Manage Sourcing Portfolio Too

An insightful post  by John Sloat on Information Week’s Web site uses the example of Australian airline Qantas (disclosure: a TPI client) to make the point that today’s information leaders need to be able to juggle their own homegrown projects with managing multiple, even overlapping, sourcing relations with outside vendors. 

Gone are the days when CIOs were judged solely on their ability to deliver and maintain new systems. Now the performance review measures whether the CIO can balance a technology strategy with a comprehensive “resourcing” plan to deliver the Three Cs: topflight Capabilities, desired Capacity and best Cost.

Few companies believe they can get all three without turning to outside providers, which is how CIOs took on the extra responsibility of managing a portfolio of external resources.

From my vantage, the progressive CIOs are dedicating significant time to their resourcing strategies, trying to get everything in line with the overall business plan.

Any astute CIO knows that outsourcing has to be considered as a service-delivery option. It certainly is the appropriate choice when an external firm can do a job better than you can. But the hard work only begins at this point. Managing the seams between outsourced service and internal function is more art than science.

Look for the stock of the most artful CIOs to keep climbing.