How to successfully transition to HR BPO

The role of governance in outsourcing contracts

Article

In this article, Mike Friend, Managing Director of M3C Consulting, discusses the role of governance in outsourcing contracts.

Customers entering into outsourcing agreements, knowingly choose to sacrifice direct control of their business processes in return for lower cost and/or better quality services. However, approaches to governance vary widely.

Good governance requires the establishment of a joint contract management committee that meets regularly to monitor contract performance against defined Service Level Agreements and addresses key issues from a strategic to an operational level.

When outsourcing contracts fail as they do from time to time, then the finger of blame is frequently pointed at the role of governance.

While a contact is the product of two organizations seeking a mutually beneficial agreement, the success of that contract comes down to the dedication of a comparatively small number of people—how they interpret that contact, and how they engage with one another.

Inevitably, the complexity of any contact will determine its risk profile, governance requirements and to a large degree of its success.

Rather than being overly fixated by such a headline number, customers should work with a bottom-up approach. Only then will they gain a better idea of the number of customer representatives required to sit on the governance committee.