There’s a well-known expression that characterizes performance measurement:
Those tasks are executed, which are measured. You cannot manage the process if you do not measure it.

In order to improve overall performance, you first need to establish the current level of efficiency. At the same time employees should clearly understand the criteria by which they are being assessed, as well as why the measurement process is important.

The results of a survey (Armstrong & Baron, 1998) help to understand the outcomes of a performance management system. Managers of 437 widely known US-based companies were interviewed. 205 companies used performance measurement systems; 232 did not. It turned out that the 205 companies that used the systems differed from the others in the following ways:

1) They had larger margins, a better cash flow, higher stock exchange ratings, and a higher capitalization.
2) They provided a considerable gain in financial activity and performance during the previous three years.
3) They had a lower specific increase in the number of employees.

Download the Employee Productivity and Efficiency Assessment White Paper to learn more.

After you’ve selected your outsourcing team and signed the deal comes the phase when you need to reevaluate and readapt your management strategies - Change Management. At that time it might come to reorganizing departments, changing the communication and governance strategies.
So, here’s what you could keep in mind:
1. Having a developed change-management program early in the game really helps.
2. Proactive communication of objectives, benefits, staff redeployment plans can prevent a lot of misunderstandings.
3. Teambuilding exercises for the “retained organization” - this will help to manage both your in-house and offshore team better.
4. Compensation for transition leaders - keep your opinion and team leaders happy with the management.

An outsourcer must always be responsible and accountable for its outsourcing process. Not always this is the case. Sometimes companies don’t even realize they’re making a mistake that could lead to the failure of the whole outsourcing deal.

I just came across an article discussing five major outsourcing mistakes. The list is quite logical, so here’re a few excerpts:

Mistake #1: Completely task or project-based outsourcing.

That is, instead of hiring a team to take care of a specific task, it helps being more relationship-oriented, building a partnership that will last.

Mistake #2: Looking for the cheapest price.

Thus you shouldn’t be looking for the cheapest deal on the market, but rather for the one that will deliver quality over time. Don’t expect much with the cheapest there is.

Mistake #3: Not giving clear instructions.

The more precise you are and the more you’re willing to give information, the better. Don’t expect much of your team if they only have a vague idea of what they are doing. The better you explain what’s needed, the better result you’ll get.

“And, a lot of the time, it’s the way they gave the instructions. If you don’t give enough information, either that person has to interpret what needs to be done, or they may misunderstand, and it’s just your own fault.”

Mistake #4: Not checking work.

Checking your outsourcing team’s work is a must, especially at the first stages when the team doesn’t know what’s expected of them yet. Provide constructive feedback, help them to learn and grow.

“They’re not going to be perfect, right out of the gate, so they need that feedback.”

Mistake #5: Not evaluating their actual delegation.

That is, basically, check if outsourcing lives up to your expectations and everything is functioning the way you planned. This needs to be regular, even if you’ve come to trust your partner completely over time (it’s your business and money after all).

Yet another voice saying that mutual trust and respect between the outsourcing parties play the key role in making outsourcing deals succeed.

The article is by William A Cowell, with an extensive experience in outsourcing (in the business since the early ’80’s) and knows quite a bit about what makes companies succeed or fail when it comes to outsourcing.

Judging from his own experience, he concludes that “the key to success or failure is in the “relationship”, the relationship that creates a certain degree of flexibility.

Outsourcing can and does work and like all relationships: it is not an event, but a journey.

Most companies when they decide to outsource a product are confident enough that this action will save them money in respect that is cheaper than producing the product themselves. The most common mistake in this line of thinking is that the company is usually under the impression, that it’s receiving a fair deal, simply because the outsourcers’ costs are lower that their own.

Typically outsourcers propose 15-20% less than a company’s current cost. But a lot of times this difference in costs results in poor product quality. So benchmarking is required to provide a baseline of costs and service levels. A company can use it to compare results delivered by the outsourcer against the same or similar results throughout the industry or market, and consequently negotiate or renegotiate the outsourcing deal. During negotiations, benchmarking knowledge is critical to setting the right expectations for cost, performance and service levels. Any negotiation position is reinforced by external validation of one’s requirements. Also when a company has decided to outsource, with very little investigation, and wants to move fast through the negotiation process, benchmarking data can be a useful guide.

When an outsourcing deal is signed and the process is finally set in motion, benchmarking can be used for contract refinement. Most of outsourcing deals are renegotiated within two years of existing. Dissatisfaction with pricing and service are usually the main drivers for renegotiation. Benchmarking could play a key role here, as it allows the client to access the industry performance requirements and thus make a solid case with the outsourcer. The requirements for benchmarking should be drafted into the final terms of an outsourcing agreement.

Check out “How to Design and Manage a Strategic Outsourcing Program and Avoid Common Mistakes” white paper for more info.

Related to my yesterday’s post about good fences for outsourcing deals, below is a checklist for you to follow to ensure that you get the right skills, high turnover rates and enjoy your collaboration with your outsourcing partner. Make sure you have these all tuned in and see how they work for you in return.

1. Go for fixed fee contracts (possibly at higher rates)
2. Be sure that you get what you pay for, not something else
3. Try and choose vendors with low turnover and high CMM certification
4. Be sure your outsourcing partner matches country versus needed skill sets
5. Conduct ackground checks and third party references (no matter how reliable your partner looks at first)

When you have a positive on all of the above, your fence is sound enough for you to finally start building an outsourcing relationship that will bear fruit for both you and your partner.

“Good fences make good neighbors” - does that really describe a proper relationship with an outsourcing partner? Or is this overly exaggerated? When can you really relax knowing that somewhere halfway around the world, someone else is taking care of your project for you?

Just on the point, a recent Reseller News article talks about a “healthy commercial relationship” that grounds on clear pricing tables, billing with sufficient explanation and mapping back to volume, scheduled reporting etc. Your outsourcing partner shouldn’t be a rocket scientist to figure out what he’s working on and what he’s getting for it. That would be a sound foundation for developing a partnership just as sound as the time goes.

So then, it’s building “good fences” (decipherable and clear agreements and contracts) where you should start before you get to become “good neighbours”.

At the early stages of developing outsourcing relations a lot of companies struggle managing the new relations with a new team member (I mean the outsourcer, as strange as it may sound). Far too often the company doesn’t realize that the outsourcer is a business asset and must be treated as such. Instead, we see this link lost in the process of change management.

I’m just saying, get into your outsourcing deal knowing that your outsourcing partner is a vital part of your business’s success. If you treat the outsourcer differently, the one thing that ensures your success will be lost.

Just stumbled upon an interesting post exploring the different dimensions of outsourcing. The author describes quite a few approaches to defining outsourcing and contemplates on what laysbehind each of them. Check it out over here to broaden your knowledge of what application management outsourcing, IT outsourcing, and HR outsourcing involve.

One of the things a lot of comapnies stumble upon when entering their first outsourcing deal is choosing the right people to manage the process. Companies often assume that since all the details of an outsourcing contract are discussed and the contract is signed, there’s nothing else to worry about, well at least not the outsourcing process. And that’s exactly where things start to go wrong.

The right person for the job is someone who really understands the process, can focus and interpret the results in terms of the company’s best interest. Your outsourcing manager should have a different way of thinking, he/she should be able to foresee, recognize and prevent any possible problems before they get a chance to grow into an actual problem. Make sure you have a someone like that before you let yourself relax and watch your deal go well.

To learn more about common outsourcing mistakes, download the white paper.