Changing role of governance in outsourcing contract

The recent failure of world’s largest security company G4S to provide the required security staff for the Olympic Games has again popped up the debate to outsource or not. While some argue that it is wise to perform the tasks on their own, others argue, the wisdom lies in outsourcing the tasks in which a company does not have core competency. Whatever the argument be, the real issue in this case is the lack of proper governance in outsourcing.

outsourcing-governance-organization-design. Source

Generally, in an outsourcing contract, problems and difficulties will arise but the success lies in identifying these issues and addressing them properly as early as possible. According to a latest survey by Gartner, 53% of the respondents who have adopted outsourcing stated that their business still struggle to get the desired outcomes from their outsourcing contracts.  One of the contributing reasons for this is the lack of proper governance in outsourcing business process.

For most of the companies, taking a decision to outsource is easy, but what they ignore is the need of setting up a governance team. While a company decides to outsource, they must form a governance team who are responsible to ensure that the outsourcing decisions are aligned to the strategic goals of the business.

What is the role of governance team in outsourcing?

Properly framed governance and an expert panel of governance team plays a key role in success of an outsourcing contract. They are:

  1. Guides effective transition

The process of transferring a business process to an outsourcing partner requires a high level of commitment from the senior management. The governance team will make sure the outsourcing partner is focused on delivering the desired service. The governance team will take up the initiative to align the interest of the both the company internally as well as that of the outsourcing partner.

    1. Ensure that the rules of engagement are in the right track.

Once the outsourcing contract commences, it’s the responsibility of the governance team to take the engagement in the right track. They can be vested with the responsibility of identifying the areas that can be transformed with the help of outsourcing contract.

    1. Communicator of expectations

The governance team will take up the responsibility to communicate clearly the expectations or what the company desires to achieve in quantifiable terms to the outsourcing partners.

    1. The maker or breaker of the agreement

The governance team will have the authority to make or break agreements if in any case it finds the move is necessary to ensure that the business goals are met.

    1. Act as the facilitator

The governance team plays the role of facilitator between the company and outsourcing partner to facilitate a beneficial relationship between both the parties.

The probability of outsourcing agreement to fail is high at any given time if the outsourcing partner is kept at an arms distance with little or no governance. Analysts are of the opinion that outsourcing buyer should invest 4% to 7% in governance to prevent further failures like what happened with G4S.


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