Since governance is often criticized as being weak and the cause of value leakage in outsourcing contracts, I believe it’s worth considering where it can be improved. I would like to ask for your focus on just one aspect for a moment, supplier steering.

If you’ve been involved in any kind of large scale outsourcing, you will probably recognize that whilst day to day operational ‘steering’ is often done at the service manager/product manager or project manager level (depending on the phase of outsourcing), most contracts define steering through a multi-tier governance model. Such models are often split across operational, tactical and strategic levels using a pyramid model.

Key representatives from both sides are chosen to represent the companies and the rules of engagement are defined, including roles, frequency, agenda, minute taking, etc. Considering that the definition of governance is the way in which an organization is managed at the highestlevel, and the systems for doing this, the above approach sounds sensible. Unfortunately, how to effectively communicate to the tiers of employees below the management level in both parties is rarely defined nor evaluated in outsourcing agreements.

Governance meetings usually comprise a limited audience (not a bad thing, known for being more effective in decision making) at the management or executive level. Meeting minutes are taken to reflect key decisions and actions rather than explain why a decision was taken or what needs to be done. Decisions are made but plans are not (okay, maybe a few key dates are agreed).

In the best cases, the management of each party then explains ‘their’ view to their subordinates who are tasked with developing a plan. More often, those actually executing on the decisions need to develop plans based only on minutes of a meeting they did not attend. If you then consider a language barrier (for multi-nationals, or foreign resources in the case of outsourcing) and the complexity of deviating incentives in each company it becomes clear that the best made decisions can easily be misunderstood by those tasked to implement them.

Basically, any decision or agreement made in a steering meeting can become so diluted and construed through mis-communication before it reaches those who need to understand it, that governance is destined to fail without effective communication.  

Of course, the phase of the deal, size of organization and particularly the supplier’s culture greatly influence all of the above. The honeymoon period of any deal tends to find the supplier more receptive and keener to listen and some suppliers are simply more focused on customer satisfaction rather than internal goals. Likewise, companies with a fewer layers of hierarchy are also less prone to dilution of information through the ranks.

Whilst I would advocate deploying technologies such as podcasts or video recording of steering meetings to offer a wider audience the information they may need, I also understand that this is a step too far for many companies. As minimum measures I believe that:

• active participation (as guests to steering meetings) of those expected to execute on decisions should be encouraged in steering meetings
• collaborative sessions (representatives of both Supplier and customer) should be held by management when announcing major decisions including their intent
• a feedback loop to ensure bi-directional communication in the start-up phase of implementing a decision should be introduced to give those executing on the decision direct access to those who made the decision

I am interested to understand if you experience the same issues, or if you believe your steering mechanisms are effective, then how is the communication throughout both organizations done, ensuring that employees on both sides are working to the same goal?  

Clearly, this is aimed at the governance model of large-scale outsourcing and the steering of cloud providers or internal delivery units demands a different focus. Something maybe for a different discussion.