Defining effective governance structures and nurturing collaboration


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Presentation by Parag at Shared Services and Outsourcing Conference in Bangalore on 7 Dec 2011

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  • An insightful board will challenge and support the vendor by helping to focus on outcomes rather than processes. Foresight comes when the board can predict aspects of future performance by monitoring current KPIsIt is important to remember that the oversight role is the foundation for the insight role. No board can sensibly offer advice on improving performance if there is any doubt about the veracity of the information they are basing their insights upon. Similarly the board must have appropriate good quality data from their performance insight to be able to make any use of their instincts regarding foresight. Attempting to move to a higher level without the data from the lower levels is dangerous; it can leave a board exposed to making decisions that do not stand the test of later analysis. Attempting to govern a successful company without progressing from oversight to foresight is also dangerous. The board can become trapped in old paradigm thinking and performance can deteriorate to a point where future options are limited by lack of resources. Boards must have confidence in their data to be able to move successfully through from oversight to insight and then to foresight so that their organisation moves from compliance to performance to sustained competitive advantage.
  • The need for openness and trust in the relationship should be underpinned by a mutual readiness to communicate when issues arise rather than simply revert to the terms of the outsourcing contract. This is particularly important in multi-supplier deals that span countries and geographically remote sites. You should communicate your desired strategic and deal outcomes to your supplier during the course of the outsourcing deal and communicate regularly about your changing business requirements and outcomes to ensure that the outsourcing relationship meets your current needs. You should ensure there is rapid escalation of problems as part of a dispute resolution procedure. There may be a concern that the use of dispute resolution is an admission of failure by the delivery management team. This may be correct in certain circumstances but as outsourcing deals increasingly involve key business activities, problems do require senior management engagement for resolution and the greater danger is the reluctance to escalate urgent problems to an appropriate level. It is important to ensure that any resolution to problems and issues during the course of the deal are documented properly. Where disputes arise this is often reflected in a poorly documented series of change control notices and resulting lack of clarity as to the scope of the deal and deliverables.
  • Defining effective governance structures and nurturing collaboration

    1. 1. Objective• Outsourcing makes new and unique demands in terms of collaboration - between multiple cultures, locations, and time zones. What human skills do we need to develop and nurture? Also, an integral part of productive partner relationship management is to define and structure the roles, governance, responsibilities and procedures. Explore how to achieve effective governance and nurture collaboration in this session.7 Dec 2011 Parag Deodhar - SSON Bangalore 2
    2. 2. What is the risk? “The main risk identified is: complexity of – achieving suitable management oversight and control – from a distance.”*Financial Services Authority report on the risks associated with outsourcing7 Dec 2011 Parag Deodhar - SSON Bangalore 3
    3. 3. What is the problem? • Business • Matters of mutual Strong correlation dealings not40% honest and interest not between transparent 44% being governance capabilities & buyer decided satisfaction jointly • Joint Buyers with better governance Only 25% governance and 60% structures clients satisfied relationship not working management VoC effectively in the case of capabilities, achieve IT deals Study of 1600 much higher satisfaction levels • Risks and IT • Suppliers rewards not outsourcing not being 69% being shared deals73% proactively fairly innovative Solution *Results from recent survey on outsourcing7 Dec 2011 Parag Deodhar - SSON Bangalore 4
    4. 4. Governance• The word governance derives from the Greek verb κυβερνάω [kubernáo] which means to steer• An alternate definition sees governance as: the use of institutions, structures of authority and even collaboration to allocate resources and coordinate or control activity.7 Dec 2011 Parag Deodhar - SSON Bangalore 5
    5. 5. Why is governance necessary? Quality Communica- Misunder- Assurance / Security & Customer tion / cultural standing of Process Compliance Satisfaction barriers requirement Discipline Who is responsible?7 Dec 2011 Parag Deodhar - SSON Bangalore 6
    6. 6. Governance = Oversight? Oversight Insight Foresight • Should we be doing this? •Are these the best activities •What activities will be required • Are we doing this correctly? for generating the results we in the future? want? •What must we learn now to be • Are the right people doing •How do we do them more more effective in the future? this? effectively or efficiently? •How will we track that our • Do they have the right tools •What would help them to be people are learning the and training? more effective? required skills? •Who does these activities •When should we start to better than we do and what deploy new activities? could we learn from them?7 Dec 2011 Parag Deodhar - SSON Bangalore 7
    7. 7. Governance = Oversight?• Oversight: Watchful care; general supervision. – If we have chosen the right partner, a trusted expert in its field, why do we need a big team to conduct general supervision?• Insight: Power of acute observation and deduction; penetration, discernment, perception. – A properly designed governance structure should establish good insight, not provide layers of supervisory oversight. – In an effective outsourcing partnership, a company contracts with service providers that are real experts. Such partnerships should be managed to create a culture of insight, not oversight.• Risk: Micro-management• How do we move from Oversight to Insight?7 Dec 2011 Parag Deodhar - SSON Bangalore 8
    8. 8. COLLABORATE = INSIGHT• Collaborate - to work with another; cooperate• Collaboration is working together to achieve a goal. – This is more than just intersection of common goals, but a deep, collective, determination to reach an identical objective - by sharing knowledge, learning and building consensus. – Teams that work collaboratively can obtain greater resources, recognition and reward when facing competition for finite resources – Most collaboration requires leadership.7 Dec 2011 Parag Deodhar - SSON Bangalore 9
    9. 9. Collaborative Governance• A new form of governance has emerged to replace traditional “Supervisory” and “Oversight” model• Collaborative governance, brings stakeholders together in collective forums to engage in consensus-oriented decision making• It is important to identify critical variables that influence the success of this mode of governance including: – prior history of conflict or cooperation – incentives for stakeholders to participate – power and resources imbalances – leadership and culture• Collaborative forums focus on face-to-face dialogue, “small wins” that deepen trust, commitment and shared understanding.7 Dec 2011 Parag Deodhar - SSON Bangalore 10
    10. 10. Get it right the first time!• Most important – choose the right partner• Its like a marriage – works best on “trust” model• But, don’t forget the pre-nuptial agreement – Clarify scope of services and client and service provider roles and responsibilities – Implement effective performance measurement, monitoring, and reporting processes – Deliverables – Partner will deliver solutions, not just activities. Provide incentives to solve the customer’s problems – Design pricing structures and financial reporting that enable proactive financial management, “win-win” for both partners• Assurance that outsourcing arrangement provides extended value over time7 Dec 2011 Parag Deodhar - SSON Bangalore 11
    11. 11. Once the honeymoon is over…• Avoid surprises with a thorough governance program. – Effective outsourcing governance framework consists of management structures and processes designed for use in both controlling and nurturing an outsourcing relationship.• Day-to-day management of the relationship with your partner is critical to the overall success of the deal.• Problems will always arise in long term services arrangements: – Changes in business strategy, business models, new products, changes in regulations• Agreements can’t cover it all..• Result: Specifications not met, delays, cost overruns and poor performance…• Underlying most of these issues is a single recurrent theme - poor management and communication between the parties.• If an effective management framework is established early and applied consistently throughout the deal, then the risk of an outsourcing deal failing is significantly reduced.7 Dec 2011 Parag Deodhar - SSON Bangalore 12
    12. 12. Governance Structure Partner Organization Exec Relationship Management Head - PMO Manager• Legal • Legal• Procurement • Procurement• IT Business / Program / Delivery/ • IT Operations Vendor Operations• Finance Management Manager Manager • Finance• Risk & • Risk & Compliance Compliance• Process Support Financial Performance Team Process • Process Excellence Teams Analyst Analyst Manager Manager Excellence 7 Dec 2011 Parag Deodhar - SSON Bangalore 13
    13. 13. The P.M.O.• Multiple layers of interaction with different reporting and governance structures to address operational, financial and strategic requirements. – These processes should run in parallel and strategic relationship meetings should be distinguished from the escalation of operational issues• Role of PMO – To assist in the creation of a culture of trust and partnership – Collaborate with the help of a finely calibrated monitoring system – Real time monitoring of project’s progress, quality control and track the performance to improve individual project success rates & implementing standard practices – Foster development of key individual relationships with partner so as to facilitate a constructive relationship – Timely escalation, communication and resolution of issues• Extend the organization!!!7 Dec 2011 Parag Deodhar - SSON Bangalore 14
    14. 14. Extend the Organization• DOES NOT MEAN ONE WAY TRAFFIC!!!• Processes – Many risks can be avoided if you can successfully transport your best practices to partners – Be open to suggestions by partner – to assimilate their best practices• People – Place your “experts” in the partner organization – Train the partner team and make them “experts” – Be open to learn from partner “experts” – Rewards and recognition programs• Technology – Seamless integration of applications – Make available your technology resources – network, applications, databases.. – Ride on partner’s technology resources• Financial stakes in one another to make sure the interests are aligned.7 Dec 2011 Parag Deodhar - SSON Bangalore 15
    15. 15. Culture and Values• Benefits of extending your organization: – Help get an insight into each other’s organization – You can appreciate and adopt each others organization culture and values• Understanding of culture & values helps: – Collaborate effectively to resolve issues, conflicts – Preempt issues and problems, proactive risk management7 Dec 2011 Parag Deodhar - SSON Bangalore 16
    16. 16. Collaborate effectively• Create and maintain consistent communications in support of strong, trusting relationships – drive the relationship process and communicate to stakeholders throughout the relationship in support of your organisational mission and objectives• Build trust-based governance foundations – Establish robust governance processes and forums early on to increase and maintain the level of trust between organisations• Focus on Results, Not day to day transactions – Work together to ensure mutual success and the service provided gets the desired outcomes• Focus on the What, Not the How – This isn’t going to change the nature of the work to be performed. Of course at the operational level, lines of code must be written, rules and tasks are established.• Optimize Pricing Model Incentive – The pricing model must balance risk and reward for the organizations.7 Dec 2011 Parag Deodhar - SSON Bangalore 17
    17. 17. To summarize…• Effective governance should be a source of strength - not a show of force - when challenges arise• Using governance to both manage and build/nurture a relationship require careful balance.• Collaborate – Communicate – Extend the organization• TRUST BUT VERIFY – There is no escape: Audits, Reviews, Compliance7 Dec 2011 Parag Deodhar - SSON Bangalore 18