As every newlywed discovers, golden anniversaries are more likely to be in a couple's future if they start off their marriage on the right foot. The same applies to outsourcing relationships. Paul Swinscoe, senior program manager for Raytheon Training International in London, England, says proper preparation before buyers sign an outsourcing contract stacks the odds of its success. This advice is even more compelling when assigning accountability.
Buyers should clearly define their Service Level Agreements (SLA) and points of accountability up front. "Make them clear in advance," suggests Swinscoe.
Like a marriage, an outsourcing relationship must be a committed partnership. In Swinscoe's experience, accountability diminishes along with the emotional distance between the two players. The close proximity can cause friction and confrontation. These difficulties are harder to work out if the buyer and vendor operate at arm's length.
In the training area, the original course design lays the foundation for the vendor's ability to meet the buyer's goals. Raytheon must design the course work for its buyers so it reflects the needs and direction of the company. Raytheon provides a total outsourcing solution to large corporations that need training for everything from specific software applications to personal development. Training is a good area to outsource because it's rarely a core competency for companies but it is for Raytheon.
Measuring Accountability by Improvement
For example, if the company's goal is to have its staff produce more professional looking documentation, the course should center around that. Too often trainers conduct a course on how to use Microsoft Word, ignoring the company's specific requirements. In this case, the measurement of accountability would be to determine if the production staff did indeed produce better documents. Of course, the difficulty is, what is "better?"
Swinscoe extends that accountability to the buyer's bottom line. He wants to know how better documents improved the company's profitability. The ultimate measurement is: Did this training seminar improve shareholder value?
When it comes to outsourcing accountability, success lies in the details. For example, decide at the outset who is going to talk to whom and when. Each level of management requires different interface points and different measurement criteria. Swinscoe says drolly, "You wouldn't talk to the CEO about how many training days you delivered. He's worried about the return on investment for the entire training program."
Buyers who want to hold their vendors accountable for their performance must ask this key question, according to the outsourcing supplier. Swinscoe's goal is to give his buyers a fair return on the money they spend. "Buyers want to receive value for what they bought," he says. Consequently, Raytheon structures its SLAs to target results instead of reporting what he calls "how many's". Quality not quantity is the key according to the Raytheon playbook.
'How Many's' Are A Poor Measurement Tool
Swinscoe admits using "how many's" is much easier yardstick for measurement. Many customers prefer these black and white measures because they are easy to check. But, in the end, they are "a bad measurement," believes the executive.
In his business, a far better SLA is to measure the improvement in the specific area after a Raytheon seminar on the topic. If the supplier can show that the buyer's employees are progressing, then Raytheon was accountable to the buyer. Swinscoe adds that improvement should be continuous. "As suppliers, we must demonstrate a constant increase in value," he says.
For example, if the Raytheon seminar focused on sales training, Swinscoe would monitor each salesperson's numbers to gauge the improvement. Then he could discuss with the CEO the revenue gains attributable to his outsourcing effort. "We design our training to enhance your business," Swinscoe tells his buyers.
Buyers need a sharp costing model if they want their suppliers to be accountable. Swinscoe acknowledges this can be difficult in some areas of the corporate world. But it is crucial when a buyer decides to outsource its training functions. If a prospect doesn't have a handle on its training costs, it makes it difficult for the outsourcing selection committee to evaluate Raytheon's proposal. "We have to prove our prices provide good value for the dollars," says Swinscoe.
Raytheon can prepare a cost-benefit analysis for its customers. "But it's vital we know the company's true cost of its instructor training," says the executive. Then Raytheon can prepare a proposal that provides cost savings as well as spot on training.
Mimicking The Corporate Culture
Vendors in long term contracts have to guard against "churning out the same stuff, which happens in the training area," he reports. Every time software changes, so should the syllabus. He also favors sliding scales for supplier accountability in longer term engagements as employees climb to the top of the learning curve.
Swinscoe says Raytheon works hard to fit into the buyer's corporate culture, down to its distinctive dress code. "The trainees don't know they are dealing with an outsourcing vendor," he says.
Lessons from the Outsourcing Journal:
- Don't measure performance by "how many's." Improved performance is a much better yardstick. But it is harder to measure.
- Accountability should reach down to the bottom line: Did the outsourcing process improve shareholder equity?
- Define all SLAs clearly at the very beginning.
- Clearly designate interfaces. Vendors should specify who talks to whom and about what.