Frank J. Casale Founder and CEO The Outsourcing Institute

A Message From Frank Casale
What most service providers used to see governance as, the cut and dry details of the contract, maintenance and implementation, has given way to a structure where relationship management/customer satisfaction has become an integral part of the governance process. In today’s marketplace, a handful of the most successful service providers are taking the governance process a step further and actually using it to increase business opportunities. This focus on increasing sales through governance is a natural fit for service providers; however, most have not realized they have this built-in capability.

Everyone wants to be the good guy and provide excellent customer service for his or her clients. But, the fact is, you can provide top-notch customer service AND grow your business. The key is to learn how to properly manage the outsourcing engagement to create a situation where more business will result from that relationship – either directly from that client or as a direct result of a positive reference.

So, whatever your company calls it, relationship management, customer service or any other name, it all points to governance. If managed correctly, governance can lead you toward a significant increase in your outsourcing sales. By paying close attention to the governance process, chances are the smooth run of the relationship will end up bringing greater customer loyalty and you’ll discover the gold in governance. The answer to increased sales could be right in front of you.

Good Luck and Good Selling
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Discovering the Gold in Governance -
Increasing Your Business Opportunities Through Existing Clients

As you wrap up the process of establishing an outsourcing arrangement with your buyer, they may feel a sense of completion. However, you, the vendor, need to remind them that there is still plenty to do after you pick up operations. In addition, you need to focus on the intangibles of the governance process. ”Today’s process is about the Arts & Sciences of governance. The science is the black and white, legal jargon of managing the contract. The successful service provider will learn to work in the gray or ‘Arts’ portion of governance. The ‘Arts’ comprises all of the components that go into relationship management,” explains The Outsourcing Institute’s Frank Casale. For example, if the contract with your buyer states that you work Monday – Friday and the customer calls you on Saturday for something, how are you going to handle this? Good governance is all about how you handle the gray.” The following areas are key for service providers to move toward mastering the ‘art’ of governance, not just the science.

The contract is only the starting point. As buyers and vendors have gained experience with outsourcing, they have learned that a good contract is only a starting point. Solid governance and relationship management are key to getting the full benefits out of an outsourcing partnership. According to a survey conducted by The Conference Board research organization in New York, 97% of respondents who had outsourced a function would do so again – “but the second time around, they would pay more attention to the contract and contract governance.”

Why should governance be important to the vendor? Typically, governance is thought of as more important to the buyer, but service providers should be just as enthusiastic about setting up a governance structure. Why? It leads to long-term success in the outsourcing relationship. Without governance, the buyer may feel out of the loop, they may not understand certain processes and in general feel uncomfortable with their decision to outsource. A solid governance structure eliminates the likelihood of error, miscommunication and in the long run will make the buyer confident in their decision to partner with you and likely to do more business with you. Outsourcing is partly an education process on the part of the service provider. Proper governance gives you the tools to do this successfully.

Many service providers fall short in the governance process by failing to use it to its full capacity. By focusing on the big picture, learning the Arts & Sciences of the process, service providers can use governance as a tool to achieve the ultimate result: gaining more business. Developing a solid relationship management structure will lead to a seamless outsourcing process and a happy client. In turn, a happy client is a green light to up-selling new business or act as a solid reference for your next outsourcing engagement.

A key factor in governance is relationship management. Most outsourcing contracts are collaborative in intent. The buyer’s assumption is that you are going to be an advisor, that you will introduce best practices, and that together you can develop better solutions than the buyer could accomplish alone. The implication is that there is a higher level of interdependence between you and the buyer than in past transactional relationships.

Mike Beals, President of Relationship Management Solutions and Senior Advisor to The Outsourcing Institute comments, “A good relationship management capability will keep you aligned with the ever changing needs of your buyer. Without this alignment, you run the risk of becoming irrelevant and not being considered for new business, or worse yet, replaced by a competitor that has better relationship management capabilities. With alignment that comes from a relationship management program, comes the opportunity to protect your revenue stream and position your company as an organization capable of increased responsibility. This opens up cross and up-sell opportunities.”

Every service provider wants this to be the end result – more business. By paying close attention to the governance process, chances are the smooth run of the relationship will end up bringing greater customer loyalty.

Defining the structure in the black, white and gray. So, what needs to happen to have successful governance? The easier of the two is hammering out those black and white issues. Both parties need to work together to stay in touch and adapt to new business conditions. A relationship needs to be developed that looks at more than just response time, uptime, etc. In short, says The Outsourcing Institute’s Howard Lackow, “Without governance, you can eventually kiss your contract goodbye. With most of the contracts we see that are in trouble, its because there has been little or no attention paid to governance.”

The governance structure for an outsourcing arrangement needs to be formal and well defined. The following are key components that need to be addressed:

1. The steering committee that will be set up;
2. The executive relationship owners from both the buyer and service provider sides;
3. The performance monitoring and measurement processes that will be used;
4. The problem identification and resolution mechanisms that will be employed.