A slightly different sort of model...

A slightly different sort of model…

Governance is a balancing act between ensuring what has been contracted is done in the manner stipulated and asking so many questions that you get in the way of your sourcer. Organizations use many techniques for creating a balanced approach to governance. Techniques range from developing your own governance structure to using process models. Whether or not you engage consultants to help develop a contract, using a model (or models) as the discussion framework is an effective method to jump-start governance.

Why are models so effective? Initially a model provides a common set of constraints that all parties can agree to without much consternation. How can you argue with a model that is regularly billed as an industry standard? Models such as CMMI, COBIT, or ITIL are certainly well accepted and are usually effective if the parties express clear goals for their use. Models are practically ubiquitous in sourcing arrangements, which usually makes the meat of the discussion not whether, but which, model will be adopted. (While outside of the scope of this discussion, the choice is important as each model focuses on different constraints.)

Each model brings with it a defined vocabulary and a set of processes that direct communication and activity. These common definitions provide the basis for governance while minimizing the work needed to arrive at an agreement. Whether recognized or not, the creation of a common vocabulary and process set is the single most important value that a model provides.

But there are problems with using common models such as CMMI or ITIL to create balance. The first is a temptation for one party to view the model as a goal unto itself. The second is that no individual model covers all of the elements of more complex sourcing arrangements. The size and complexity of governance provisions required are generally correlated to the size and complexity of the sourcing deal. As a result, complex sourcing arrangements often require using more than one model.

The balanced scorecard popularized by Kaplan and Norton provides a conceptual framework for establishing balance. Leveraging one or more of the popular process models such as the CMMI and ITIL, along with the balanced scorecard, creates a dominant tool set for providing balance in complex governance relationships.

Whether two or more organizations are involved in sourcing discussions, culture is a major determinant of governance structure. The act (or art) of balancing a sourcing contract is an intricate translation of multiple cultures into a set of covenants and agreements that must reflect the human factor. Individual needs and goals are important in an organization but are dwarfed by the goals of groups or constituencies. Constituencies can include senior management, users, unions, IT, and vendors, and organizational goals act as links between constituencies. Balance must include recognition of the overarching goals; the balanced scorecard is a tool for making sure this recognition occurs and is built into the governance process.

Balance provides focus that aligns monitoring and enforcement. Monitoring and enforcement are interrelated in their simplest forms. Monitoring is merely the process of watching for what you want to happenand enforcement is the mechanism to make it happen. In some cases, monitoring and enforcement are dealt with in the same process. An analogy for monitoring and enforcement processes is the speed trap, which monitors speed and at the same time is an enforcement tool (unless totally hidden). The tactic is enabled by the laws and tools. Sourcing uses similar monitoring/enforcement dichotomies. Cost and budget are monitored. Enforcement is accomplished by using accounting tools enabled by the contract.

Individual contracts refine the framework of a model, anchor the sourcing arrangement and provide the basis for any discussion of balance. The contract defines what is important (to all parties) and how the goals will be monitored and enforced. Cost of the governance structure is a part of the balance discussion. Implementing models, monitoring, and measurement processes are not free. But using models is the most efficient means of pursuing balance within sourcing contracts.

Models provide a focus for establishing a balanced approach to governance and as an equally important benefit, models provide a standard set of role definitions. Each of these areas is critical to creating an atmosphere in which communication can occur. The combination of models and enabled communication provide a platform from which organizations can construct a balanced governance approach.