Managing risk is one of the keys to success in an outsourcing arrangement. There are many control mechanisms used to manage outsourcing deals. Control mechanisms can range from full-scale contract offices, PMO’s, metrics, scorecard reporting, audits, CMMI assessments and on-site oversight teams. In real life, typically these are applied in combination.
Cultural disconnects are a major contributor to problems in outsourcing that increase as the distance between client and outsourcer grows. Sounds like a truism, however examples abound even today as organizations fall prey to misunderstandings driven by cultural disconnects. The misunderstandings that can occur can range for differences in semantics to deep-seated cultural differences.
A tool to manage/minimize this type of disconnect is to co-locate an on-site account management team with the outsourcer. This type of arrangement provides an avenue to mitigate cultural differences, translate both intent and words and mainly to build trust. All positives; however darker possibilities exist, and as personal observations prove, they do happen!
On-site management of outsourced projects provides a number of impressive benefits that other forms of control do not provide. The first and most important of these is a simple visible presence that reinforces that work is important. Secondly, an onsite presence can provide a bridge between cultures (both organizational and sociological cultures). Further, a presence provides a mechanism for translation, and for ironing out semantic differences quickly and efficiently. Finally, an onsite presence is a basis to build a common history and understanding, which yields trust.
A powerful tool with equally powerful drawbacks: what happens when an onsite lead or team loses perspective? I participated in an assessment of team that supports a group of outsourced applications. During initial discussions it was impossible to determine who worked for the outsourcer and who worked for the onsite account management. Collaboration you might ask? True, but only if the arrangement is structured as such and all parties perceive it that way, which was not the case. The on-site team had lost perspective and aligned themselves with organization they were overseeing, an application of the ‘Stockholm Syndrome’.
When an onsite team gets too close, they lose perspective, and they begin to believe they are part of the company they supposed to interface with. When perspective is lost, who will they advocate for the project or how will a critical point of translation be interpreted? Even if the closeness is merely an appearance, it will be difficult for others to understand how to act.
How do the best make co-located teams work? The best observed application of the techniques begins with the sourcer deploying a cross-functional team. The skills that are required include project management, business and systems analysis. The very best include personnel with both facilitation and negotiation skills (negotiation is more typical). All team members require a strong sense loyalty to their company. Note that if the work is ’offshored‘ (not just outsourced), then the team members must have command of the local language. The rational for teams rather than an individual is two-fold: The first is that a team can field more skills. The second is that a team is far less likely to “go native” than an individual (teams create their own support structure). Note, using teams is a best practice only if the amount of work supports it. Smaller outsourcing agreements may not have the luxury, which means they must roll all of these skills into a single individual.
Despites the downside risks, co-locating sourcer and outsourcing teams of any size are a best practice. How organizations structure their co-location program to keep the personnel fresh and useful is what separates the wheat from the chaff. Observed tactical best practices to maintain the crispness of on-site teams include:
- Rotation of personnel (not everyone at once unless there is only one person) re-enforces the attachment to the parent company. A secondary form of rotation includes making a spot on the team a step on a job progression.
- Leveraging PPQA reviews provides an assessment of whether the outsourcers processes are being followed. Non-compliances are identified and an action plan is put in place for remediation.
- External audits, using models such as the CMMI, ITIL or ISO Standards, provide a far more formal reading of whether processes are followed (typically with more consequences if they are not).
On-site teams are a best practice for reducing the risk of an outsourcing agreement, but it is a best practice that has a downside unless they are carefully managed.