Complex scorecards Vs Simple SLAs

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    There are as many opinions as there are options when it comes to monitoring outsource relationships, and they basically break down into 2 options, simple Vs complex.


     


    When a company outsources a function the first thing they have to give up is control. They no longer run that function on a day to day basis but rightly want an insight into how that function is being run by the vendor. This leads to the development of Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) to assist in the monitoring process. Depending on their previous experience clients often opt for something which often doesn’t fit their needs.


     


    Setting up complex scorecards means that clients desire to have a deeper understanding of the workings of the Vendor. This window is enabling them to take decisions about the relationship and manage the partner and the work they do. Setting these up and monitoring them can be a time consuming process. Often metrics are set up at the time of contract negotiation and, as the relationship matures, not reviewed. People stop looking at some of them and the key ones are brought to the front while the unimportant ones are left to rot.


     


    Detailed scorecards in some cases stifle vendor innovation as the scorecards more of less determine not only the results but the process to deliver the results. The vendor may well have opinions as to how things could be improved but if this requires too much effort, they will follow the status quo and continue to deliver so the scorecard stays green all over. Unless a review of the scorecard happens regularly, which mean a review of the contract, much of the data can be useless and the scorecard obsolete.


     


    The reason I have called out SLAs as an example of simple KPIs is that they focus on Service Levels rather than the details of the function. Defining what is important and keeping it simple means that vendors can focus on a few key areas of service rather than the minutia of detail. A good example would be setting the response time and resolution time on an issue without worrying about how the company manage issue internally, what tools they use to track issues or how transitions happen between teams. The vendor is focused on what is important, driving down turn around times rather than how quickly a triage is performed on the issue. In this way the vendor relationship manager can have an overall view of how the partnership is working and can then work with the vendor on improvements without impacting the contract.


     


    The vendor is also free to innovate within the bounds of the contract and improve their own processes while still delivering a quality service.


     


    What is important about an outsource relationship is delivery . Delivery on service levels not on the process within the service. When the process was in-house, these detailed controls were required and necessary. Management may have forgotten that they have to pass this level of control to the Vendor management team. Perhaps a conversation between management teams about control processes that existed before the outsourcer project, without stipulating the vendor put them in place would assist in the relinquishing of control. This would also let both teams gain in confidence and provide opportunities for other knowledge sharing.

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