Managing an Outsourcing Initiative-5
Originally published: May 2011
Phase 5 – Measuring Success
In four previous articles on Managing an Outsourcing Initiative, we discussed:
- Analysis and Selection of the Outsourcing Vendor
- Designing the Outsourcing Contract and Other Documents
To be meaningful, the results expected from an outsourcing initiative should be objective, measurable, quantifiable, and comparable to pre-established criteria.
A powerful technique for managing and measuring the success of an outsourcing initiative is the use of balanced scorecards.
Balanced scorecards include categories representing the most general level of expectations. These are usually built around cost, service, and quality. Within each category, specific attributes are defined through a joint buyer-provider process, with the exact composition and number depending on the goals of the relationship and the service in question. An appropriate measure for each attribute is also decided upon.
Key principles to remember when determining the composition of the balanced scorecard:
- Only measure what you want to manage.
- Develop the balanced scorecard jointly with the outsourcing provider.
- Balance long-term and short-term goals.
- Gather and report information over a period, for instance, monthly.
- Expect early results to be close to the “floor”.
- Anticipate continued improvement (month over month).
Sample Balanced Scorecard for Receivables
(result to strive
|Average Speed of
|40 Seconds||30 Seconds||20 Seconds|
- An established set of metrics by which to measure performance that can be changed as requirements in service levels change.
- A mutually-agreed upon performance management system which can be used to reward exemplary service.
- Historical information to help decide the future of the outsourcing relationship when it is time to renew the contract.