Outsourcing: How to Overcome Your Fear of Losing Control

If you want something done right, you better do it yourself. While there is some truth to that, the reality is you simply can’t do everything. Or maybe you can ─ but really, you shouldn’t.

In some cases, those efforts and spending could be better allocated elsewhere.

But the idea of turning all that responsibility over to a service provider is incredibly frightening. A number of things can go wrong on a daily basis that the provider will need to resolve on your behalf.

And what happens when your needs change? You need to be confident that your provider is aligned with where you want to be in the future.

Loss of control is the biggest outsourcing fear that Cutter consultants hear from our clients.

Loss of Control

Most of us recognize the importance of delegation and the potential consequences if we don’t delegate. However, like many things in life, it is easier said than done.

To be effective, it’s critical not only to know which tasks to delegate, but how to monitor progress without micromanaging. You’ll need open lines of communication and ways to check-in and provide feedback. Sometimes, you’ll also need patience.

In many respects, outsourcing is not that much different.

Know What to Delegate

Some tasks may not be appropriate for delegation. In fact, Cutter consultants often recommend to clients that functions further up the value chain remain in-house since many of these functions are less standard and have client-specific needs.

Play to the provider’s strengths and develop more controls and rigor in the areas that you believe are the provider’s weaknesses. If you are skeptical about the provider’s ability to support your more complex derivatives, focus your controls there or don’t outsource those specific functions at all.

Document your process. You’ll need training not only during the implementation, but also on an ongoing basis, perhaps multiple times a year. When considering outsourcing, it’s a good idea to sit down with the team performing those tasks. Some firms even swap staff for short periods of time to develop expertise and share information.

And pay attention to succession planning. You don’t want to find yourself in a position where the provider knows your business better than you do.

Open the Lines of Communication and Transparency

Service providers should offer a multi-layered relationship model. This should include interaction with the analysts who perform the daily tasks on your behalf, the client service manager who ensures that service-level agreements (SLAs) are met, and the firm’s senior management to discuss future development and how they can support your strategic direction.

Transparency is critical. The best service providers have invested in providing information to their clients in real-time. Operational dashboards offer detailed status updates and exception reporting with drill-through capabilities, while ticketing for change requests or issues is being replaced by web-based self-service tools.

For any outsourcing arrangement, you need to develop meaningful metrics, controls, and methods for oversight. But SLAs are not a substitute for relationship management. And if recurring issues cannot be documented and measured, they cannot be managed.

Develop an incident management program and encourage staff to log issues as they occur. Without them, your service reviews will not be effective, their service will not improve, and the relationship will eventually turn sour.

Be Patient

There will be challenges that will not be resolved overnight. And like any relationship, it will take time to develop, while requiring commitment and compromise along the way.

The most successful partnerships happen when firms see their service provider not as their vendor, but really as an extension of their staff.

Overcoming Loss of Control Fears

Here are some practical tools that you can use to help lessen the fear of losing control when outsourcing:

1. Exception-based processing: If you are still manually reviewing all functions in your operations team, consider adopting an exception-based method. Establish rules on what the acceptable tolerances are within your organization so you can streamline operations, free up valuable staff time, and better align your organization with how service providers function. By modernizing your operations, you lessen the cultural impact introduced by outsourcing.
2. SLAs: These formats are generally driven by the provider but must clearly reflect the list of services in scope covering core activity, dependencies, service standard required ─ i.e., frequency and timing, method of communication, and KPI reporting. Very few providers will support service credit models on continually achieving the services standards, and too much focus in this area can impact a positive partnership relationship. Monitor the key metrics and work together if signs of underperformance arise. Both parties must understand the root cause and remediate to avoid recurrence. Keep the SLA current because services change or expand during the relationship.
3. Training programs: Not only should training programs be part of the implementation, but they should also be ongoing to ensure smooth operations and to provide a closed-loop feedback mechanism. Consider swapping staff between the provider and the client for periods of time. This allows the provider to better understand how you operate and teaches you how they operate, allowing you to find develop a shared language and understand.
4. Dashboards: Use service provider dashboards to provide real-time oversight and gain transparency into provider performance.
5. Client service processes: Establish monthly meetings, change programs, incident management, and SLA breaches. The goal is to create bi-directional communication to remediate problems and quickly develop action plans. For information on oversight tools, see our latest research on Vendor Management.
6. Multi-layered relationship model: Foster relationships with the provider at the executive, manager, and staff levels. Interactions will be varied and will cover items like the following:
   1. Strategic direction
   2. Product roadmap
   3. Issue remediation
   4. Weaknesses that require special attention

Need Help?

Cutter Consulting can help you work through your outsourcing concerns, and more importantly, help identify your target operating model. Learn more here.