Meet the New Boss: Changes in Management Roles in an Outsourced Environment

The transition to an outsourced services environment can lead to fundamental changes in how managers do their jobs. In an internally run organization, managers are accountable for what individuals do. In an outsourced environment, leaders must focus on managing service levels and contractual terms and adhere to process discipline. These Top 5 key changes occur when moving to an outsourced environment, requiring a manager to transition from managing people to managing services.

1. Assure problem resolution instead of solving problems. Managers who directly supervise staff are accustomed to tackling issues by directing how things should be done. In an outsourced environment, where the focus has to be on the what rather than the how, this hands-on approach will be counterproductive and circumvent the service provider’s processes. Operational managers are particularly at risk of getting into the weeds of day-to-day activities. Role playing typical scenarios can help managers understand new ways of interacting.
2. Measure outcomes and service levels instead of employee performance. Typically, a manager measures an employee’s performance based on the individual objectives and key competencies required for that role. When outsourcing, the manager’s “team” is comprised of a number of service providers within the supply chain. The manager’s responsibility must shift from assessing individual performance to assessing overall compliance with agreed-upon service levels in the contract. Similarly, a manager must focus incentives to change behavior on service level improvement rather than individual staff improvements.
3. Manage service demand and consumption. A manager with a fixed staff must keep people productive and prioritize projects that address key business requirements. Apart from bringing in contractors when demand spikes, a manager does not have a great deal of staffing or spend flexibility. A managed services environment lifts resource constraints, so service capacity can flex in response to workload. To avoid unconstrained spending, managers must correlate business cycles to resource consumption and accurately forecast and respond to spikes in demand for resources. Managers can employ mechanisms to control demand for resources, such as regulating the business’s attributed cost for services or restricting approvals of spend.
4. Drive standards and enterprise service improvement. Many organizations, particularly those with limited outsourcing experience, measure performance on a per unit basis, with limited consistency of operation and standards. Outsourced environments are characterized by continual circulation of staff across many diverse teams, requiring process documentation, clearly defined standards and training. Inconsistent requirements and processes between business units can exponentially increase costs. Managers must improve performance through enterprise-driven standardization and a common set of objectives agreed to by all parties.
5. Resolve performance issues commercially. When insourcing, a manager typically addresses persistent performance issues internally through staffing or other contained actions. In an outsourced environment, managers must address non-performance through supplier management processes and commercial vehicles, such as penalties or invoice non-payment. Contract parameters often restrict flexibility and speed to address performance, and commercial actions can easily spiral into relationship breakdown and service degradation. Investing in solid contract and performance management processes early in the relationship is imperative for successful long-term service provider performance.

ISG helps CIOs and other business leaders determine their evolving roles and capitalize on alternative sourcing environments. Contact Lois Coatney to discuss further.

About the author

Lois helps large global companies build innovative and industry-leading practices into their service integration, operational effectiveness and operating model transformation. She works with companies to create a strategy for service management, implement organizational, process and tooling capabilities and mobilize change across their environments. Lois has consulted with Fortune 500 clients across many geographies and industries to design and transform their service delivery operation, achieving the greatest amount of value and service from their Services. Lois offers expertise in IT governance, service provider performance and relationship management, service delivery strategy and design, ITIL service management, transformation and organizational change management and IT portfolio design and management. Prior to ISG, Lois served as Service Delivery Executive and Global Capability Owner for HP’s Multi-Supplier Integration Services.