­

The Need For a Solid Governance Model

When I make presentations at client conferences, I often ask this question: What is the single largest factor contributing to the failure of services globalization initiatives?

The answers I receive range from ‘lack of proper planning’, ‘supplier incompetence’ to ‘miscommunication’ to ‘internal resistance.’ But in my experience, a great percentage of services globalization initiatives fail because of the client organization’s inadequate attention to governance.

Governance usually gets a lot of attention during the rollout period of the initiative. It’s after steady state has been reached and executives have moved on to new initiatives that governance often gets forgotten – though it’s as important during steady state as it is any other time. The most common problems that I’ve seen plague services globalization initiatives post-rollout include a lack of executive focus after the contract has been signed, insufficient monitoring of performance and deliverables, contract amnesia and a loss of original objectives.

In the 1978 Superman movie, Christopher Reeve’s Superman catches Lois Lane mid-fall and says, “Easy Miss, I’ve got you.”

“You’ve got me?” Lois exclaims, “Who’s got you!”

The question can be all-too-familiar in business, as everyone assumes that someone else has assumed responsibility. But in a services globalization initiative, a lack of direct monitoring of performance and deliverables can lead to reduced quality and missed or misaligned expectations. Even if a client organization is monitoring service levels, there are other performance criteria such as attrition levels that are critical to the continued success of the initiative. Without direct monitoring, the quality of service may suffer.

The successful governance model operates on three levels:

  • Organizational
  • Functional
  • Operational

The top tier in the pyramid reflects organizational governance. At this level, governance activities are primarily strategic and are engaged by the organization’s senior leaders. Organizational governance is where the big picture is reconciled, where the firm’s business case for globalization is aligned with the initiative itself.

This level of governance focuses on achievement of strategic objectives through services globalization and monitors that progress. Lenovo’s former CIO Steve Bandrowczak describes how governance was structured at the organizational level there.

“You’ve got to make services globalization a business project and you’ve got to make it where the business leaders of all impacted functions are either on the steering committee or part of the regular executive update programme. The worst thing you can do is make your globalization initiative an ‘IT or HR or Finance Programme’.

“You’ve got to have the programme where it’s business-owned and business-led, and you’ve got to get the business to buy in.”

At the functional level, the role of the governance group is to enable coordination, communication and control among key stakeholders and functional leads.Focus is on functional synergies and coordination rather than day-to-day management.

The operational level is the front line of an initiative’s governance activities. This is where individual contracts and relationships are managed. The operational governance team is responsible for monitoring the day-to-day activities within the initiative as well as for reporting from-the-ground information to the functional and organizational governance teams.

Because the operational governance team is directly responsible for managing the initiative on a day-to-day basis, large organizations may have several operational governance groups in place across divisions or functional areas (refer to table, right).

At FedEx, tracking performance is a hallmark of the company’s success. “Make sure you have a great tracking system,” Rob Carter FedEx CIO told me.”At FedEx, we use that data to make sure we understand the variability in our business and to solve problems and to continuously improve the business.”

Leading firms are using tools like Oblicore,Enlighta,Digital Fuel or -eva to report service levels and create enhanced transparency.

Programme Governance Office

The lack of a single, unified management office is a leading cause of initiative failure, says Ron Kifer,Group VP and CIO at Applied Materials. “More often than not,the reason these managed service initiatives fail is because there is no single point of contact for the engagement – for vendor negotiations, for vendor management, for contract management.”

Ultimately, it is the Programme Governance Office(PGO) that is accountable for the ongoing success of the services globalization initiative. That doesn’t mean that PGO has to bear the weight of governance at all three layers instead,it means that the PGO is where the proverbial buck stops.

The PGO is key to long-term success. Certainly it’s key in negotiations.You can’t have every business leader in the negotiation – there has to be a single point of contact throughout the entire process and then a single management entity with responsibility across the whole enterprise. This is because globalization is not just about IT – it’s an enterprise solution,” Kifer explains.

The PGO bears the ultimate resposibility for ensuring that good governance is being practiced within all three layers.
A successful PGO will do that by:

  • Ensuring that accountable resources are identified for individual programme management and execution(expectations should be clearly outlined as well as the conseque)
  • Ensuring that schedules and plans are synchronized for all project constituents.
  • Ensuring that Client Business and Operations groups are linked and synchronized.
  • Ensuring executive sponsorship, user acceptance and buy-in throughout the engagement.

While the project Governance office is a part of the client organization, a successful programme manager will assign a dedicated on-site manager (a global project manager) to act as a liaison between the client and the supplier organizations.

The global project manager may be a direct employee of the client organization who relocates to the supplier country (the do-it-yourself model), an employee of the supplier’s or an independent local third party oversight organization. Applied Materials leverages Neo Group to help it manage, monitor and improve IT supply relationships.

In most cases, I recommend that client organizations use an independent third party oversight organization that is in the same location as the supplier to act as the global programme manager. I never recommend that a client organization rely solely on the supplier for governance, and the do-it-yourself model is usually only effective when a client organization has a large presence in the location already and can leverage economies of scale.

Whichever global programme manage model is chosen, the best global programme manager will understand the cultural and business climate in the supplier country and have experience working with client and supplier organizations in global arrangements. Specifically, a successful global programme manager will have direct experience with and knowledge of supplier methodologies as well as an understanding of the client’s business processes.

The table(left: “Global Programme Manager’s Governance Activities”) details the activities that a successful global programme manager will undertake in each governance area. In the end, the purpose of governance is to ensure that the goals set out for a services globalization initiative are being met.

Establishing a strong governance model helps to ensure that globalization continues to be embraced and welcomed as a transformation lever; that the lifecycle is followed through; that business and globalization objectives are consistently re-measured and realigned; and that the best people stay on the job.

It is only with strong governance that an organisation can secure the continued success of its globalization initiative.

Please fill in the form below to receive an email with the access to download this free Whitepaper:

About the Author: Atul Vashistha

Atul is the Chairman and CEO of Neo Group, a firm he founded in 1999. Neo is recognized globally as a leading supply and outsourcing analytics, monitoring and advisory firm.
07-15-2010|Whitepapers0 Comments