Outsourcing Analysis Part III: Building Your Toolkit

For the last two blogs we have been building a tool to help you evaluate your current sourcing decisions, in other words where your staff resides and how they are employed (employees, temps, outsourced, etc.) to perform your business functions. In part I we went over location options, and you collected information on the options that are available in your firm. In part II we looked at the concept of “gates”: progressive groupings of questions that identify one or more of the available locations or methods of staffing that constrain the sourcing options for the function. Today we will put together the information we’ve collected and create your tool. Here we go!

Open the attached spreadsheet (“Click Here” ), and take a look. All along I’ve been using the outsourcing of legal functions as my example, so that I can provide you with real examples. The list starts with legal groups, and then places specific functions under each group. Of course, in your organization the structure of the Legal department may be different, or you may need finer details, but this should serve as a reasonable template and can easily be adjusted for other groups. Now, let’s take a look at the column headings.

This example uses seven gates, starting with the Core and ending with offshore outsourcing. Within each gate, there are several questions. The first question is the most important constraint in that gate, and the last is the least important  constraint. When a constraint applies, you put an “X” in that cell. Some functions may have multiple constraints. This way you have a more or less graphic view of how “far away” the functions could be sourced. The greater the distance from where the work is currently performed and where it could be performed, the more likely that this could/should be sourced differently. Furthermore, you will see that some functions have many items checked and others have just a few that are scattered around. Both the importance of the constraint and the number of applicable constraints count in evaluating  sourcing options. You can give points for each question, but that’s a refinement for future versions.

Let’s take a closer look at our first gate, “Core Functions”. The questions are graded from most important (is it illegal?) to least important (is it traditional to do the work here?). This last question (tradition) is different from all the others. Tradition is not a justifiable reason in most firms, but you do want to put this down if there is no other reason. As stated in the footnotes for this item, the reason for the question is to dig deeper and find if there are any other reasons. If there are no real constraints you move on to the next gate, until you hit a constraint. You should continue on to the end, in case other constrains apply.

When this is completed, others may disagree with you about a constraint. If this happens, then you may remove a check mark, and then the function continues to move to the right until it hits the next constraint. The last constraint is where the function could be performed most efficiently. You may find that a disturbing number of functions could move one or more gates to the right. And you may not believe that these moves are the right thing to do. If that’s the case, please remember three things:

  1. Fewer changes are made than could be: Firms that execute on every project that they should are rare indeed. This process tells you what you what could happen. You need to weigh in on what should happen.
  2. This is an iterative process: After your first go through, you may discover that there are many other gates or questions that need to be included. If you feel in your heart that something is missing from the analysis… find out what it is an add it.
  3. Improve the service and change the options: Services with the highest quality, the best cost per unit, and the greatest client satisfaction levels are rarely on the list for outsourcing, regardless of the analysis. If you resolve any outstanding issues for these three areas, you become an unlikely target for a move to the right of the chart. Remember, this is a tool to help you manage your services. A big part of management is awareness. If you are now aware of problems you need to resolve, then that’s a win.. right?  

That’ about it. You have a basic, but flexible tool that you can customize for your organization. After you’ve had some time to get familiar with how this works, we will revisit this tool and add more functionality. But for today, that’s my Niccolls worth!

This entry was posted in Best Practices, Common Sense Contracting, Decision Making, Delivering Services, Improvement, Continuous or Not, Uncategorized, Unique Ideas and tagged , , , , , , , . Bookmark the permalink.

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