When considering a partnership to outsource one or more of a company’s functions, it is important to design and analyze the contract to meet multiple business requirements. All contract points should be synergized to guide the desired outcome based on their collective outcomes.
1. Service level agreements (SLAs):
An SLA is an official document included in the master contract for an outsourcing agreement that includes a detailed description of services required and level of performance needed. When preparing an SLA, design it to meet the needs for project success in deliverables as well as financials. Set a standard when reviewing potential outsourcing partners’ capabilities and making a provider selection. Outsourcing requires a high level of trust, and only with careful planning, monitoring and execution of the SLA will success be obtained.
2. Legalities:
Hire a legal firm, or use an in-house legal expert to take advantage of his or her experience designing outsourcing contracts. Look for specific verbiage on the contract that covers risk mitigation, change orders, regional compliance issues, delegation of tasks, partial or total delegation, ownership of IP and future retention after the contract term, contract termination measures, transition of tasks, and other items that may be necessary.
3. Expertise:
The goal is to make the outsourcing process seamless – new assets are just like talent. Whether it’s an outsourcing provider’s technical proficiency, specific industry niche experience or ability to perform at the expected level, on time and budget, draw on that provider’s expertise. If the project will require ongoing compliance to changing laws and obtaining various certifications, engage an outsourcer with a proven track record. The outsourcing partner must be knowledgeable of requirements for initial project phases and have the capabilities and be forward-thinking enough to obtain what the organization needs to remain compliant and on target.
4. Milestones:
Setting milestone achievements is key in the outsourcing contract. Milestones should involve any and all actions toward specific needs. Product delivery phases, personnel deployment, fee allocations, acquiring specialized permits or certifications, obtaining government approvals and creating valuable training programs are just a few items to include when expecting milestones to be met during contract duration.
5. Backup plans:
Even after completing due diligence in selecting an outsourcing partner, an organization needs a plan B, or backup plan, as a contingency. In some cases, it may help to have a plan C. Outsourcing partners may be acquired or suffer an unexpected financial decline, even though their past financials reflect a strong position. Unexpected acts of nature, wars, embargoes, natural and man-made disasters, sudden passing of key management figures, and many other factors can contribute to a sudden change of contract plans.
Outsourcing is a necessity today. Enhancing company value to shareholders while focusing on core competencies is a daily challenge. If talent leaders monitor and balance talent assignments, equipment allocation and other assets while performing within financial constraints, with the right preparation, attention to detail and ongoing oversight, outsourcing contracts can become a key business asset.
by Richard G. Shulman | Talent Management
[About the Author: Richard G. Shulman is a director at The Training Associates.]
