Lee Ayling, EquaTerra Managing Director of Information Technology (IT) Advisory Services, UK

The first in a pair of blogs, I here begin a look at sole-sourcing, an increasingly popular method of services procurement, from the perspective of the service provider.

What?

Sole source is not, as it is easy to assume, a short cut to service provider selection – omitting the competitive process. The sole-source approach to the outsourcing of services is simply one where a client conducts a procurement process with just one supplier rather than multiple outsourcing organisations.

Sole source is a legitimate, and often smart, strategy – in fact, the first objective of all good competitive selection processes is to a identify a single preferred provider, only then is real value created.

When?

A client organisation may consider sole sourcing when they are initiating a new outsourcing project.  However, in EquaTerra’s experience, service providers are more likely to find themselves discussing sole sourcing with an existing client considering renewing a contract – and particularly when the client is interested in adding additional scope.

Why?

For the service provider, a sole source approach has the benefit of bid cost reduction, lower competition risk and having the full attention of the client organisation. Clients will be keen to realise the benefits of reaching a better solution sooner, through a collaborative negotiation process.

Service providers can be concerned about the role of an advisor in sole source negotiations, fearing that they will impose a standardised and cumbersome procurement process.  However, the role of an EquaTerra advisor when working with a service provider and client organisation is to optimise the value of the contract – our extensive experience in advising on sole source deals with the trust and respect of both parties, has enabled us to develop a uniquely adapted approach that combines speed with safety.

Further Insight

Read EquaTerra’s article Considerations for Adopting a Sole-Sourcing Approach to learn more about getting the best from the sole source approach.

If you would like to discuss how EquaTerra can help you deliver the maximum benefit and sustainability from sole sourcing please contact me at  lee.ayling@equaterra.com.

Coming soon

Sole Sourcing -  Traits of a Successful Sole Sourcing Deal

Filed under: Contract Review & Negotiation, Outsourcing by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research

This is the seventh in an ongoing series of blogs presenting the findings from EquaTerra’s recently completed market study assessing North American and U.K. finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast held on January 28, 2010. The blog series has so far addressed the following points:

• Key items on organizations’ corporate agenda for 2010
• What is on the CFO’s agenda
• Strategies and tactics to enable the CFO’s agenda
• FAO Future Plans
• FAO Benefits Sought and Achieved
• How Strategic is FAO Today?

FAO Success Factors

Numerous EquaTerra client engagements and the results from the FAO market study illustrate the value successful FAO efforts can bring buyers, both in terms of reducing F&A costs as well as enabling the F&A function to perform a more strategic role within the organization. The challenge lies in ensuring the FAO effort is successful.

There are a variety of factors that contribute to the success of an FAO initiative. They include developing a realistic and consensus-driven business plan, ensuring that adequate and skilled resources are applied to the sourcing, transition and governance efforts, and gaining active and meaningful executive support for the initiative. Buyers must also ensure there is as good a fit as possible among their FAO strategy, their culture and operating style and the service provider selected. This may mean the largest, highest ranked or incumbent service provider is not the best choice for a new FAO effort.

The market study assessed what current FAO users feel are the factors most critical to creating a successful FAO effort. Respondents identified their top three choices from a selection of twelve factors.   All of the top five factors identified relate to service providers and service provider selection (see below).

• Service provider industry knowledge, experience and expertise is identified as the most critical factor in a successful FAO effort, cited by 41 percent of respondents.
• The next four factors selected are clustered in the high 30 percent range and include service provider global service delivery capabilities, buyer cultural fit with the service provider, the obvious picking the best service provider and the ability of the service provider to deliver both strategic and operational F&A services.
• Respondents from different sized organizations have different opinions on the top success factors. For example, respondents from the largest class of buyers polled ($20 billion+ revenue) are much more likely than respondents from the smallest class of firms ($3-$10 billion revenue) to value service provider global service delivery capabilities (42 percent versus 15 percent) and the ability of the service provider to deliver both strategic and operational F&A services (42 percent versus 26 percent).

FAO Risk Factors

Tied closely to striving to achieve key FAO success factors is identifying and addressing key FAO risk factors and concerns. Buyers must recognize that addressing outsourcing risks is a perpetual process which involves developing the optimal deal structure, selecting the best fit provider, and deploying a skilled and capable outsourcing governance program.

A good outsourcing governance program focuses on balancing risk mitigation with the realization of value, ensuring that expected deal benefits are achieved. Buyers must ensure this program is holistic and focuses equally on service quality, issues, change control and commercial management, and overall compliance and risk management. The risk management program must take a systematic approach to identifying potential major risk factors, evaluating each risk (e.g., probability, scale, severity, volatility) and then developing and maintaining programs to mitigate them.

The market study assessed the greatest perceived FAO risks and concerns of FAO buyers. Respondents selected their top three choices from a list of twenty factors (see below for the top five selected choices).

• The most commonly cited risk is loss of control of outsourced F&A processes, cited by 42 percent of respondents. This is a natural concern when work is first being transferred outside the organization. It is also one of the six FAO myths EquaTerra believes buyers can address and overcome by clearly defining service performance levels, implementing a solid outsourcing governance program, and putting mechanisms in place to efficiently and effectively address any performance problems that arise.
• The next four risks and concerns cited all garnered response levels under 30 percent and include service provider issues such as risk of service provider failure, service provider inability to deliver and a deterioration in service quality, loss of institutional F&A knowledge and data, information security and  related privacy risks.

FAO is not easy or simple, especially for larger and more global buyer organizations, but its benefits are potentially compelling. While any FAO buyer must identify all potential FAO risks and concerns, they should not view them as gating factors but rather as challenges to overcome and account for in structuring the FAO deal. Nothing worthwhile in business is without risks and challenges, including FAO.

Next up:  Taking FAO to the Next Level

Filed under: Finance & Accounting, Market Trends and News, Outsourcing by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research
Lowell Williams, EquaTerra General Counsel and Executive Director, Global Human Resources Services

Various EquaTerra research studies, such as the quarterly global Pulse survey,  have routinely identified legal process outsourcing (LPO) – along with document services, pharmaceutical research and development, and real estate and facilities management – as emerging growth areas in the outsourcing market. LPO has initially been focused on law firms or in-house legal counsel outsourcing routine tasks and processes (e.g., library services, records management, basic research and contract work), as well as more strategic services that have a significant labor element such as the discovery process, litigation support and patent claims drafting and filing.

The drivers behind LPO’s growth are similar to those in other functional and process outsourcing areas: expensive labor, difficult economic times, the desire to increase the automation of manual tasks (e.g., contract creation and management), and the growth in the breadth and quality of third-party service provider options, including those with lower cost offshore resources. What differentiates or minimally complicates LPO is the complexity and sensitivity of the data and information involved in the efforts, particularly if offshore captive shared services centers or outsourcers are utilized.

There are many service providers targeting the LPO space. They range from specialized providers like Evalueserve to India-based BPO and ITO service providers such as Infosys and WNS to legacy western and multinational service providers such as ACS/Xerox. While some specialized providers have a background in legal services, more often they have skills in more generic areas like knowledge process outsourcing (Evalueserve) or document services (ACS/Xerox), or are able to leverage skilled offshore labor.

Organizations considering LPO can approach it from several angles. Internal corporate law departments can leverage LPO to reduce costs and enable greater automation of administrative services, enabling the retained organization to focus on more strategic legal issues and potentially reducing the spend and reliance on local, expensive, third-party counsel. Law firms can do the same for their own work, but also engage third parties to reduce the cost of the services they provide to corporate clients.

While LPO is different from other forms of BPO in terms of focus, it is not that different in terms of process. However, EquaTerra has found that some LPO buyers forget to leverage their experience and lessons learned from other outsourcing efforts.  Buyers must pay close attention to defining a realistic business case and addressing other key points such as definition and scope of services, pricing models, transition and governance approaches, processes and needs.

Coming soon:  Exploring e-Discovery

Filed under: Market Trends and News, Outsourcing by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research

This is the sixth in an ongoing series of blogs presenting the findings from EquaTerra’s recently completed market study assessing North American and U.K. finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast held on January 28, 2010. The blog series has so far addressed the following points:

• Key items on organizations’ corporate agenda for 2010
• What is on the CFO’s agenda
• Strategies and tactics to enable the CFO’s agenda
• FAO Future Plans
• FAO Benefits Sought and Achieved

While the use of outsourcing in general and FAO in particular continues to grow, it is still often viewed as primarily applicable to routine or administrative tasks and a means to reduce costs (e.g., through automation, labor arbitrage, process improvement). While cutting costs is a key driver in nearly all outsourcing efforts, the question is to what degree today’s buyers are also using outsourcers to perform more strategic activities and pursuing outsourcing to achieve more strategic goals.

In the industry’s early days it was often argued that organizations should confine outsourcing efforts to “non-value-added” activities or those that did not “touch the customer.” This logic is flawed. Organizations should eliminate, not outsource, any task or activity that truly does not “add value.” Similarly, if organizations do a poor job of interfacing with internal or external customers, they should consider the role of outsourcing in potentially improving the customer experience.

A clear goal for any CFO is to ensure that business activities are performed as well and as cost-effectively as possible. This should hold true regardless of whether the activities are performed by internal resources or an external service provider. This is where FAO plays a role, particularly as the FAO market continues to mature and the breadth and quality of available FAO services increases. An FAO service provider that focuses on F&A as a core business offering can often better design and optimize F&A processes, and invest more in better, robust supporting IT applications and systems. It can also leverage best practices across multiple client organizations to the benefit of all, and spread the cost of investment across a wider base.

Many FAO deals have, historically, been focused on administrative and back-office tasks. But FAO buyer perceptions are evolving relative to the use of FAO to support both operational and strategic activities. More FAO buyers today recognize that a broad range of activities deemed strategic (e.g., analytics, planning, forecasting) are viable candidates for some level of outsourcing. This is manifested in a trend which gives service providers greater scope, often delivering services end-to-end across the entire process. As indicated, this scope increase is being driven both by growing buyer sophistication and enhanced breadth and quality of services FAO providers can deliver.

This trend was reinforced in our market study results. Just over 50 percent of respondents indicated that FAO is viewed as a tool to address both operational and strategic F&A needs and while it can help reduce F&A costs, it can also deliver strategic business value. The balance of respondents held the more traditional view that FAO is viewed as a tool primarily applicable to administrative/back-office F&A activities and to reduce F&A costs. It is EquaTerra’s opinion that the percentage of organizations which indicated FAO has strategic potential is much higher than it would have been had the poll been conducted several years ago. These findings were similar across all sizes of respondent organizations. U.K. respondents, however, are more convinced of FAO’s strategic potential than those from the U.S. (58 percent compared to 44 percent).

These findings do not mean that operational FAO is becoming less important. Achieving operational goals such as cost reduction is often a prerequisite to addressing more strategic issues such as using those cost savings to fund process improvement efforts or attract more skilled F&A talent. Yet, while FAO has the potential to add more strategic value to an F&A organization, it can do so only if the outsourcing effort is successfully undertaken.

The next blog in this series will examine market study results on key FAO success factors, and identify key common FAO risks and concerns that buyers must address and overcome.

Next up:  FAO Success Factors, Risks and Concerns

Filed under: Finance & Accounting, Market Trends and News, Outsourcing by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research

This is the fifth in an ongoing series of blogs presenting the findings from EquaTerra’s recently completed market study assessing North American and U.K. finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast held on January 28, 2010. The blog series has so far addressed the following points:

• Key items on organizations’ corporate agenda for 2010
• What is on the CFO’s agenda
• Strategies and tactics to enable the CFO’s agenda
• FAO Future Plans

The use of FAO continues to gain relative importance, and in some cases prominence, over other tools to enable F&A change such as investing in more and better IT tools and solutions and the use of shared services centers. While all tools are relevant, IT and shared services investments have not taken some F&A organizations far enough down their improvement paths. One of the strongest indicators of FAO success is the decision to expand its use and scope. As noted in the last blog, FAO users polled in the market study are expanding FAO usage in a variety of ways and only a very few are pulling back from FAO efforts.

A more explicit test of FAO success is whether it achieves its original goals. EquaTerra asked market study respondents to identify the key benefits sought from their FAO efforts and assess to what degree these benefits are being achieved. Respondents selected from a list of 13 potential benefits and goals (including benefits not clearly articulated/defined) and ranked their achievement on a one to five scale where one represents benefits not at all achieved and five represents benefits fully achieved.

The benefit most frequently sought in FAO, not surprisingly, is reducing total F&A operating costs, identified by 80 percent of respondents. It is clear, however, that organizations pursue many parallel FAO goals. Other common benefits sought include gain costs savings to fund F&A transformational efforts and dedicate or redirect the focus of the F&A group to more strategic activities. The key, as noted above, is to what degree these benefits are being achieved.

• FAO users are having the greatest success in achieving the benefit most commonly sought in FAO efforts. The average respondent score for reducing total F&A operating costs is 3.65 on the five point scale.
• Using cost savings to fund F&A transformation efforts scored 3.54 and gaining access to external F&A skills, knowledge and expertise via FAO scored a 3.51.
• It is notable that all benefits identified for the scope of the study scored above the 3.0 mid-point on the one to five scale. This highlights that no major benefits sought from FAO are consistently not being achieved.

Rankings are generally consistent across respondents from different size organizations and between U.S. and U.K. respondents, though there are some variations:

• Respondents from the smallest organizations polled ($3-10 billion+ revenue) are less likely (2.79 compared to the overall score of 3.18) to find value in FAO helping to better address regulatory compliance and related requirements.
• U.K. respondents were more positive on this same compliance metric, scoring it on average at  3.55 compared to their peers in the U.S. whose average score is 3.02.

The prioritization of benefits sought illustrates that buyers are employing FAO to achieve both tactical goals, such as reduced costs, as well as address more strategic issues, such as access to external F&A knowledge and expertise. The question is, does this imply that FAO has sufficiently evolved to become a means to address both operational and strategic F&A needs, helping to reduce F&A costs but also bringing strategic business value to the organization? Or is it still a tool primary applicable to administrative and back-office F&A activities, and a method to reduce F&A costs?

Next up:  How Strategic is FAO?

Filed under: Finance & Accounting, Market Trends and News, Outsourcing, Process Transformation by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research

This is the fourth in an ongoing series of blogs presenting the findings from EquaTerra’s recently completed market study assessing North American and U.K. finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast on January 28, 2010. The blog series has so far addressed the following points:

• Key items on organizations’ corporate agenda for 2010
• What is on the CFO’s agenda
• Strategies and tactics to enable the CFO’s agenda

The introduction or expansion of FAO is increasingly one of the strategies employed to enable the CFO’s agenda. FAO investments can complement, extend and, in some cases, supplant investments in shared services operations. As noted in the prior blog, FAO is one of several tools CFOs are employing to address various challenges and take advantage of the varied opportunities facing their firms. While FAO is typically viewed as a means to cut costs – and this has certainly been a key driver in the expansion of its usage over the past two years – FAO is increasingly being employed to deliver more strategic services such as analytics, planning and compliance. If deployed successfully, FAO can enable the retained F&A organization to devote more resources and focus on more strategic activities as well. Cost cutting remains key but is now a prerequisite to undertake FAO and not the only endgame goal sought.

One of the strongest pronouncements of the success of any FAO implementation is the expansion of scope and contract renewal. EquaTerra asked market study respondents about their future plans for their FAO initiatives:

• The most common course of action cited by 49 percent of respondents is that their organizations will expand FAO scope by outsourcing additional F&A processes
• Forty-two percent of respondents plan to expand FAO use into new business units, geographies or divisions
• Thirty-nine percent plan to expand the use of global or offshore delivery locations and services
• Twenty-three percent of respondents plan to maintain current FAO scope
• Most importantly, just three percent are planning to curtail or eliminate FAO

There are some variations in response levels based on the size and geographic location of respondent organizations:

• Respondents from larger organizations ($20 billion+ revenue) are the most likely to expand outsourcing into other process areas (51 percent) or add additional geographies or business units (46 percent)
• A higher percent of U.K. versus. U.S. respondents cite FAO expansion plans (58 to 39 percent in new process areas, 44 to 37 percent in new geographies and business units and 42 to 34 percent more global and offshore)

While problematic or “failed” outsourcing deals are often highlighted in the press and the market, this market study (again) illustrates that most FAO buyers are satisfied and plan to expand the scope of their efforts. This does not mean that there is not (often much) room for improvement, but that FAO is a mainstream tool for CFOs to employ to address their strategic agendas.

Next up: FAO benefits sought and achieved.

Filed under: Finance & Accounting, Market Trends and News, Outsourcing by admin
No Comments »

Bill Thomas, Executive Director, Europe & Asia Pacific

There can be no better way of understanding the continued intensity of globalisation than attending NASSCOM.

The week of  8-12 February 2010, some 1400 professionals from all parts of the outsourcing industry attended India’s showcase outsourcing conference at NASSCOM in Mumbai.  The confidence displayed by the India-based service providers was palpable.  Many are armed with significant access to funding, have seemingly limitless access to skilled resources, innovate at a rate previously not seen, and meld all of this with an intense focus in execution.

I heard several speakers referring to the “developed economies” and I compared this with multiple delegations from the “developed nations” promoting inward investment schemes into their struggling Western European economies.

The dichotomy between these themes was astounding.  The flow of capital around the world is a flood; the tide of capability building in the East is truly tectonic.

“Developed?”  Let’s not be quite so smug…..

Filed under: Market Trends and News, Outsourcing by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research

The Wall Street Journal recently published an insightful article on how to address some common problems buyer organizations face in their global – and not so global – outsourcing efforts.  The article, entitled Advice for Outsourcers: Think Bigger, has a subtitle of Too many companies mistakenly limit offshore work to routine tasks. While this statement is often true, the more important point of the article is that management and workers in buyer organizations often struggle to collaborate well with their peers in the outsourcing service provider organization. This invariably leads to problems and can make even routine tasks difficult to complete successfully, not to mention more strategic activities.

The article’s authors, professors from the London School of Economics and the Indian School of Business, are clearly fans of globalization and offshore outsourcing.  They understand, however, that problems exist within any organization attempting collaborative efforts involving workers dispersed across multiple locations, time zones, countries and cultures.  Such problems can occur whether involving an outsourcer,  business partner or just within the walls of their own organization.  Given that globalization’s growth will invariably continue, and through it the growth of more global supply and service chains, it is an imperative that organizations work to improve these collaboration skills.

Optimizing collaboration is obviously a tall order and a task that is never completed. It is in part a function of experience. It helps if there is a good cultural fit between the buyer and service provider. It is also dependent on fitting the work being performed to the delivery model and the buyer’s collaborative skills level. For instance, highly collaborative work that requires strong business and industry knowledge is harder, and often less suited, to a multi-location global sourcing effort or for a buyer inexperienced with global sourcing.

In some situations, however, the level of collaboration needed is much less and at times not necessary at all. The amount of collaboration required depends on whether the client organization is buying a process or an outcome from a service provider. Often it is both, but increasingly buyers need to focus on the outcome rather than the process the service provider uses to deliver the outcome. Simply, if the provider is the expert at performing an activity (and if it is not, why was it hired?), then leave it to the experts (i.e., don’t tell the pilot how to fly the plane but make sure it’s taking you where you want to go).

Buyers in many outsourcing scenarios are well served to not micro-manage their service providers or dictate how work is performed. If buyers can (safely) take this approach then success in outsourcing in general and global sourcing specifically becomes more viable. This approach also enables buyers to refocus more of their scarce resources and management attention on more strategic business issues (like how to exploit IT capabilities and not define how IT operations are organizations are run).

Competitive differentiation, particularly for western businesses, is derived from innovation and specialization. Outsourcing can support efforts to improve differentiation if, where and when applicable, buyers can cede greater control to outsourcing partners and allow them to deliver best in class services via their own standardized processes and systems.

Filed under: Offshore & Captive Centers, Outsourcing by admin
No Comments »

Stan Lepeak, Managing Director, EquaTerra Global Research

This is the third in an ongoing series of blogs presenting the findings from EquaTerra’s recently completed market study assessing North American and U.K. finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast held on January 28, 2010. The first blog reviewed the key items on organizations’ corporate agendas for 2010, and the second blog analyzed what is on the CFO’s agenda. Having defined these agendas, the next step is to assess and determine the best tools to employ to successfully address them.

There are a variety of tools at CFOs’ disposal to affect change. Some are internally focused, such as process improvement and reengineering efforts, or quality initiatives such as Six Sigma. Investing more in new, and ideally better,  IT software applications and systems is a perennial favorite but one that has fallen from favor not only due to tight economic times but also because many F&A organizations have already made extensive IT investments. Relatively new and more dramatic tactics involve the expansion of shared services centers (SSCs) or the increased use of FAO.

F&A organizations have been implementing both captive SSCs and FAO for a number of years. What has changed over the past five-10 years is the scale and scope of SSC and FAO efforts – particularly in best-in-class user organizations – and their usage to support more strategic F&A activities (e.g., planning, analytic and compliance).

Many SSCs, however, have not achieved best-in-class status. There are many reasons for this, including the inability to tap into skilled resources, inadequate support of IT applications and systems and lack of a clear strategy for improvement aligned with corporate goals. The captive SSC model has started to fall into disfavor in some F&A organizations as the challenges – and costs – associated with building and managing effective, competitive operations has proven more burdensome than anticipated. As a result, FAO is growing in importance as an alternative to SSC expansion. FAO now often encompasses a full range F&A processes serving multiple business units and geographies, and delivered from multiple lower cost, global service delivery locations.

So the challenge in 2010 for CFOs and their F&A organizations is to identify and prioritize options and tools to use to achieve their agendas. Addressing this point in our recent market study, survey respondents ranked the importance of eight different tools, tactics and initiatives they could use to address the agenda items previously laid out. The rankings are on a one to five scale where one represents not at all important and five represents extremely important.

• The most important tactic identified by study respondents is undertake internal process improvement and reengineering efforts of F&A processes, scoring3.71 on the one to five scale.
• Implement or expand use of third-party providers and shared services centers (including offshore captive centers) to support and deliver F&A processes and services scored a 3.62.
• Upgrade and improve the overall F&A staff and talent pool also scored a 3.62.

There is only limited variation among the top five rankings ranging from 3.71 to 3.46. And there are no major variations in rankings based on respondent geography or organization size except that respondents from the smallest class of organizations polled ($3-$10 billion revenue) were somewhat less likely to favor FAO.

Clearly CFO’s recognize there are multiple tools available to enable their agendas. They  must define a portfolio strategy and multi-pronged approach to change, using a range of tactics often including SSCs and the greater use of FAO. While this complicates the process, the upside is that the breadth and range of tools and tactics available to support change is greater than ever.

Next up: FAO futures

Filed under: Finance & Accounting, Market Trends and News, Offshore & Captive Centers, Process Transformation, Shared Services by admin
No Comments »

Lee Ann Moore, Chief Marketing Officer and
Joe Lancaster, Project Director

While not experiencing 7.34 on the Richter scale, many EquaTerra clients have felt their operating environment shift and their global footprint change as they migrate their businesses to geographic areas of greatest growth. Our client base includes a large number of the oldest U.S.-based companies which faced sluggish growth even before the recession hit. In their quest for growth beyond the U.S. borders, their employee base has shifted and global teams have emerged. These companies, many of them public, are working for their shareholders trying to maximize return in an environment that rewards growth.

For many companies, growth today means moving into markets where their brand is not understood, known or respected. For example, I recently spoke with one agriculture executive who commented his company’s brand is held in reverence in agricultural circles in the U.S., but in India its brand means nothing. This same company mentioned that for the first time in its 100+ year history it will soon have more employees abroad than in the United States.

This corporate demographic shift wreaks havoc on employees accustomed to living in the same town, working in the same office and sharing the same background and beliefs as their colleagues. For example, one premiere U.S.-based food manufacturing client of ours is establishing shared services centers around the world, and is struggling with the daily challenges of working virtually.

As EquaTerra has been a virtual company since its inception, we have well-learned what works and what doesn’t. Following are five key principles we have identified which will enable companies new to the model to succeed with virtual teams:

1. Trust (and other operating values) – Sounds simple, but if a team is not operating based on a platform of trust that each member is working toward a common goal, is using his or her talents to deliver value to the organization and contributing to the project, a virtual operating model will fail. In an environment lacking trust, relationships break down and productivity stops because of the time needed to mend the situation, if it in fact can be mended. Trust is the foundation of any successful virtual operating team.
2. Tools – Operating on a virtual team was not practical 15 years ago, and it was a challenge (and expensive) 10 years ago. But now, with tools like WebEx, Skype, Groove, SharePoint and other communications and collaboration tools, virtual teams can become productive in a relatively short time period and often for a nominal fee. For example, Skype’s video feature creates an effective conference room for global team meetings.
3. Measure, not Manage – The 9 am-5 pm work shift may exist somewhere, but not on global operating teams. It is expected and accepted that calls and meetings will take place after local business hours to accommodate team members around the globe (yes, 4:00 am conference calls are within reason). While it’s impossible to manage the presence of employees in a virtual environment, companies can measure their performance. Set clear MBO’s based on broad organizational goals or outcomes not day-to-day responsibility. A requisite shift in corporate mindset from performance management to performance measurement – or outcome-based productivity – gives employees the flexibility to accomplish their jobs to the best of their ability, provides room for them to grow and enables them to deliver concrete results to their organization.
4. Who Decides? Clear Decision-rights, Governance – Outlining the decision rights for certain tasks is one of the critical first steps in establishing a virtual team. Whether you use a RACI chart or equivalent tool to define the roles for your organization, doing so will eliminate the lack of clarity which otherwise will mire a team in confusion and inefficiency. Note that when broken down by project, the nuances between being a contributor and being informed often require an initial face-to-face session to work toward a place of common understanding (see below).
5. Face Time is a Must, Just not all the Time – While nothing replaces the experience of an actual meeting, tools like the video cameras on most of today’s laptops, interactive WebEx sessions and the free conference services still offered by Skype come very close. And using them eliminates the massive expenses associated with frequent in-person team face time. As an active user of these tools, we still find that our team needs to meet at critical inflection points during the year – budgeting/planning, kick-off and critical check points of a global project and other sessions when the details are potentially lost when not sharing the same room. But with the technology available today, we are able to work through many complex situations, dependencies and check points in a virtual environment.

Filed under: Process Transformation by admin
No Comments »