I am often reminded of how many different ways those of us in the sourcing world define governance, often by defining what it is not. With so many different opinions, it can be difficult to discern myth from reality. To fully realize the benefits of governance, it’s important to separate fact from fiction.
Here are the Top 5 governance myths debunked:
Myth #1. Governance isn’t important if I only outsource to one provider (or not at all). Fact: Governance is about ensuring the value you receive aligns with expectations, which are based upon the internal cost to deliver or the external price to the client. This definition is true whether you outsource to one provider, multiple providers or perform services in-house. Different considerations apply when operationalizing in-sourcing or outsourcing, but governance is still relevant and applicable across the enterprise.
Myth #2. Governance is a part-time job. Fact: Many clients realize the need for governance but don’t allocate the time and resources needed to reap the benefits. Too often, the role is tacked on to someone who already has a full-time job, making it similar to situations in which the Incident Manager and the Problem Manager are one in the same. Fighting fires always takes the top slot on the priority list. When governance is a part-time job or isn’t filled with the right person for the role, there is a good chance it will not be done effectively, or at all.
Myth #3. Governance is used punitively against the service provider. Fact: Governance that penalizes the service provider always fails. Governance that supports business controls and strong relationships between the service provider and the client is much more likely to achieve positive outcomes. In the 2014 IAOP State of the Industry survey, both clients and service providers ranked Joint Governance Forums as the number one incentive of service integration. Properly executed governance ensures that both sides meet their obligations, keeping involved parties accountable and the relationship balanced.
Myth #4. Governance is handled by Procurement. Fact: Procurement teams typically drive the activities leading up to contract signing. After signature, procurement often moves to a monitor type of role, engaging only in escalations, which is a significantly different role than governance. The relationship, contract, commercial and performance management of the contract require regular care and feeding to realize the expected benefits.
Myth #5. Governance doesn’t provide benefits. Fact: When performed correctly, governance will bridge the gap between the contract, performance and payment. Ensuring a three-way match keeps stakeholders aligned and mitigates against dissatisfied clients and “watermelon metrics” (when service levels are reporting green, but stakeholders are seeing red).
Good governance is foundational to achieving full and expected value in sourcing. ISG can help. Contact me to learn more.