The Need for Solid Governance Model

///The Need for Solid Governance Model
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The Need for 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 globalisation 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 globalisation initiatives fail because of the client organisation’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 globalisation 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 globalisation initiative, a lack of direct monitoring of performance and deliverables can lead to reduced quality and missed or misaligned expectations. Even if a client organisation 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:

– Organisational
– Functional
– Operational

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

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

“You’ve got to make services globalisation 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 globalisation initiative an ‘IT or HR or Finance Programme’.

“You’ve got to have the programme where it’s business-owned and businessled, 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 organisational governance teams.

Because the operational governance team is directly responsible for managing the initiative on a day-to-day basis, large organisations may have several operational governance groups in place across divisions or functional areas (referto 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 globalisation 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 globalisation 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 synchronised for all project constituents.

– Ensuring that Client Business and Operations groups are linked and syncronised.

– Ensuring executive sponsorship, user acceptance and buy-in throughout the engagement.

While the project Governance office is a part of the client organisation, 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 organisations.

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

In most cases, I recommend that client organisations use an independent third party oversight organisation that is in the same location as the supplier to act as the global programme manager. I never recommend that a client organisation rely solely on the supplier for governance, and the do-it-yourself model is usually only effective when a client organisation 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 organisations 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 globalisation initiative are being met.

Establishing a strong governance model helps to ensure that globalisation continues to be embraced and welcomed as a transformation lever; that the lifecycle is followed through; that business and globalisation 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 globalisation initiative.

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About the Author: Atul Vashista

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Atul is recognized globally as one of the leading experts on globalization, emerging markets, outsourcing and related governance. Globalization Today recognized Atul as an Industry Most Influential Powerhouse 25 in...

07-15-2010|WhitePapers0 Comments