Trust, Governance and a Focus on Outcomes

“If we don’t trust our partner. we should recognize that the problem lies in our selection process”. That was one of the observations delivered by Srini Krishna, Director of Global Supplier Management at Microsoft, when he spoke at this week’s IACCM Member Meeting in London.

Srini has a leadership role in managing the outsourcing of Microsoft’s finance operations. This global project started from a base of confusion, in that there was no common process in place. It had all the hallmarks of a potential outsourcing disaster, yet has proven to be extremely successful.

Key to the turn-round was the readiness of both Microsoft and Accenture, their supplier, to come together and work constructively on the program. Srini outlined five core principles which lie at the heart of success:

• clarity on outcomes – a simple definition of the goals.
• a focus on ‘what’ not ‘how’ – resisting the temptation to dictate the detailed process, even when things are going wrong.
• ensuring that the outcomes are not only well defined, bu also measurable – and that measurements are kept few in number and appropriate to the goals.
• a pricing method that is simple to operate and allows focus on improvement and innovation.
• a robust governance system that delivers insight, not arguments.

As an example, Srini highlighted how traditional pricing and budget models tend to make every change an item for negotiation. “We designed an approach that is capable of dealing with change without always forcing negotiation.” He also commented on the need fror greater clarity over roles and skills. “We quickly realized that there was a disconnect between the internal business manager who was trying to deliver services and the vendor manager who saw their task as periodically beating up the supplier. There had to be far better communication, different communication.”

The outcome sought by Microsoft became a very simple statement – they wanted transformation of financial operations. Measurements of success were also simple – for example, to achieve top quartile benchmarked performance over the lifetime of the contract, as measured by an independent third party. Quarterly reporting to senior management also ensured continued focus and a senior attention that meant issues and opportunities were quickly addressed at the right decision-making level.

“Sound governance is the key to it all”, concluded Srini. It sets the tone for the relationship, drives accountability and clarity of roles and responsibilities, and ensures transparency, a common view of the truth.

With these ingredients in place, it became possible to deal with the complexity of the program, which was subject to massive variations between countries in process scope and maturity, the need to cope with global change and volatility, the introduction of new products and commercial models and a multitude of stakeholders and users.

Srini paid tribute to the thinking introduced by Vested Outsourcing and the simple model this offers for handling complex situations. His presentation should certainly be viewed by anyone who wants to ensure success in their outsourcing operations – and I will be asking him to share it with a much wider audience.