Need For Result and Performance Management

Outsourced Profits through Misaligned Solutions

Outsourced operations cannot be aligned with enterprise operations, because the business is not managed to align all performance solutions utilized with the results produced.

Some enterprises have others execute performance solutions for them. Some have shared service centers providing a common solution to their local enterprises. Others outsource application systems, back office processing, product assembly, business processes, or other solutions to an Outsourced Solution Provider.

Outsourcing provides economies of scale and lower unit costs, but can also create problems, such as:

  • The objective of most outsourced solutions is to standardize, making it difficult to improve beyond the standard
  • Difficulties in aligning the outsourced solutions with the internal processing of the enterprise
  • The need for the enterprise to adjust and maintain related operations to conform with the outsourced solution
  • A reduced feeling of ownership of the solution, and removal of internal support capability

Many head offices provide a common ERP system for their local enterprises. The system standardizes local processing and reporting to provide comparisons for the head office. Usually, a head office team trains local users on the standard system. System support is transferred to the service center. In the end, the local enterprise feels absolved of responsibility for utilizing the system to improve results. But, in fact, the system must be utilized to improve results, for favorable comparison with the other enterprises’ results.

The 20th century enterprise has alignment problems between internal solutions and outsourced performance solutions

Most enterprises outsource performance solutions without understanding what they are outsourcing. They outsource a combination of results and performance, but this is not explicit in the outsourcing agreement. There is no good framework to manage the outsourced solution in relationship to the internal enterprise operations. The enterprise creates additional processes in order to accept and make use of whatever they get.

Many methods have been contrived and books have written on aligning strategy, processes, IT, organization, customer service, tangible assets, intangible assets, or outsourced solutions with each other. This is futile; solutions are not aligned with solutions. Solutions can only be aligned with their input and output results.

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20th Century Outsourcing Compared to Result-performance Outsourcing: Conventional 20th century outsourcing covers a variety of situations. R-pM applies outsourcing to situations where an enterprise provides results to another party as inputs into their performance to transform the result into output results provided back to the enterprise. R-pM solves the alignment problem. Both the outsourced and internal solutions are aligned with the enterprise results in the business structure.

Solutions can not be aligned with solutions, internal and outsourced solutions must be aligned with the results they produce

R-pM organizes and manages the actual business, including all results and all internal and outsourced solutions utilized, as one integrated business structure. The business structure provides a framework for all results produced and performance solutions utilized. R-pM aligns outsourced performance solutions within the structure of results and other performance solutions used by the enterprise. Solutions utilized for the same chain of results then are aligned. R-pM provides the mechanisms that enable the enterprise and solution provider to understand exactly what is being outsourced and to work together for enterprise result value.