Outsourcing no longer just arm’s length, buyer-of-services process

Codes of conduct help employers avoid becoming (bad) front-page news
By By Jagdish Dalal
|Canadian HR Reporter|Last Updated: 01/13/2014

Outsourcing used to be viewed as a desperate act to fix a problem or a “necessary nuisance.” But that’s no longer the case. Many employers have adopted it as a strategy to refocus their business model and become more competitive and agile.

In the wake of this change, the importance of outsourcing and the complexity of managing relationships have advanced the notion that outsourcing is a profession and engaging in outsourcing is a business imperative. Outsourcing can no longer be viewed as an arm’s length, buyer-of-services process, devoid of the usual business controls and disciplines.

In fact, many key outsourcing relationships are classified as material to business results and fall under various governmental regulations (such as the privacy act). A buyer of outsourcing services cannot hide behind a statement that it is not affiliated with the outsourcer.

This has led to a highly necessary discipline of governance based on a detailed, contractual framework. Experienced businesses have created and implemented methodologies and codes of conduct around outsourcing.

As a result, they are seeing benefits such as better results and better risk management. They are not worried about becoming front-page news as organizations that have created unhealthy business relationships for themselves and employees.

Governance for outsourcing covers several areas, but one important one is codes of conduct. These fall into two distinct categories: corporate limits and pre-requisites; and managing outsourcing engagements.

Corporate limits and prerequisites

All corporations have defined or implied limits of strategy implementations or “boundary conditions” for operation. They are driven by various factors, including:

•market positioning

•branding

•product placement

•regulation compliance

•social responsibility consciousness.

At well-managed organizations, these principles are predefined and deployed in all areas of operations, including outsourcing acquisition.

They identify the circumstances in which a business may or may not pursue a certain strategy or action. For example, most Western employers have adopted the United Nations’ principles of labour laws (such as age restrictions and preventing a harmful work environment).

Total compliance with the laws — of business as well as an outsourcer’s place of work — is another strong code of conduct adopted by most businesses.

Some employers also adopt codes of conduct based on their unique positioning in the marketplace or on corporate values. For example, a CEO may not even consider sending any work offshore because it might hamper her ability to sleep at night and live comfortably among neighbours and customers. Or perhaps an organization has a philosophy of selecting providers that engage under-privileged workers, improving their overall economic and personal conditions.

These aren’t necessarily altruistic values — some companies produce products that employees could afford to buy if they had a slightly higher economic level. It’s similar to the thinking of Henry Ford in the early 1900s who paid his autoworkers considerably more than other factory workers so they could purchase a Model T.

Managing outsourcing engagements

Once the business boundary conditions are well-established, there are certain codes of conduct that govern each engagement. Most of these deal with process management and governance. These codes of conduct are contractual in nature, as well as personal for those involved.

The IAOP (International Association of Outsourcing Professionals) has established core codes of conduct for those who achieve a level of proficiency and become Certified Outsourcing Professionals (COPs) (see sidebar). In addition, governing the process of engaging a provider for services includes:

•managing the outsourcing process in a disciplined manner to ensure a credible outcome for both the buyer and provider

•creating a team environment to avoid setting up artificial management boundaries, thereby creating a higher-performing team of customers and providers who can create higher productivity, job satisfaction and increased business relationships

•continuous and unchanging management attention and relentless discipline in governance

•a joint commitment of both the buyer and the provider.

A well-defined outsourcing process — supplemented with a strong code of conduct and commitment to remain compliant — is the only way outsourcing can yield a high level of success and, ultimately, a high return on the investment for a business — buyers and providers alike.

Jag Dalal is chief advisor of thought leadership at IAOP (International Association of Outsourcing Professionals) and president of JDalal Associates in Hartford, Conn. For more information, visit www.iaop.org or www.jdalalassociates.com.

Getting it right

Codes of conduct

The International Association of Outsourcing Professionals (IAOP) has established core codes of conduct for those who achieve a level of proficiency and become Certified Outsourcing Professionals (COPs):

Professional responsibility: To adhere to the highest standards of ethical business practices in all business dealings, especially those that involve business decisions on entering, maintaining or discontinuing outsourcing relationships. To conduct oneself in a way that contributes to a positive image for the individuals and organizations that work in the field of outsourcing.

Professional representation: To represent one’s skills, knowledge and experiences with honesty and integrity, enabling customers, employers and other business partners to make fully informed hiring and contracting decisions.

Accountability for outcomes: To measure and share accomplishments in terms of the business outcomes actually achieved over time, using industry-defined terms and thresholds, where available, in a way that can be objectively evaluated by others.

Professional development: To continuously increase the economic value derived through outsourcing by building professional skills and knowledge through ongoing education, expanded experience and a focus on innovation.

Outsourcing advocacy: To be an effective, proactive advocate for outsourcing as a management practice and as a profession.

Issue resolution: For these standards to fully benefit the field and profession, customers, employees and others need a reliable method for reporting and resolving issues with standards and how they are being applied.

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