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Management And Training

Performance Measurement — Is It Working? Part Two

September 19, 2010
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1) Consistently and objectively measure performance

The survey suggested the vast majority of buyers thought that effective measurement of performance would lead to innovation and enhanced performance. Yet, fewer than half of the contractors surveyed thought so. So, does performance measurement help, or not?

How to move forward?

The objectivity of the inspector was the leading issue for both buyers and contractors, with buyers preferring an objective third-party to be the monitor.

What is being measured and managed is important to the buyer''s business. Clear alignment of expectations will lead to the right metrics and elimination of much of the conflict that stems from misunderstanding of what is really important.

Less than 20 percent of buyers of outsourced services said the people responsible for monitoring outsourced services have specific skills or training for this purpose. Nearly 80 percent of the respondents were not happy with the frequency of onsite audits. Most agreed that a regular weekly or monthly cycle of inspection was important.

2) Measure the right key performance indicators (KPIs)

Defining the right KPIs appears to be a difficulty for buyers. There is a surprising lack of confidence that the right ones are being used. So, what works?

How to move forward?

Effective managers have identified ongoing process improvements as a primary reason for monitoring. This is significantly driven by clear internal alignment within the buyer organization about what is really important for their business and perceived mandated transparency of contractor processes and performance.

The majority of respondents on both sides believe service level agreements (SLAs) must be used in a collaborative relationship with emphasis on contractual performance and increasing value of the service relationship.

While vast majorities of the respondents believe that using the right KPIs was the most important factor for success for any party that is monitoring performance, a majority were also unsure whether they were using the right ones.

3) Measurement starts with outsourcing

Buyers and their operations managers do not measure or manage from the product-driven "specification," except when things go horribly wrong. For the product buying approach, it''s easy to lose sight of what you are really buying and measuring.

How to move forward?

The overwhelming majority of buyers were not comfortable with their knowledge of the local market. Pre-qualification is an important strategy for measuring the likelihood of a successful outsourcing event.

Buyers generally tell the contractor "what tasks to do," rather than, "what results are expected." Best practice buying is all about results, even for services.

Also, to be fair, any metric that will be used to evaluate the contractor''s ongoing performance must be defined and documented early in the outsourcing cycle.

4) Ongoing management

The contractor''s view is that the buyer''s project management is "good enough," but buyers themselves are about half-convinced. The presence of effective project managers for both buyers and contractors is the strongest indicator of service success or failure.

How to move forward?

About half of buyers and half of contractors are not confident that the ongoing management structure being used will lead to improved and updated processes. Both sides of the project management relationship need to acquire and utilize process improvement skills as a key part of their ongoing management strategy.

The four most important factors for effective performance management are: The choice of the correct KPIs; quality of data collection; internal consistency of views and expectations for results within the customer organization; and transparency of the contractor''s processes and performance improvement.

Conclusion

Addressing measurement shortcomings will promote more aligned and collaborative relationships focused on achieving consistent, continuous improvement of quality and business capabilities in the outsourcing relationship.

It is clear that a number of these issues stem from front-end outsourcing and negotiation practices.

Without clarity of the results expected and alignment of goals at the outset, it will not be possible to improve many of the KPIs or to establish clear measurement mechanisms for overseeing and improving performance.


Vincent F. Elliott is the founder, president and CEO of Elliott Affiliates, Ltd. of Hunt Valley, MD, www.ealtd.com. He is widely recognized as the leading authority in the design and utilization of best practice performance-driven techniques for janitorial outsourcing and ongoing management.

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