The increasing number of success stories of companies using outsourcing to gain competitive advantage and increase shareholder value has sparked a growing quest among enterprises for best practice tips on structuring the outsourcing initiative as well as managing the ongoing relationship. We asked leading HRO firms for advice on three questions; here are their recommendations.

Q: What are the top success factors to incorporate into the contractual and relationship structure to avoid the pain of having to switch providers?

Steve Bohannon, President, EDS HR Business Process Outsourcing: The structure of an HR outsourcing relationship, and ultimately the contract, is an outcome of much that goes before it. Success emanates from the hard work that goes into creating a positive relationship with open communication.

-> Alignment of Goals: What makes that foundation work is the alignment between provider and client around their mutual understanding of the value proposition. The client's clarity of thought around what it is seeking in an HR outsourcing agreement is absolutely critical. Those goals need to be understood at many levels within the organization. Secondly, it's equally important that the provider has clarity around its ability to deliver on that value proposition.

-> Open Communication: Once goals and value propositions are understood, it is important to merge them through open, honest communication steeped in realistic expectations around how things are going to work. The structure of the relationship must reflect realistic expectations about economic returns, levels of services, and transitions.

-> Governance Structure: A key element of the contract is the governance structure. A model with the following four committees, made up of client and provider members, helps ensure that the relationship honors the spirit and letter of the contract. The Executive Steering Committee guides the overall process, making sure that both parties adhere to the principals of the relationship. The Operating Committee is responsible for day-to-day success of service delivery and the economics of the contract. The Projects Committee focuses on the projects that require attention away from the day-to-day operations. The Incidents Committee manages issues and creates process to quickly deal with any problems.

Ultimately, it is the ability to communicate openly at all levels in a complex relationship that is the key success factor.

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More views of members shall add up to an excellent discussion on the issue of Outsourcing. Thanks Saumil for initiating an interesting topic of immense importance.

Best Regards

Rahul M