July-August 2013

BACK OFFICE VIEW: Measuring success

Much attention is being paid to the selection of the outsourcing partner.
Heavyweights of the banking industry are battling for the audience vote like a business version of X Factor, over an intense period of workshops and presentations.

Much less emphasis is paid to what happens after the winner has been announced and the transition process has been completed. How does the relationship work in practice?

Who remembers the winner of the 2010 X Factor and do they still have the same recording contract three years on?

Some asset manager and outsourcing supplier partnerships can be viewed like an unruly coalition with all the inherent tensions. How can the partnership be managed to keep the team in shape until the next contract term?

To add sharper focus, it is not only the management of the respective businesses who need this partnership to work, it is also in the glare of the UK regulator (remember the recent Dear CEO letter), who are watching how the publics savings are being held.

The secret is in the vital and growing discipline of supplier management.

From our work with asset manager clients and their outsourcing partners, we have noted the following attributes that are indicators for a successful partnership.   
• Clarity of legal relationship and responsibilities, including liability.
• Regular review of contractual arrangements, including benchmarking audit and compliance reviews.
• A change control process that is documented
and observed.
• Clear issue management and escalation process.
• Regular, structured evaluation of performance using up to date and meaningful criteria.  
• Processes or structures for, and active work on, continuous improvement of the relationship and
service delivery.
• Clear relationship management communication characterised by courtesy and an absence of blame and hostility in language used about the other party.

The supplier management function has responsibility for multiple aspects of the supplier relationship, including service monitoring, relationship management, management of change (internally and with the supplier), risk control, issue management, meetings and events, business continuity and document control.

To add to the challenges, a firm may have multiple service or technology providers, each of which requires management.

There is a considerable challenge in tracking a complex outsourcing agreement, as the fees are often based on multiple factors, and it is hard for management to see trends.  

Monthly reports from supplier to client are characterised by a mass of detail, which needs to be sifted and distilled into useful management information.

Key performance indicators are reported on but are not easily tracked. If the supplier manager can harness the detail and show the trends over time, it will empower the management team in their discussions with their supplier.       

Important steps are to record what has been outsourced and to whom in a structured way, and to then ensure the consistent application of key performance indicators.

A measure of success in this role is when it gives space for the partnership to address business challenges jointly, in an atmosphere of trust.  

Supplier management encompasses a range of diverse components, from commercial matters and assessment of risks to the practical side of tracking and resolving issues, and the strategic aspect of planning for the future.

The successful supplier manager who masters all these aspects can make a significant difference to the business, harnessing the joint power of the client and service provider to deliver the benefits of excellent service coupled with innovation.

And, by the way, the X Factor winner in 2010 was Matt Cardle, let go by Simon Cowell, then a judge on the show. Cardle is now with So-What Recordings.  

Elizabeth Gee is product lead at Knadel

©2013 funds europe