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Occasionally, consultants with StratForm hear forecasts which suggest that more complex types of business functions will soon become the primary domains of third-party service providers.
Some traditional “sacred cows” such as some legal processes, research & development activities, and other knowledge-based processes have or are rapidly becoming true.

But, while it is theoretically possible to outsource almost any function, there are a few areas of responsibility which no business should ever seriously consider - regardless of whether a service provider has the skills to perform it or not.
In the market for business services outsourcing, some advisory firms have recently begun trying to convince buyers that they, as experts, can govern their clients’ outsourcing relationships. Governance is still one of the most underestimated and undervalued elements of outsourcing, with the result that many buyers do it poorly or not at all. However, handing over responsibility for governing your relationships to any type of third party is a dangerous and very slippery slope.

When a company decides to outsource, they transfer responsibility for performing the process to a service provider but they still retain accountability for the process itself. As a result, one of the given costs of outsourcing is that you need to invest in sufficient resources and knowledge to govern the provider effectively. In effect, you need to replace a service with a core expertise.

By handing-off governance to another party, you are in effect removing all accountability for that service from your organization. Your outside advisor is never going to govern your relationships with the same understanding of your best interests, and you are ultimately creating the environment for three way finger-pointing about who is accountable when things go wrong...
In the market for business transformation management, some outsourcers now claim that Program Management Offices (PMOs) can be outsourced. Certainly many providers have program and project management skills, and it can be tempting to let them manage a function which is often not predictable or consistent. Many companies are also not confident in their program management capabilities.

However, accountability for managing large-scale or a large numbers of projects should never be completely transferred to a third-party. For a single major program like an ERP implementation, a buyer must ensure that all decisions being made are in their best interests. For multiple project-type PMOs, priority decision-making and accountability for selected projects is closely tied to the overall business strategy and must always remain a core competency.

If skills are a concern, contract experienced independent consultants to co-manage your PMO with your staff for a period of time. That way, all of the people driving the program are directly accountable to you and the independent consultant brings an objective view on the performance of your major service provider(s) while at the same time transferring knowledge to your staff for the future.
Three Functions You Should NOT Outsource...
Program Management Offices
Outsourcing Relationship Governance
Finally, in the area of lean operations management, there are offers by some consulting and service provider firms to provide a complete “managed service” for their clients' six-sigma or other brand of lean corporate improvement program. This would include not just the traditional implementation and training support services, but the ongoing management and tracking of the overall program.

Adopting a lean program is a strategic decision that companies make when they recognize the importance of having a standard methodology for solving problems and managing improvements within their business. Study after study has demonstrated that successful implementations result when the chosen standard has become imbedded within the culture and fabric of the organization, and all types of improvement projects use the most appropriate tools and methods in each situation.

Although outside help is often needed for expertise and additional training capacity during the initial deployment, the responsibility for owning and managing the program needs to reside within the organization and investments need to be made to build the skills to manage and evolve it over time.
By letting a third party manage their lean improvement, leadership is effectively telling the organization that they are not committed to the program for the long-term. And the service provider is inherently incented to find opportunities to train more people or develop the program beyond the point where it is providing additional value that is in the best interest or needs of the company.
Managing Your Lean Improvement Program
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