Part 3: Performance Accountability Required For Successful Outsourcing
Performance Accountability Required For Successful Outsourcing
By Vince Elliott - October 2012 - Facilities Management
Performance accountability defines the specific nature of the consequences that are linked to performance. For the facility manager's organization, these consequences are felt through its competitive position in the marketplace. The loss of external customers (and their revenue) or internal customers (and their skills) reduces the company's capability to maintain or grow in its market. There is a real dollar consequence to the facility manager's company if either of these consequences occurs.
For the contractor, incentives or deductions from regular profit can be powerful consequences. The satisfactory delivery of outcomes to the facility manager's company can be linked to a variety of economic and market consequences for the contractor. These consequences can include financial incentives or deductions, shared marketing, additional business opportunities, etc. It is important, and it is fair, to clearly define both financial and non-financial accountability for this performance-outcome-consequence link.
Neither buyers nor contractors can be held accountable for performance if there is no reliable measurement of performance. Measurement validates the level of performance delivered against contract requirements as a basis for payment; measurement can also be used to identify opportunities to improve buyer and contractor systems.
Given the financial consequences of the numbers, a high degree of reliability must be present in the measurement function. Even in the most trusting of relationships, honest disagreements, unreliable data and financial motivations can sour a good contract when so much is at stake. Independent, third party measurement can be vital to the integrity of any financial incentive/deduction process.
Perhaps the most powerful benefit of reliable measurement is the opportunity for process improvement. If the service process is not delivering the outcome required by the performance contract, everyone loses. It is in everyone's best interest to constantly change and improve tasks, processes and systems that are not delivering successful outcomes. The process improvement effort is the best insurance that both parties are successful in achieving their mutual economic and market goals.
Vincent F. Elliott is president of Elliott Affiliates, Ltd. He has represented buyers across the country in writing, modifying or updating more than 500 performance-based building service contracts with an estimated market value of a quarter of a billion dollars. He can be reached at firstname.lastname@example.org.