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4 Steps for Managing Outsourced Contracts

Risk & Compliance

Outsourcing is the way of the world. Businesses of all sizes frequently find themselves in situations in which they simply do not have the time or resources to take care of all of their operational activities. Thus, it is often necessary to recruit professionals external to the company to help handle certain matters. This is true across sectors and throughout many departments within a business, including the contracting world. In many cases, companies subcontract with other firms to provide a service independent of or in conjunction with their own service delivery. It is clearly risky to outsource certain activities, as it is harder to control for quality, but with the right management approach, it can prove to be quite useful. Here are some tips for managing outsourced contracts:

Vet Prospective Contractors

As with any potential business relationship, finding the right contracting partner is critical to long term success. And, given that outsourcing contracts to other firms means relinquishing a fair amount of direct control and oversight, ensuring that the right partner is selected is even more important. The company seeking to outsource the arrangement must ensure that the potential partner has the resources and capability to get the job done. Even if a company is operationally sound or has a good strategic eye, if its approach or endgame does not align with your company’s business mindset, the relationship will no doubt become more of a liability than an asset. As a result, vigorously vetting any and all prospective contractors is an absolute must.

Implement a Clear Framework

To ensure an effective management process of any outsourced contract, there must be a clear framework implemented. This means including clear goals and expectations with respect to the nature of the outsourced arrangement, as well as a specific delineation of each party’s roles and obligations throughout the transaction. It would be absolutely catastrophic to simply outsource the delivery of a service to another firm without making it abundantly clear what the overall objectives are. Therefore, the framework must be well-designed and clearly communicated so that everyone is on the same page.

Utilize Benchmarking

The only way to assess whether an outsourced agreement is unfolding as anticipated is by instituting some clear benchmarks to evaluate progress. As with any other outsourced projects, the company requesting the outsourcing has to have a way to look at the way in which things are progressing, or perhaps are failing to do so. With outsourced contracts, there will likely be various deadlines and key milestones, which should keep the parties on track and demonstrate if and how each side’s obligations are being met.

Establish Strong Communication Channels

The key to any successful business partnership is clear, consistent communication. Time after time business relationships have soured and minor disputes have turned into massive litigation nightmares due to poor communication. To avoid this scenario, it is vital for there to be strong communication channels between the outsourcer and the outsourcee. Ideally, the parties will have a predetermined communication schedule established, as well as a clear list as to the expected subject matter that should be discussed during certain time periods.

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