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Managing outsourcing, part 2 — the performance evaluation

Our basic premise, of course, is that running a shoestring, startup, or small business in which part or all of the business functions are outsourced or offshored demands that you become an effective outsource manager. Too often, entrepreneurs turn to outsourcing to get rid of the headache of dealing with the business function they’re outsourcing. “I’ll contract with a call center in Manila and that will be that. I’ll just let them do their thing and I’ll go do more important things.”

However, it’s precisely because a vendor is performing a critical business function that you need to monitor and evaluate performance as part of your ongoing relationship. So, just like an employee, you need to sit down and produce a performance evaluation sheet and perform monthly and quarterly evaluations of your vendor — or vendors, if you’re outsourcing the function to more than one.

You should have in hand three things before you vend out business functions:

  • An organization chart and job list outlining all the jobs that need to be done in order for your business to succeed at its current level of development.
  • Performance expectations for each job that you expect vendors to meet. These performance expectations may require specialized knowledge — for instance, your performance expectations for a call center will involve call center metrics, such as average wait times (AWT) and resolution percentages. It is your job to learn what these performance measures are and what the industry standards are.
  • Some kind of company positioning and information statement. These vendors, after all, are working for you, so they should understand what your company is about. This is critically important for any vendors that have customer-facing duties, such as a contact center.

    Your organization chart and your performance expectations are used to evaluate potential vendors in the bidding or decision process. If you’ve really done your homework, you’ve also drawn up organization charts for later stages of your company’s growth, allowing you to determine if the vendors you bring on today are able to grow with your company’s needs.

    Once you bring on a vendor, you recast your performance expectations into a one-sheet performance evaluation form. As part of your performance expectations, you expect your vendor to report monthly and quarterly (better yet, weekly and quarterly). These reports, along with your interaction with the vendor, become the basis of a monthly and quarterly evaluation. If you have multiple vendors performing the same function, these evaluations can become instruments for balancing the work load between vendors.

    One of the most painful aspects of running a business is evaluating employees. Skipping employee evaluations is often the first symptom of disorganization. But replacing employees does not exempt you from performance evaluations — and regularly evaluating your vendors is no less painful than evaluating your employees.

    But here’s the right way to look at the situation — it’s your money. You’re paying your vendors to perform a business function at a certain level of quality, budget, and timeliness. The only way to ensure that performance is to organize it.

    We have always said that outsourcing frees you to do what you do best, but, of course, that doesn’t mean you don’t have to manage your outsource business.

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