Metrics

Executives normally use metrics and incentives as a mechanism for establishing accountability and control. Whether they are working with people inside their own organization or with outside partners, they use metrics to focus behavior and incentives to motivate it. But transformational outsourcing presents a unique challenge. The more far-reaching and ambitious the outsourcing agenda is, the more blurred the lines of accountability and control become (see Exhibit 7.2). For well-behaved operations, control remains important, but strategic partnering requires more. Because of its bet-the-ranch character, transformational outsourcing needs commitment.

Exhibit 7.2: In transformational outsourcing, accountability doesn’t match control.

At the senior level of the organization, this means relaxing the tight linkage between accountability and control. Executives go beyond best practices to use metrics and incentives to keep their interests tightly aligned and to support deep, continuing commitment on both sides. They establish new metrics to complement their operational ones, craft a compelling set of incentives, and use lower-level metrics in an entirely new way. Executives who operate at this cutting edge have loosened their white-knuckle grip on control and use metrics and incentives to foster commitment.