Outsourcing’s Marriage Counselor

More and more companies are hiring a new kind of chief to keep an outsourcing relationship in harmony.
Michelle GabrielleAugust 1, 2001

“Outsourcing is similar to a marriage.”

Time and time again, you will hear this analogy used by experts when they describe outsourcing relationships.

In other words, hard work and attention to the little things are critical to a successful arrangement. It’s not that smooth-as-silk road to riches.

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It also has it warts, conflicts and tension. And misunderstandings.

As a result, a growing number of companies are hiring a chief resource officer (CRO) to manage this sensitive relationship. Whereas in a marriage, a counselor may be consulted when a problem arises, in an outsourcing relationship a company would rely on its CRO to prevent a problem from erupting altogether.

If you aren’t familiar with the CRO title or position, you’re not alone. According to John Challenger, CEO of Chicago-based outplacement firm Challenger, Gray and Christmas, creating the position of CRO in a company is relatively new.

Still, “as more and more companies look to outsource a wide range of their departments and/or division functions,” says Challenger, “it appears more necessary for them to hire someone who understands how the outsourcing partnership will work — someone who will work to apply consistent values and know-how to keep those relationships strong.”

“The CRO, when empowered as the focal point of all outsourcing strategy, implementation and relationship management, can ensure that all outsourcing relationships live up to expectations,” says Frank J. Casale, CEO of The Outsourcing Institute in Westbury, N.Y.

In many cases, departmental managers share the responsibilities of managing the outsourcing relationships. However, sometimes there are too many cooks in the kitchen, says Challenger, especially when more than one function of the company is being outsourced.

Creating a role within the company that will specifically serve to monitor and mediate the outsourcing relationship enables both the buyer (the company) and the supplier (the vendor) to focus on their chief responsibilities and job functions, with the comfort of knowing that the line of communication is not only open but being closely monitored.

In addition, if a problem does arise within the marriage, it has a better chance at being resolved in a civil manner if you have one person within your company whose sole responsibility is to keep the spark alive. Otherwise, you can wind up with a messy divorce.

Typically, a CRO reports to either the CEO or CFO directly. However, since many outsourcing arrangements are made for financial reasons, the CRO is more likely to report to the CFO.

The CRO position is not an easy one to fill, however, since it is somewhat of a new concept. Therefore, you cannot easily advertise for one. If you can find someone within your organization who has the critical skills to perform this function, then you are one step ahead. The person is already familiar with your company’s operations. Otherwise, you can search for a CRO as you would for other top executive positions.

So, what kind of person qualifies for a CRO? According to Casale, a CRO should possess skills in the following:

  • Managing different dusinesses. A CRO must have experience managing a variety of businesses, says Casale. Having the responsibility of serving as a median between the buyer and seller requires at least a basic understanding of the two businesses themselves. It only makes the decision processes that much easier and effective.
  • Managing costs. Like a CFO, a CRO should always be aware of the dollar signs. A CRO will be responsible for a relationship that will undoubtedly affect the company’s bottom line. A CRO with a substantial financial background understands how each decision or aspect of the outsourcing relationship financially affects the company as well as the vendor.
  • Project management. The words pretty much speak for themselves. Marriage is often referred to as work, good or bad, depending on one’s perception. Regardless, within that work, exists the “project” of accomplishing something, making it successful. A CRO cannot be without project management skills if she is to be successful in managing an outsourcing relationship.
  • Contract negotiations. Ideally, the CRO should be hired the moment a company decides to outsource. In that case — and even if she is hired after that decision — the CRO will be involved in the contract negotiation. The CRO should have experience in contract negotiations so she can better represent the company and manage the relationship throughout its duration.
  • Political and cultural consciousness. This applies to two aspects of the outsourcing relationship. First, the CRO needs to understand and respect both sides of the relationship. Hopefully, the company will have chosen a vendor with a similar corporate culture. But if not, the CRO will need to understand both of the companies to better help them get along. In addition, if a company has chosen an international vendor, understanding other countries and their customary way of doing business can truly be an asset to a CRO when managing the outsourcing relationship.
  • An open mind. A CRO should be able to “think out of the box,” says Casale. These days, a CFO uses more than just his financial expertise to get the job done…same with the CRO. She needs to constantly be aware of how decisions regarding the outsourcing relationship will affect the company’s numbers, its personnel, and the entire relationship.
  • Flexibility. Again, as in a marriage, both partners need to be flexible. A CRO who understands this concept has a great chance at helping to make the relationship successful — harmonious. The reality is that in almost any relationship, nothing is set in stone — not in a marriage contract and not in an outsourcing contract. There are too many contributing factors to the relationship that can cause it to sway one way or another. A CRO should not be frightened or discouraged by sudden change, and should ideally be able to make it work to the relationship’s advantage.

“The potential is enormous for the CRO — as a top-level career executive — to change the way outsourcing is bought and sold,” says Casale. “And the CRO can help to enable organizational transformation, which results in increased competitiveness, globalization and shareholder value.”