Any outsourcing programme in a corporate treasury or finance department will take time to settle down. However, after a couple of years the evidence will be clear as to the full impact, the real contribution to efficiency of the department. Yet few companies do such a review, often because the assumption is that outsourcing is such a ‘good idea’ and the impact is bound to have been positive. Admittedly, it is difficult to do such a benchmark because the actual process of benchmarking success of an outsourcing operation against actual / physical savings is difficult because of the ‘unseen’ costs of the added/extra effort and time that employees in the ‘retained organisation’ spend fixing the problems/mistakes of the outsource partner. Nevertheless, this difficulty shouldn’t stop companies trying to evaluate the full impact of the outsourcing programme. Here are some of the critical questions to ask about your outsourcing programme:
- How much time and resources do staff in the ‘retained organisation’ spend fixing the problems/mistakes of the outsource partner? Number of incidents /week or month? Scale and type of errors?
- Has the loss of integration and quick communication in managing all activities from a central single treasury team increased the risk of error? What errors of this type have occurred and what scale?
- Have the extended communication lines with the outsourcing provider meant that issues are not escalated quickly and resolved directly with bank relationship managers?
- Has moving to the standard operations of the outsource company in order to make it work, restricted the approach that your treasury takes?
- Have differing languages between you and the outsourcing provider been a problem when dealing with confirmation / dealing of real money?
- In standardising processes to hand them over, have any quality, control and key features been lost?
- Migration: Did the migration from in-house management to outsource provider succeed in taking over the full scope of responsibilities / business functions of what was planned at the outset? If not why not? Is there still a desire to complete the migration to outsource these functions?
- Costs: Did the outsource migration deliver the ongoing cost savings promised in the provider's bid documentation / RFP (if applicable)? If not, what obligations does the provider have to provide to contractually meet the original cost model? Should there be a review / renegotiation of the outsource cost model?
- Service Level Satisfaction: Has the outsourcing provider achieved the agreed SLAs? Are they still the correct SLAs? How many breaches of service level commitments have taken place; what mitigating actions have been taken to reduce the number of breaches in future? Should there be a review / renegotiation of Service Levels (efficiency targets, costs, penalties)? How happy is the rest of your company with the services provided by outsourcing provider?
- What unexpected benefits / consequences have been discovered by the company due to the shift to outsourced services and can these be leveraged for better results in the future?
Measure it and manage it
Peter Drucker, the doyenne of management consultants, believed that the fourth element in the work of my manager is measurement. He wrote that, “few factors are as important to the performance of an organisation and every unit” as measurement. Yet in Treasury outsourcing, all too often, the full impact is not being measured. It is critical that all aspects of outsourcing are measured honestly and fairly, covering the questions above.
(CTMfile is very grateful to the many people who contributed to the above list of questions, particularly Colin Evans Treasury Partner at Think Global Growth and Andrew Marshall MD at Covarius.)
CTMfile take: Treasury outsourcing is not all bad, there are unexpected benefits and these need to be sought out and measured too. Nevertheless, the good and the bad and the ugly of corporate treasury outsourcing programmes need to be measured comprehensively and fairly with no hiding behind the fact that a senior manager initiated the programme.
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