A Paradigm Shift for Improved Outsourcing

(Free e-book available)

For businesses that regularly utilize outsourcing, there is an innovative concept, Performance-Based Outsourcing (PBO), that delivers increased productivity and financial performance to organizations. According to an executive survey conducted by the Outsourcing Institute, almost every organization currently outsources or is considering it in the near future, ranging from small (under 499 employees) to very large businesses (10,000+ employees). 

In any type of outsourcing arrangement, companies seek outside resources for services that are not within their core competency or are more expensive to perform in-house. Most traditional outsourcing is transaction-oriented and based on a designed labor rate. With the PBO process, the client requires that the outsourcing provider deliver specific, measurable results.  

“The primary focus on PBO is paying for results, not just completing the job,” says Kate Vitasek, lead PBO faculty member and researcher at the University of Tennessee’s Center for Executive Education. “A PBO contract is structured to drive accountability to the bottom line — delivering desired results — and relies on the outsource provider’s expertise to determine how to achieve the optimum service level at reduced costs while meeting the required performance goals.” 

For example, traditional outsourcing for a property management business might involve employing a maintenance company to clean the restrooms and maintain temperature controls. By using PBO, the job parameters would define measurable outcomes, such as having less than a certain percentage of unclean restroom complaints monthly or having the air conditioning running effectively 99.5 percent of the time.

Performance-Based Outsourcing can

• Create more closely aligned client and provider goals, reducing risk across the entire supply chain.
• Better define joint performance responsibilities and compensation packages against agreed-upon goals.
• Produce joint expectations that are known “up front,” are less transaction-driven, and are focused on broader strategic/financial goals.

Alex Miller, associate dean of executive education, is excited about the Center for Executive Education’s efforts to develop a program that helps companies adopt PBO strategies. “We are industry leaders in PBO, a concept that requires a paradigm shift in the way companies think about traditional outsourcing. This program is a perfect complement to our other supply-chain-related programs, already renowned in the field.” 

Vitasek, a thought leader in supply chain management and an authority on performance management/metrics implementation, is the lead faculty member for the Performance-Based Outsourcing course. Based on extensive research with supply chain experts on how to move from traditional outsourcing to PBO, the curriculum includes practical "how to" strategies to develop mutually productive, profitable, and long-term relationships. [Vitasek also has written an e-book on the 10 Diseases of Outsourcing. A free download is available at http://PBO.utk.edu.]

Through real-world examples and interactive discussions, attendees will learn how to use a proven, structured approach to assess their supply chain opportunities, evaluate internal processes, define contractual performance expectations, enable process benchmarking, and eliminate wasted time and money. 

The next PBO course will be offered October 27-29, 2009.  For more information, please call 865-974-5001 or visit http://PBO.utk.edu.

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