Performance management and the outsourcing process

Abstract

PurposeThe purpose of this paper is to assess the applicability of a number of performance management techniques in the outsourcing process, in a business services context.Design/methodology/approachUsing a structured outsourcing framework, performance management techniques are applied in a financial services organisation over a three‐year period. A case study approach is employed to undertake the research, which involved the research team engaging directly with the organisation throughout the outsourcing process.FindingsApplying performance management techniques in the outsourcing process is challenging in a number of areas including comparison difficulties, incomplete information and inadequate performance management systems. However, benchmarking and cost analysis are useful mechanisms for improving performance, and reducing costs via internal process redesign or outsourcing. Performance management techniques can be employed to remove inefficiencies from processes both prior to outsourcing and during the outsourcing relationship.Research limitations/implicationsThere are a number of limitations of the research approach including gaining full participation from the company, having access to all relevant company information and time constraints.Practical implicationsThe research findings highlight the implications of applying performance management techniques in a practical outsourcing setting. As well as identifying the challenges, the research highlights the value of integrating critical success factors, cost analysis, benchmarking and other performance management techniques into the outsourcing process.Originality/valueThere are few studies in the literature of applying performance management techniques in the outsourcing process at an operation's level. The findings have identified the challenges and benefits of performance management techniques in the outsourcing process. The findings have highlighted the importance of operations management concepts such as performance management, operations strategy, business improvement and process re‐design to services outsourcing, and the need for further research in this area by operations management scholars.