How Can Banks Enforce Performance Standards Set Up in Outsourcing Contracts?
Christy, Suzanne, American Banker
Regional vice president
IT IS IMPORTANT to have the right level of commitment to the oversight process. A lot of institutions take a hands-off approach, but that does not mean you can completely ignore the details. One of the first things bankers should do is establish a fixed meeting frequency with the outsourcer, who can then present statistics and go over other management issues.
Those who take part in the meetings should have at least enough technical expertise so that they can evaluate the performance of the outsourcer. They don't necessarily have to be techies, but they should have some kind of management experience.
As well as having a fixed meeting, them should be a clearly stated agenda. Know exactly what statistics will be reported and what issues need to be discussed. The objectives must be clearly stated with measurable results, something that is attainable and that can really happen.
Once the performance standards are set, there must be incentives built in to ensure they are met.
Vice president of operations
One of the most important things you can do is participate in a regional and national user group where you have the opportunity to address your concerns directly. An issue or concern ay not be significant when it come from one institution, but when a number of users are having difficulty, we can work together to get an outsources to toe the line.
It is also immensely important that you build in "measurable" performance standards. They are not much good if they can't really be measured.
You also need to verify that the information you are being given is accurate. After all, that is usually what you are being billed on.
But the performance of an outsource is really more dynamic than day-to-day measurements. yes, you do need to know certain information. But those numbers can often obscure the bigger issues, such as if your outsourcer is proactive or reactive. yes, we want them to keep us up and running 100% of the time, but we also want them to help us stay competitive and ahead of the game. We want them to be our partners. That is something that can not be measured by performance standards. It is a relationship that only comes from working with people. These are the things you know intuitively when it comes time to renew the contract.
Some people thank having an outsourcer means you can wash your hands of the whole operation. Realistically, that is not the case.
Richard T. Powers
Chief operating officer
North Fork Bank
Banks must set up very specific benchmarks on the level of service expected and quality assurance issues. The more specific the agreement, the easier it is for both pardes to measure performance standards. In addition, remedies need to be specified in case the outsourcer fails to meet the standards. Penalties do no good if there is not an agreed-upon way to make sure it doesn't happen again.
Standards can be monitored through reports, which should be generated on a monthly basis, minimum. I would recommend weekly reports if someone was starting a new relationship. …