The folks at Marriott International Inc. are betting that they know the answer, and it may be simpler than you think. "An overriding principle at Marriott is that how we run an outsourced project and how we run an insourced project is the same," says Howard Melnick, senior vice president of information resources application services.
The Bethesda, Md.-based hotel management company has developed a set of project management processes to assign and track all project tasks and standardize metrics and reporting, regardless of who does the actual work.
A case in point is OCEANS (One Corporate Enterprise Advanced New-world System), a multiyear, multi-million-dollar project to transform Marriott's long-standing practice of managing finance and accounting processes at the hotel level. The multiphased initiative will ultimately deliver a single, worldwide financial overview using a unified, scalable application architecture and PeopleSoft and Oracle financial software. Accenture Ltd. provides most of the IT services.
Marriott doesn't see outsourcing as a way to cut costs or get rid of a problem. It's a way to add temporary expert staff and save time on a project like OCEANS, "where I need 100 people, but I won't need them forever," says Melnick.
Governance
Marriott's project methodology is built around accountability and governance, so an outsourced project is never farmed out and forgotten. "And it's not like we have someone just watching the outsourcer work," Melnick says. "We are ultimately accountable for the project, so to that end, we work with the outsourcer to get it done."
That collaboration starts at the top. "We have a very formal governance process," Melnick says. Governance of the OCEANS project starts with a high-level steering committee. It is made up of Melnick; Pam Murray, executive vice president and general manager of enterprise accounting services; and Paul Chiu, the Accenture partner in charge of the Marriott/Accenture relationship. "We make up the three-legged stool of governance," Melnick says. "We take that model and drive it down through the organization."
At the next level are the top project managers. Kent Petty, vice president of information resources application services, is the IT person accountable for all financial systems. Michael Cullen, vice president of finance and accounting, oversees the business component. Yutta Shelton, a partner at Accenture, manages the outsourced leg.
On a large project like OCEANS, the steering committee meets as needed but at least monthly. "And we might have to get together at 7:00 in the morning because we have an urgent issue," Melnick says.
But most issues are resolved before they get to his level. "We'll start with the project managers [of individual projects within OCEANS] and say, 'You have three business days to get this resolved.' If they can't, we bump it up a level to Kent, Michael and Yutta. If they can't get it resolved, it comes to me, Pam and Paul."
The three-legged stool is pretty close to a partnership of equals. "My focus is to ensure that we maintain the integrity of the original business case," says Cullen, the business lead. "But we work in tandem. There were times when they would meet with senior finance people and I wouldn't be there, and there were times when I met with the architecture team and they wouldn't be there."
Cullen explains how each leg of the stool works. "These initiatives are far-reaching in terms of who you need to engage," he says. "Finance touches just about every system and part of the organization. So there are dozens and dozens of people in the IT group who need to be engaged. Kent provides that."
For specific Oracle or PeopleSoft expertise, "Paul and Yutta can reach into their bench of expertise, whether for a week, a month or a year," he adds.
Cullen's role is to engage and align the finance community.
"It's pretty seamless," he says. "I judge the success of a project partly on whether, if an outsider came in, he couldn't tell the difference between a Marriott IT person, a business person and a consultant."
Culture
The apparent simplicity of the three-legged stool is deceptive. It means that an outsourced project takes just as much time and effort from IT and business management as an in-house project. And in one area -- personnel -- it takes even more.
Marriott typically chooses the outsourcer through a comprehensive, competitive request for proposals (RFP) process. Among the most important factors it considers is cultural fit. "You have to pick the partner that is culturally aligned with your organization," Cullen says.
That goes for the individuals as well as the company as a whole. "We approve all the team leads, and we interview all the key people," Melnick says. "Although everyone they may submit may be competent, the chemistry is also important."
The result of this attention to personnel upfront is long-term relationships with individuals that sometimes transcend specific projects. For example, as an Accenture employee, Shelton has been working with Marriott for years. "We get a really good cultural fit, and we get continuity as well because we're not retraining people," Melnick explains.
"We're looking to create a strategic relationship [with the outsourcer], not a one-off transaction. We hope this is a win for both parties. It could be a multiple-year relationship, so you think about things in a longer context -- much different than if it were one transaction."
Once an outsourcer is engaged, Marriott spends time on team-building. Many of the OCEANS team members recall a team-building exercise for an earlier project with Accenture. They all went to Annapolis, Md., where mixed crews of IT, business and Accenture people were given small sailboats. But it wasn't a race; the goal was to get all the boats to cross the finish line at the same time. "Seven years later, people still remember it," Melnick says. "It created a sense of unity around a common set of goals. It doesn't really help me to say, 'Great news: Marriott is delivering on all their commitments, but the outsourcer isn't.' "
How closely do the Marriott project managers work with the outsourcer? "I know Yutta's kids' names and birthdays," says Petty, the IT lead. "There's quite a bit of interaction. I've had two meetings with her today already."
Shelton says Marriott's skin-in-the-game approach makes a big difference. "Having the same core values and the same degree of accountability at all levels of all of the organizations is key," she explains.
Accountability
Marriott's integrated view of the outsourcer's role eschews the conventional wisdom of budgeting x percent of a project's funds for outsourcer management. "We don't think of it as a straight percentage," Melnick says. "We think of it more as, 'Do we have the right roles covered?' "
Having the roles covered is shorthand for what's at the heart of Marriott's project management process: accountability. The company's understanding of what accountability means and its processes to ensure it allow the outsourcer to be integrated seamlessly into the project.
Accountability starts with an end-to-end project plan from business case to postmortem, and the outsourcer is intimately involved. "You need to bring in the outsourcer as early as you can to help build out the project plan," Melnick says. That plan includes components from technology to training and change management, "because you could have the technology work perfectly and not get the benefits," he adds.
Then the planners dive down into specific tasks where accountability is assigned, confirmed and monitored through a simple spreadsheet called the RACI (short for "responsible, accountable, consult, inform") document. Marriott sees those as the key roles in any project. In the course of planning, Petty, Cullen and Shelton consider each task and determine who will ultimately be accountable for getting it done, who will be responsible for actually doing it, who must be consulted along the way and who needs to be informed about it. This prevents internecine squabbling and finger-pointing and makes it far less likely that toes will be stepped on or that tasks will slip in the course of the work. "It's a way of thinking," Melnick says. "We're used to working in this way, and it clears up a lot of misunderstandings."
Standards
Once the tasks begin, Marriott's proc-esses and methodologies require that no matter who does what, it will all be done to the same standards. Melnick calls this "one of the key components of our success. You have the same mechanisms for how you report, how you manage the project, how you measure success," he says.
"We manage by our metrics; we live and die by our numbers," Petty adds.
Having strong methodologies heads off a common problem with outsourcing, says John Whitridge, vice president of information resources enterprise architecture at Marriott. "If this methodology didn't exist, when you bring in someone from the outside, they would bring their own. But because this is so institutionalized, there's no vacuum to fill."
The result: "When you manage projects, it's a lot more consistent," he says.
One of those methodologies is earned value accounting. Marriott breaks down internal and outsourced projects into manageable chunks and does regular earned-value assessments. When an assessment shows slippage, the project managers determine what has changed, why and how they can make a course correction.
All Marriott projects also use identical metrics and reporting vehicles, such as scorecards. "We have that consistent management, project after project," Petty says. "I don't have to figure out which tool I'm using for this project, which methodology is prescribed. Whether the project is in the finance group, the HR group or the sales group, it's consistent across the company."
That consistency is largely thanks to Toni McDermott, vice president of enterprise architecture process and security domains, who designs the training and processes that enable consistent application development. "It's all about standard, repeatable processes," she says. "We wanted to provide better customer service, be more efficient, deliver a similar customer experience, deliver on time on budget and hit quality."
To do that, her group developed a tool kit that, through standard terminology, processes and training, has changed the project management culture. "We wanted something that would work on a small project and a large project, insourced and outsourced, custom or [commercial off-the-shelf]. So it has a lot of flexibility, but between the language and the templates and standards, it's given us a way to communicate across the organization," she says. "And having these templates really speeds things up."
The people on the front lines of project management say Marriott's three-legged-stool approach works. "I've been in this type of role for 10 years, and in the first half of that time, we didn't use this model," Cullen says. "There's a significant difference in what I experience."
While the relationship between IT and the business has always been strong, he says, "the difference is how we view the outsourcer: They're more than a vendor; they're a partner. Their success is our success. If you view them as a vendor and you try to manage margins, it's a different mentality.
"Having the three-legged stool brings deep subject-matter expertise and the deep relationships required to engage the appropriate stakeholders," he says. "The combination is critical."
Accenture's Shelton agrees. "Once we start the race, there is only one color jersey," she says. "If somebody falls, we pick him up and keep on going. We all have to cross the finish line to win."
Sidebar
Prologue to a successful outsourcing effort
Mark Jeffery, associate professor of technology at the Kellogg School of Management at Northwestern University, says Marriott is doing lots of things right in how it manages outsourced projects. He says, however, that for less-savvy companies, "the seeds of failure are sown early."
"When I think about managing outsourcers," Jeffery says, "most of the problems are because the contract wasn't well written in the first place. You have to realize that the contract is the relationship."
Here are some points to consider to ensure that you get off to a good start:
-- A wide variation of bids on your outsourcing RFP indicates that the bidders don't agree on what your proposal requires. Rework your proposal, because the requirements aren't clear.
-- In the contract, specify the kind and quality of the people needed and note that you will interview and approve key people.
-- Choosing the outsourcer before you negotiate the contract will leave you with no leverage. Negotiate with the top two companies vying for the job, and then choose one.
-- You should design every project to be measured. Clearly specify deliverables, how you will measure them and how the outsourcer will be paid.
-- Fixed-price contracts work well when the outsourcer has done similar jobs before. Groundbreaking projects, however, may require many changes along the way. If the outsourcer feels financially squeezed, it may take its best people off the project and quality could suffer. In that kind of project, a cost-plus payment arrangement makes more sense.
Sidebar
Sharpening your outsourcing skill set
What kinds of skills are needed to manage an outsourced project?
"Nothing dramatically changes, but I think everything ratchets up a step," says Howard Melnick, senior vice president of information resources application services at Marriott International. He and IT project lead Kent Petty highlight three areas where managers of outsourced projects need to be a step above their peers.
Communication: "To influence someone remotely is different than when you're sitting right here and drawing them a picture," Petty says. "It gets back to trust and doing what you said you were going to do. You need a project manager who doesn't have to have everyone under his thumb to influence them and get the work done."
Cultural sensitivity: "You need to not only understand the cultural differences between the two organizations, but also cultural differences around the world," Melnick says.
But more mundane differences are also important -- such as those between Marriott's Bethesda, Md., headquarters and the Accenture team's home base in Atlanta, Petty says. "It's as simple as knowing that Marriott has holidays that Accenture may not have. It's knowing that you can't read body language on the phone, knowing that traffic patterns are different in Atlanta so sometimes they're late or we're late for a call. You need to consider all that and be flexible."
Business know-how: Technical skills are a given, Petty says, "but we need a certain amount of business acumen. The business leadership here doesn't have to understand what I'm doing, but I have to understand what they're doing and why -- and the downstream and upstream impacts."