Regardless of the specific goals or implicit challenges in any type of outsourcing relationship, they all require that certain dynamics be well managed or else value will deteriorate for both parties. The following set of dynamics is illustrative of some of the problems faced by most complex outsourcing relationships:
- Agreeing on scope, deliverables, and work plans for an initiative
- Resolving a disagreement about whether something is in or out of scope
- Managing perceptions of service provider performance (from both sides of the relationship)
- Gaining the necessary alignment with internal stakeholders around a specific business requirement or action plan
- Building trust and an effective working relationship with the provider's delivery team (after the sales team has moved on)
The challenges posed by these five dynamics are of special concern in complex outsourcing arrangements and there's only so much that structure and process can do to address them. Fundamentally, they require individuals to change some of their behaviors. For example, buyers and providers often agree on service-level agreements or other types of metrics for measuring performance. Such metrics can be helpful for assessing service delivery performance, but they don't say anything about how discussions or disagreements about performance should be handled. "At first our conversations with our provider were mostly about pointing fingers. We had to step back and re-think and enable our teams with skills to be part of the solution instead of just adding to the blame," said Williams' Nancy Gustine.
Similarly, a governance model can specify an issue resolution process and an appropriate escalation path, but it doesn't tell you how two parties should engage the problem prior to escalating it. "We are all quite used to the model where buyer representatives go in and pound the table and insist on their position, and wait for the provider representatives make some appropriate counter. After some back and forth, maybe we reach a compromise neither of us is too happy with, or we escalate. We knew that in starting out five years ago to create one of the pioneering HR outsourcing relationships, we had to break out of that mold, and develop more collaborative negotiation skills," said Hugh MacDonald, VP of HR Operations and Knowledge Management for CIBC until he retired to set up his own consulting practice.
Figure 1, below (while not a comprehensive catalog by any means), should serve as a good starting point for introspection and an important dialogue among a company's leadership about how to drive the behaviors that are critical to realizing the value of an outsourcing deal.
In the next and final part of this series, I will discuss ways to implement effective change management when equipping individuals for managing the outsourcing arrangement and relationship.
- Danny Ertel, Partner at Vantage Partners