Changing the Behavior Between Buyer and Provider

Spend Matters would like to welcome a guest post from Vantage Partners. See previous posts in this series here: Part 1, Part 2, and Part 3.

Over the course of this series of posts, I have touched upon the types of skills and behaviors that enable -- and are necessary for -- outsourcing success. In this closing piece, I will focus on the change management program to implement these new skills and behaviors.

Depending on the realities of a particular buyer-provider environment and the kind of relationship that is envisioned, it may be more or less important to equip individuals to deal with some of these relationship dynamics and exhibit these behaviors. There will generally also be some differences in terms of which individuals in which roles will need more or fewer of these skills. An effective change management program, however, should avail itself of at least these key organizational levers:

Skills training and coaching
Asking individuals to take on new roles or exhibit new behaviors in a new context or environment is a recipe for failure if they are not provided with appropriate training and coaching. In general, individuals working on the interface between the provider and the business stakeholders should receive the training necessary to round out their repertoires in negotiation and influence, joint problem solving, facilitation and alignment, and managing difficult conversations. This kind of training tends to be most effective in a live classroom with many role plays and realistic case studies. The most forward-looking organizations actually undertake this training with key individuals from the provider's delivery and account management teams to ensure they share the same vocabulary and approach to working together. "Joint training was critical for CIBC and EDS," said Hugh MacDonald, VP of HR Operations and Knowledge Management for CIBC until he retired to set up his own consulting practice. "We needed to give all of the parties working together a common methodology and vocabulary, and a common sense of how to communicate effectively with one another. That is best done through joint training."

Communications plan
A well-orchestrated plan geared to sending the right messages to those working on outsourcing relationships need not be large or complex. It does require having management think hard about the right messages to send and how they might reinforce those messages with their own behaviors. For example, messages about the need to work together with the provider to achieve key savings should be reinforced by recognizing joint achievements and milestones, and by requiring joint root cause analyses when dealing with performance problems. "Having [the buyer's CEO] open up the session and make it clear that, in his mind, outsourcing was a way of getting partners who were better than they were at these functions was huge. Everyone in the room heard the message that he wanted us to help them improve their results, not just do the same for less," said the Managing Director of a service provider invited to a joint training workshop.

Metrics
Individuals are very good at noticing what the organization measures and cares about, even when those metrics do not directly affect their compensation plan. Letting individuals know that non-financial and non-performance attributes of the relationship will be measured and reported on joint scorecards, and that management will have fairly granular visibility into the health of the partnership, tends to help individuals focus on those aspects of their interactions with the provider. There need not be many metrics, and they could include subjective, self-reported items, but their presence on scorecards speaks volumes about their importance. Some examples of such metrics include the number and types of issues that required escalation, the amount of voluntary turnover on the team, and responses to survey questions about how often they are consulted on key topics, whether they feel respected, and whether they are learning from their counterparts.

Incentive systems
How important it is to pay individuals for exhibiting particular behaviors depends on the culture of the organization and even of the particular function. What is clear is that in order to get these kinds of behaviors to take root in an organization, it is critical to remove any disincentives to the desired behaviors. If individuals are paid, for example, on the basis of the penalties applied on a provider for missing an SLA, (or on the flipside, if provider staff are compensated for generating change orders), it is going to be that much harder to get individuals to engage in good problem-solving behaviors.

Committees and processes are important structural components of proper outsourcing governance, but they alone are not enough to ensure success. Organizations need people with the right behavioral skills to manage the complex web of relationships and interactions that comprise outsourcing arrangements. To ensure that such skills are institutionalized, senior management needs to send the right messages, use good metrics, and have a proper incentive system.

- Danny Ertel, Partner at Vantage Partners

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