5 Steps to a Successful Outsourcing Partnership
5 Steps to a Successful Outsourcing Partnership
5 Steps to a Successful Outsourcing Partnership
A service provider recently shared a story with me that I’ve heard many times. The provider has had a ten-year relationship with a client to perform all their real estate and facilities management services across a global portfolio and the contract was coming up for renewal.
The service provider was confident the contract renewal was a slam dunk. Why? Performance was strong, the scorecard was green, and the team enjoyed a positive working relationship with the client. So, when they heard the client intended to go to the market seeking a competitive bidding process rather than renewing the contract, they were blindsided. The explanation was that despite the green scorecard, there was dissatisfaction with the service provider’s performance.
The service provider was perplexed and the client was frustrated that the provider didn’t have a clue about their dissatisfaction. So, what happened? Where was the disconnect? How did the relationship breakdown and how could it have been avoided? Can this relationship be saved?
The answers can be found in governance, something that everyone knows is vital, but that is also difficult to establish, implement and operate consistently over the long-term. This is precisely where the relationship broke down.
Governance is the framework of managing people, processes, tools, and infrastructure that enables an organization to preserve and achieve the intent of an outsourcing effort. Often, a governance structure is developed at the outset of a relationship, then rarely reviewed again through the duration of the contract. Generally, it has limited flexibility, and is often viewed as a system focused on compliance and service provider performance rather than collaboration, regular communication, innovation, or improved outcomes.
There is a better way. What if governance is structured as a collaborative, win-win framework for all the parties involved? What if the goal is a flexible, transparent, and adaptable relationship that enables a results-oriented operation?
Such a relationship requires a governance structure that includes five elements that align companies and their service providers around common goals and expected outcomes:
- Trust
- Open Communication
- Shared Commitment
- Outcomes-based Performance
- Accountability
The Foundation of Trust
Building a foundation of trust begins at the onset of a sourcing initiative and must flow through every aspect of the relationship; a flexible contractual framework, a transparent commercial model that aligns performance with profitability, clearly established roles and responsibilities and well-defined processes. This not only creates confidence in the service provider’s ability to perform, but also releases the company from tactical oversight: it is able to go back to focusing on the core business. Building trust relies on good two-way communication and fact-based performance reviews.
Open Communication
Candor and healthy conflict are essential to identifying and resolving issues quickly. Ensure that communication is bidirectional and focused on facts, not subjectivity. Companies and their service providers should set the tone and cadence of communication early in the process so that as misunderstandings, conflicts and discrepancies arise, they can be dealt with quickly. When communication is collaborative rather than directive, it allows issues to be addressed immediately and openly. When an ongoing dialogue is maintained, a clear understanding of desired outcomes is revealed. Misunderstandings hinder process, relationships and impact business outcomes. Open and transparent communication enables everyone to trust the process.
Shared Commitment
A shared commitment to collaborate and alignment of incentives with desired outcomes drives improved results and puts the focus on continuous improvement. Jointly develop action plans to cultivate higher levels of performance and a tighter alignment of business objectives. A shared commitment built on transparent and open communication enhances process effectiveness and allows performance issues to be identified and resolved quickly. Timely resolution of problems can also limit performance review surprises.
Outcome-Based Performance
Develop and apply performance measures that are results oriented. Set clear goals and strategic objectives and then hold delivery teams accountable for achieving them without dictating how. The service provider’s profitability should be linked to their success. Jointly develop scorecards and other tools that track progress and movement toward future targets. Be mindful to balance qualitative and quantitative metrics that provide insight into both the relationship and performance.
Accountability
A structured, unified approach with clear goals, objectives, statements of work and performance measures provides a framework of accountability. Establishing clear expectations early in the relationship ensures alignment in strategic direction and operational delivery. Accountability occurs in real time and not at a later performance review meeting. Implementing these key governance concepts elevates the relationship, allowing the parties to focus on strategic issues for improving collective performance.
No More Blindsides
Strategic partnerships develop under strong governance frameworks that are built on a foundation of trust, open communication, shared commitment, accountability and strong performance management. Organizations that lack some or all of these elements often find themselves in a competitive bidding environment at the end of a contractual term. And if these issues are not solved for, this can become a cycle. Some organizations opt to have a relationship coach to participate in the governance and performance management program. Doing so ensures that the partnership remains healthy and on course by focusing on the changing goals and objectives of both organizations.
