Historically, outsourcing relationships were simpler and more straightforward. There were buyers and sellers, and the roles of each were clearly defined. Today, outsourcers and their customers operate in a more complex environment. Individual companies no longer compete against each other. Rather, networks of companies compete against one another. Within these networks, the roles of individual companies shift from one network to the next, and it is a company’s ability to manage these ever-changing roles that make successful teaming relationships.
A couple of years ago, we mapped the network of relationships PricewaterhouseCoopers has with one of our clients, not just the relationship between our client and us, but between all of the organizations serving the client and our firm. What we found is that on Monday we were co-providers with those other organizations to our client, on Tuesday we would compete against those same organizations, on Wednesday we would be partners, on Thursday we would be buying from them, and on Friday we would be selling to them. In today’s business environment, the same companies are ending up on our customer and competitor lists, and that turns the old buyer/ seller relationship on its ear. It also levels the playing field, because no matter what role and responsibility we might have in a relationship today, tomorrow the tables could surely be turned. That constant shifting of roles drives a particular set of behaviors, such as integrity, honesty and forthrightness.
Within each set of network relationships, we all have something to gain by becoming part of our client’s strategic thrust, making them more successful. One indication a network relationship is working, not just between our client and firm, but with the variety of providers within the network, is to go to a meeting with all parties and not be able to identify who comes from which organization.
In a successful network, the need to serve the client drives participants into co-dependent relationships. That doesn’t happen overnight. Successful co-dependent relationships come from trust, credibility, and getting to know one another. Those things can’t be mandated. They evolve. We can’t walk into a relationship and, on day one, achieve magically what we’ve achieved over years in another relationship. However, we can achieve it faster because of the lessons we’ve learned working in other network relationships.
For example, we hold formal team-building sessions and create cross-organizational teams to solve work issues, challenges and improve processes. We also reinforce the importance of social relationships with other, less formal activities. We understand the value of sharing information and are at a point where we are now sharing what was once viewed as confidential at all levels throughout our network relationships. This creates a certain forthrightness in our relationships and compels other organizations to share information with us, which results in better service for our clients.
From The Ground Up
Grassroots support is also important. While it is important to have buy-in at the top, the real strength in co-dependent relationships does not come from one or two individuals, but from working together at all levels of the organization. In any relationship, people from both sides of the table change over time. When a relationship is created at all levels of the organization, one or two individuals can go away, but the relationship remains.
A New Management Style
Network organizations require a different management style. In addition to traditional management challenges, managing network relationships requires managing the culture of each organization in the context of the network. The result is a new culture belonging uniquely to the network and reflecting each organization’s special contribution. The individuals responsible for managing network relationships must be flexible, adaptable, able to understand and manage cultural differences, and comfortable working in a dynamic business environment.
Governance structures also shift from network to network. By default, the client is usually the governing body, but that is not always the best choice. Sometimes one of the organizations providing services to the network should govern the network, or a portion of the network, particularly when the work is far from the competency of the client’s organization. Again, governing a network from outside a client’s organization requires a new style, different from the traditional role of management. The best way to learn this new style in today’s world is through the experience of managing network relationships.
The White Spaces of the Organization
In most organizations, the work within the boundaries of any organizational box is generally well understood and easy to measure. It is the space between the boxes, the white space of the organization, that requires the most attention and generally costs the most to manage. This is especially true when different organizations represent different boxes, as they do in multi-organizational environments like network relationships.
Although a great deal of effort is usually put into defining what each party will do in a relationship, our inability to know precisely what the future holds makes this difficult. As a result, and by definition, most relationships are not completely defined when they begin, and making them complete later on requires defining relationships flexibly and with appropriate economic incentives. Flexible relationships that include appropriate economic incentives ensure that critical activities will not fall into the white spaces of the organization.
The Evolving Environment
Unquestionably, the world is evolving and accepting network relationships far more than in the past. The benefits are too large to ignore and the alternatives too grave to accept.† The challenge in the coming years will be to look past the traditional buyer/seller relationships we know so well, expand relationships to include broader work processes, accept the complexity of these new forms and learn to build teams with our clients and competitors alike, in order to serve our clients better.
Ray Bayley leads two major outsourcing relationships for PricewaterhouseCoopers and specializes in outsourcing highly specialized, mission critical business processes. He is the architect of a unique approach to business process outsourcing that focuses on creating shareholder value for clients in new market-driven environments.
Lessons from the Outsourcing Primer
- Multi-organizational relationships create complex webs of co-dependent business relationships.
- Shifting roles and responsibilities from one set of relationships to another drives healthy behaviors like integrity and honesty.
- Trust is critical but cannot be mandated; it evolves.
- Multi-organizational management requires flexibility, adaptability and comfort with a dynamic environment.
- Economic incentives and flexibility in contracting arrangements can alleviate the difficulties of managing unanticipated needs and a changing environment.