Award-Winning Outsourcing Relationships — Three Key Ingredients in their “Secret Sauce” | Article

Behind each award-winning global outsourcing relationship is a fascinating story of extraordinary people, excellence in service delivery, lots of sweat equity, some painful bumps in the road, a mutual willingness to constructively solve problems, and trust earned. Contracts were awarded as a result of a competitive bid, so they started with a blank recipe card. While you may not aspire to win the Outsourcing Center’s annual Outsourcing Excellence Awards for global excellence in several categories, every outsourcing relationship has the potential to be a winner. The honor of being a judge for the 2011 awards and the privilege of hearing their stories help answer, “What are the three key ingredients in their secret sauce?”

Ingredient #1: Flexibility and Willingness to Invest

In addition to being flexible, the award-winning relationships all demonstrated a willingness for service providers to invest additional expertise and even hard dollars to make things work. No nickel and diming here! Interestingly, the majority of relationships faced difficult challenges during transition or in the early days. In every case, openness and honesty on both sides combined with a genuine interest in constructive problem solving laid the foundation for an excellent relationship. And these were not insignificant issues. For example, early in year two of a five-year deal the credit crisis hit the world. The customer asked the service provider to cut their costs. Being sensitive to the commercial needs of each company, the outsourcer recognized they needed to be flexible and creative. They reduced their client’s costs by moving work to the Philippines, which was a new location for the service provider, and met the savings goals. Another similar case was during a client engagement that went through “rocky moments because of the systems integration issues.” When the going got tough, the service provider stepped up to the plate and addressed the necessary issues. They provided the resources their customer needed to do some special recovery work or redesign. In a third case, it became apparent during transition because of major constraints that were unknown during the RFP process that a large body of work was removed from the original contract. The service provider stepped up to the plate, assumed responsibility and gracefully accepted this blow.

What can be learned from these hard lessons? In every case the service provider met their customers’ needs and made the necessary investments to resolve the issues even when it meant reduced profitability. And in every case, the customer was open and honest about their issues and willing to sign-off on appropriate changes to services and the contract. No table pounding, no standoffs.

Ingredient #2: A Personal Sense of Ownership

Service providers and service delivery aren’t always perfect, which leads us to ingredient #2 – personal ownership. What I mean by personal ownership is a willingness to be held accountable for the success of the relationship and the authority to make decisions. For example, a service provider missed their SLAs for three consecutive months, triggering service credits. With many people involved from both sides, the customer and service provider “got into quite a disagreement as to the amount of the service credits and the period they covered.” Too many opinions and politics were getting in the way. Rather than letting the problem put a permanent stain on the relationship, the customer and the service provider assigned one person from each side to reach agreement about what was fair and pragmatic. This gave them a chance to understand the other party’s point of view, to explore options and to appreciate the impact of the final decision. Another example is a service provider’s Operations Manager who really took their customer’s service level expectations seriously. In this case, a third party company proved to be integral to delivering services across the customer’s footprint. The Operations Manager led the process to integrate SLA’s and now oversees total service delivery for the customer. They are now meeting service levels at no additional charge to the customer for this above-and-beyond service. There are countless examples of services failing to meet expectations or even going off the rails. What distinguishes award-winning relationships is the strong sense of ownership, accountability to make things work, and the authority to make decisions.

Ingredient #3: One team, one goal

Fundamentally, these are commercial relationships between two companies. Each one has goals and financial and quality targets they must meet in order to satisfy their own management and shareholders. Consistently these award-winning relationships quickly developed a practice of formally establishing joint annual and long-term goals. These goals generally include commitments to improving service quality, process improvement, and managing financial impact. As one service provider described it, “this is not a perfunctory exercise.” The customer’s Chief Operating Officer and the service provider’s CEO are often directly involved, including approving the joint goals and committing necessary resources. One successful relationship was built on a combination of joint goal setting and what they called “embedding leadership behaviors.” These are five key behaviors that both parties agree to model in everything they do together. Customers pragmatically and universally leveraged their service providers’ capabilities, reaping substantial financial and non-financial benefits year after year. One award-winning customer summed it up by saying that their service provider is able to “add value without adding costs.” And the benefits from the service providers’ perspective are relationships that grow over time in size and complexity, bringing them more revenue, increased profitability and highly referenceable accounts.

Conclusion

There is so much to be learned from these award-winning outsourcing relationships between industry giants. By studying successful relationships and understanding what makes them great, you can avoid common mistakes and stress. It is said that “those who don’t study history are doomed to repeat it.” If you strive for operational excellence, words like cultural fit, trust, efficiency and transparency are just words unless you invest the time and effort needed to figure out what goes into your secret sauce for outsourcing excellence.

Linda Tuck Chapman, President ONTALA Performance Solutions (www.ONTALA.com) is an expert advisor in Outsourcing, Strategic Cost Management, and Vendor Governance. You can reach Linda at (416) 452-4635 or [email protected].


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