Why do outsourcing initiatives fail? I believe poor change management is to blame.
Poor change management translates into:
- Slower speed of adoption
- Lower ultimate utilization
- Lower proficiency
Together, they all hurt the "return on investment" (ROI) "in an outsourcing effort and are limited to a "past focused" thinking to do the same activities better, cheaper, faster.
On the other hand, effectively managing the human side of change from a future-based approach can help you:
- Accelerate adoption
- Increase overall participation
- Improve the benefit employees realize from the change
These three things increase outsourcing ROI.
This is not just my experience. The reality is even starker. McKinsey Quarterly reported that projects that employed excellent change management delivered 143 percent of the expected ROI. Projects with poor change management only delivered 35 percent of the ROI.
The math makes the case. I believe the industry needs a mindset shift in behavior. All too often, companies reduce change management to just training and communication. In the procurement process, I've observed change management is often the first to get cut during outsourcing negotiations. What's left is transaction-based change management.
The need for strategic change management in outsourcing
Instead, companies need forward-looking strategic change management based on what a buyer and service provide can create together in the future that is far superior to what they have today. Strategic change management produces results for both the short and long term. It has a positive impact on the relationship between buyers and service providers. It helps both parties to the transaction create an outsourcing relationship while still serving the needs of their own companies.
So, how do you change the mindset to strategic change management? Here's the first step: have both parties participate in alignment planning. These sessions enable the tough conversations. They force the group to focus on the highest impact work. And they allow the leaders to address both strategy and team dynamics.
This, of course, is not easy. Stuart McGuigan, CIO of CVS Caremark, described the process well when he said, "Part of creating change involved holding two incompatible ideas in your head at the same time and somehow still functioning. Being highly responsive to our business partners' and customers' needs and creating standardized processes and technology platforms can seem like conflicting goals. But doing both is key to maximizing value."
The reality is outsourcing buyers who engage strategically clearly understand the financial impact of change work. These are the buyers who achieve top performance for their companies.
Lessons from the Outsourcing Journal:
- Outsourcing buyers who embrace strategic change management achieve top financial performance because their continuous actions accelerate adoption, increase overall participation, and improve employee benefits.
- It's a mistake to reduce change management to just training and communication or cut it during outsourcing negotiations.
- Outsourcing partners can align their goals by doing alignment planning. These sessions enable the tough conversations, force the group to focus on the highest impact work, and allow the leaders to address both strategy and team dynamics.
Laura Stone is CEO of Stone + Company, a strategic change management firm that helps leaders and their teams deliver results they can be proud of by transforming fragmented teams and/or strategies into a cohesive team with an aligned game plan for achieving superior performance and true team alignment FAST. To learn more, please visit: www.stoneandcompany.com.