The evidence continues to suggest that many outsourcing relationships get into trouble almost as soon as they get out of the gate. The amount of value destroyed, for both sides, by disagreements over scope boundaries, accountability for disappointed expectations, performance failures, and the ineffectiveness of change management, is shocking. The amount of disruption to the business occasioned by attempts at remediation that turn instead into full-blown conflict and animosity should be at least a bit embarrassing to those of us who have worked in this area for the last 20 years. The lessons and the resources to tackle these problems are there, yet as an industry, we continue to fail to make use of them.
At a time when outsourcing as a business model is once again under attack in the media, both buyers and providers face an even greater obligation to fix what ails our relationships. The key is to go back to the basics and understand how some of the assumptions we make (and fail to clarify) sow the seeds of the problems we face during transition and implementation. From the start of the negotiation, through the discussions about the governance model, to the planning for transition, and even beyond that into steady state, the assumptions we make drive our behavior. We interpret their actions through the filters of our own assumptions. We then react to our interpretation of their behavior and their intentions, and they in turn assess what we have done in light of their own assumptions and understandings. When assumptions are mistaken – either by being overly optimistic, unnecessarily zero-sum, or simply misunderstood by the other side – we start down a path that only gets worse.
Consider the chart below, illustrating some of the assumptions buyers and providers make, and how those assumptions lead us to make choices that worsen, rather than improve, stressed relationships.
Potentially Debilitating Assumptions
Behaviors that often follow
Providers have an incentive to cut corners, and it’s up to customers to catch them.
Customers demand lots of reporting and impose penalties for failures to meet thresholds. Providers respond by limiting SLAs to objective, easily quantifiable indicators, and to only those things entirely within their control.
Metrics don’t measure what matters. Dashboard is green, but customer is red.
If we get the details right in the contract, we shouldn’t have any significant problems later.
Lengthy negotiations, many exhibits, but little attention paid to problem-solving capabilities on the front lines.
Conflicts arise, negative attributions are made, but there is no low-cost/low-risk way to talk through the problem and find an answer.
Providers will try to upsell, often going directly to the business.
Customers limit direct communications between providers and business units.
Service delivery and end user stakeholders don’t fully understand each other or what value means to the other.
Providers will never innovate unless they are held accountable for doing so by the customer.
Customers ask for “commitments to innovate.” Providers give them. Customers fail to recognize their own part in enabling innovation.
Nothing useful happens.
If you change the process, people will just have to adapt.
Little attention or investment in change management.
Users break the process, fail to adopt self-service, or otherwise resist change.
The assumptions in the left-most columns, and many more like them, turn out to be pretty well embedded in how people think about the nature of the buyer-provider relationship. It doesn’t typically work just to tell someone not to believe those things, or not to act on those beliefs. In order to change behavior and get people to make different choices (and thus to produce different outcomes) you have to help them recognize their embedded assumptions. You have to facilitate a discussion about how they might test whether those assumptions are valid or not, in their particular relationship, not “generally” or “often,” and if they were, what mechanisms other than the common, default behaviors, might be available for dealing with whatever challenge that fact or condition presents.
That’s a great conversation to have at the outset of a relationship, as part of an effort to design a governance organization (and to build the corresponding capabilities) well-suited to the needs of the particular relationship. The reality is that at the end of a grueling selection process and a protracted contract negotiation, few buyer-provider pairs have the energy or the patience to engage that discussion. Everyone is eager to get going, make celebratory announcements, and “get to the real work.” Fortunately, that’s not the only opportunity to visit these issues and take appropriate action.
At almost any point along the way, but typically after Transition and somewhere along the path to the relationship’s steady state, either buyer or provider can suggest taking a step back to assess the health of their working relationship, analyze the underlying causes for any gaps there are experiencing – in either the results the outsourcing relationship is producing or in how they parties are working together to achieve them – and develop a plan for addressing those gaps. Conducting such a “health check” or joint assessment and doing so collaboratively is very different from one side giving the other a “report card”; it’s very different from asking customers whether they are satisfied; and it’s very different from the kind of analysis that parties carry out while in the midst of a conflict and considering arbitration, termination, or other such remedies. (A couple of case studies illustrating how to go about structuring a health check are available here and here.)
At whatever point in the life cycle of the relationship buyers and providers might choose to engage this kind of conversation, there are a couple of more productive assumptions they should keep in mind:
Assume that each side is trying to do the right thing with respect to the problem they see and the stakeholders to whom they feel responsible. That assumption makes people a little curious, rather than angry, disappointed, or resentful. Rather than attacking behavior, it’s more productive to ask questions about what problem they are solving for, what they think is causing it, and how they think their approach would be likely to address that problem and that cause. What do they think a good outcome looks like?
Assume that each side has some “blinders” or “filters” and there are things of which each is not aware or doesn’t fully understand. Consider creating a joint buyer-provider team to collect “shared data” and work together to create a more complete picture. The process should be about improving understanding, where both sides aim to learn something (instead of prove themselves right and the other side wrong).
Assume that it is possible to improve the situation for both sides, rather than just one gaining at the expense of the other. Teams will identify a broader set of solutions, and likely identify a better one, if they conduct a real interests-based negotiation, rather than the all-too-common, zero-sum haggle between outlandish demands. Instead of trying to bluff them into giving in, try to find ways to come up with a solution that addresses their concerns as well as yours.
What we think and feel drives what we say and do. The more we can revisit and explicitly test our assumptions, and aim to shift from the rather debilitating assumptions in the table above to these more value-producing, constructive assumptions, the more likely we are to change behavior in a way that will help us truly address some of the systemic problems that have plagued the outsourcing space for far too long.