How Do You Turn An Outsource Relationship Into a True Partnership?

How Do You Turn An Outsource Relationship Into a True Partnership?

[A question recently posted in SSON’s LinkedIn group elicits passionate responses.]

We’ve recently seen a number of SSOs that have partnered with outsource providers go through a form of transition whereby the focus is now less on achieving measures, targets, and contractual commitments and instead is about working in partnership to achieve good outcomes. Barbara Collins, Business Change Manager at Zurich Insurance Company, recently asked SSON's LinkedIn group for tips on managing this transition.

An excellent response came from Jan Klose, HR Director at Unilever, who reminded us that the service provider/customer relationship is just like any other "real" relationship between people. What's important to understand, he says, is that not all expectations can be met upfront. And although the dealmakers themselves may know this, the service recipients [end users] may not.

Jan says that a proper change management approach and "transparent and open dialogue" will support a positive outcome. The best outcomes, however, are achieved where there are joint targets. Integrating the other party into tactical planning is a step in the right direction; so is trusting in a jointly supported governance framework that supports quick decision-making and covers end-to-end processes.

The issue with KPIs is that they don't necessarily move with the times, Barbara responds. She suggests a scale of KPIs that could flex, depending on the current environment and need. Perhaps more trust could be offered the provider allowing them some wiggle room on KPIs. What tends to get in the way, everyone agrees, is the need to hit personal targets [that are linked to bonuses, for example]. "If the way both teams are managed and rewarded is different," Barbara asks, "will we ever be able to truly work in partnership with each other?"

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One provider makes the point that treating an outsourcer as a "commodity" means the relationship takes on a negative rather than collaborative dynamic. Another points out that SLAs are not a one-sided penalty program but can and should work both ways.

Hartmut Jaeger, a sourcing advisor, emphasizes that managing an outsourcing relationship goes beyond technical or commercial KPIs. The quality of this relationship is closely linked to the value of the outsourcing deal, he reminds us. As such, it's important that, throughout the lifecycle of the relationship, value be tracked and recognized.

Perhaps, more fundamentally, it comes back to what Jan Klose calls the "is-it-an-outsourcing-service-or-a-product" question. Outsourcing a standardized product does not require a huge amount of cultural alignment, he concedes. But anything that is more sensitive, like a customer facing HR process, will require more finesse. In other words: "The nature of the outsourcing product influences the degree of cultural alignment required".

Liz Ditchburn, Relationship Leader at Kimberly-Clark, shares a few tips with the group that include involving the outsourcing leader in the internal leadership team and giving them a voice; focusing on goals instead of contracts; and having a safe "go to" person whose job is to resolve issues.

The downside to neglecting this relationship is, as Unni Krishnan points out, an obsession with KPIs and commercials and "too much finger-pointing". It is better to focus on value-add," he says.

Without question, the solution hinges on a shift in mindset. One that Malcolm Norquoy perhaps describes best as a "shared risk and reward" approach. Remember that outsourcing does not mean renouncing ownership or responsibility, he reminds the group. "The outsourcer is integral part of the customer not a bolt on addition".

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