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Outsource magazine: thought-leadership and outsourcing strategy | February 28, 2015

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All in the Genes?

All in the Genes?

This article originally appeared in Outsource Magazine Issue #23 Spring 2011

The relationship between vendor and end-user can be incredibly complex – but, like DNA, is made up of a small number of critical components. So what are these and how can both parties ensure they are leveraged optimally?

We understand that DNA contains the genetic instructions used in the development and functioning of all living organisms. We also understand the genetics that reside in each of us determine the way we behave during our life span. So how do you tell us apart if you happen to meet someone for the first time and do not know their genetic makeup? If it’s a meeting at work or travelling on public transport then our instincts tell us to glance around, observe people’s faces and make profile judgements about their backgrounds, prosperity, strengths and weaknesses. That image profile then becomes our reality
– until something changes it. 

So what has this got to do with an outsource relationship, I hear you ask. Well, the common denominator is that a relationship consists of those self-same people. People in a relationship, from the customer and the vendor side, both play the part of observing or being observed, and subsequent image profiles are formed. This level of scrutiny will often occur within one of the organisations if it appears that the notes being played by the other are out of tune with their own. So in reality, even though there is no physical DNA to the relationship, there are people who from the outset will determine how well your relationship performs.

If you’re lucky, in today’s outsource world, the average relationship will perform some form of assessment on how well that relationship is performing. This may be the customer running a scorecard exercise or end-user survey; or the vendor running their own company survey on customer satisfaction. However, each time you do this it can be a costly exercise so it needs to be right! It is important that this investment of time and resource enables you to fully understand the makeup of your relationship both internally and externally.

Successful relationships are built around one key factor: trust. In this context, this means total reliance on individuals to perform tasks, to the quality standards defined in the contract, to ultimately achieve your business and functional goals. When you achieve high trust then people become motivated to go the extra mile and often deliver innovative improvements that yield returns above expectation. When this occurs you also satisfy the people who observe the value factors behind your relationship. If you do not have a high level of trust then your relationship is built purely on sustaining service levels from one month to the next. It’s what we describe as a mechanical relationship and delivers only on what we must do rather than what we can do. Like all things mechanical they tend to break at some time and repairs can be costly.

Relationship Observers and Observed Functions

So cost-avoidance and building trust into your relationship (across both parties) is vitally important – but how do you get there? Well to do this you need first to get to grips with the elements of your relationship and understand who the observers are and what needs to be observed. Your observer list will be based on business hierarchy and would include the Executive End User sponsors who are receiving the service, as well as the Relationship Sponsors from both parties who are accountable for the performance of the relationship. The observed lists are created from the functional people who deliver the service as well as the commercial contract with its associated schedules and terms.

Relationship Indicators

As well as understanding the hierarchical and functional positions of the parties involved it is also important for outsource relationships today to have clear vision on what are considered as the performance indicators of the relationship. These include:

Relationship Drivers – to understand how the relationship is performing against subjects that are regarded as key differentiators. Areas such as: innovation; pricing; risk; invoicing and payments; new business; incentives and executive interaction.

Quality – to understand the Key Quality Performance Indicators of the relationship such as: measurements of people; delivery; new products and services; contractual obligations; financial processes; issue management and reporting.

Cost-Efficiency – to understand the methods used to control costs. Covering price reviews; value reporting, price measurement techniques, pass through charges, the levels of SLAs and their respective boundaries.

People Team Skills

Commitment & Drive – to understand the focus placed on the customer; the willingness to learn; the pride taken to achieve results; the personal sacrifices made to deliver the strategic objectives of the business and the overall value placed behind the relationship.

Communication & Influencing – to understand how effective the channels of communication are; the clear flow of information; the ability to challenge and present; the choice of communication used; timely and accurate information as well as active listening skills.

Knowledge & Experience – to understand the experience of both parties’ engagement and commercial teams on decisions made; appropriate solutions provided; how issues are resolved, the overall results achieved and the level of interaction experienced.

Planning & Organisation – to understand how the parties’ commercial and operational resources are being managed; availability of relevant information and management of risk and resources.

Management Skills – to understand the management techniques of the Vendor Account Manager; in terms of the positive attitude shown, the motivation to succeed, the effectiveness of teams and new resources, the respect from others, the support and practical guidance shown, the ownership of failures and ensuring continuous improvement by lessons learnt.

Responsibility – to understand how effective the Contract Schedules, Terms and Conditions and Executive and Commercial Governance terms are and how they are fulfilled by each party.

In conclusion, against a background of substantial investment and the numerous risks that pose a threat to any engagement, vendors and customers now recognise the importance of utilising effective, industry-relevant measurement techniques to clearly quantify a relationship. This DNA approach can demonstrate, back to each respective business, the potential benefits and returns that can be realised within an outsource relationship if they are understood and acted upon.

Picture: Shutterstock