The outsourcing business is primarily a ‘relationship’ business. Building agile and successful relationships with service providers is crucial if an organization is to stand any chance of successfully realizing the business benefits promised by their outsourcing arrangements.
Even the world’s best and most detailed contracts will not be able to describe all the responsibilities or foresee all of the future changes throughout the life of the contract. The cornerstone of maximizing business benefits through an outsourcing agreement is ensuring that the relationship between the service provider and client is consciously designed, proactively supported and jointly managed.
These Top 5 tips will help you focus on how to achieve successful service provider relationships.
1. Create and maintain consistent communications in support of strong, trusting relationships. Create a robust, quality communication system that clearly defines decision rights and proactively address issues, challenges and concerns. To be successful the environment should enable empowerment, collaborative working and openness.
Be sure to appoint key client and service provider leaders to drive the relationship process and communicate to stakeholders throughout the relationship in support of your organizational mission and objectives.
2. Drive relationship effectiveness by increasing competencies through effective training, organizational learning and development. As with every healthy relationship, the ability to learn, grow and evolve is critical — especially in a marketplace that is constantly changing. Creating an environment of continual learning and improvement will support the development of effective service provider relationships. Relationship requirements and capabilities should be addressed at the strategy phase and should consider how best to establish effective people interactions that go beyond the contract.
3. Build trust-based governance foundations that provide a framework for addressing opportunities and challenges over the life of the contract. Relationships inevitably encounter issues, obstacles and challenges as well as opportunities. Establish robust governance processes and forums early on to increase and maintain the level of trust between organizations. As part of the process and forum framework, test potential issues in advance and consider how they might be avoided.
4. Identify, develop and implement effective measurements to drive the best balance of mutual behaviors and benefits. In an effective relationship the key is to manage by fact rather than perception, as the latter leads to mistrust and ongoing conflict. Service reporting should be considered an ongoing process focusing on the ability to slice and dice information for decision making purposes. Your reporting should also be linked to the management information system that supports the relationship and should take a “balanced scorecard” approach.
5. Proactively assess, plan and manage risks, and control objectives. The ability to assess potential risks, analyze impact and mitigate for potential issues helps all parties. Risks can come from both changes in external business, economic and environmental factors as well as internal organizational change and operational service delivery. Risk should be managed through the sourcing life cycle — taking account of strategy, negotiation, transition, management and exit (if required) — and reviewed against external and internal risks scenarios and controls as appropriate.
To learn more about how to build or improve your service provider relationships, or to find out more about how ISG can help your organization, contact us.