Enabling Effective Outsourcing Relationships

Outsourcing on a significant scale requires effective governance and relationship management. Without it, buyers fail to achieve the value they sought, and providers cannot be profitable.

Effective outsourcing relationship management requires effort at multiple levels. New processes are needed for communicating, making decisions, resolving conflict, monitoring performance effectively and managing the contract and financials of the deal.

New metrics that help the parties to assess what really matters to them—not just what is easy to measure—must be defined and agreed upon. Individuals must acquire new relationship management skills in addition to subject-matter expertise, exhibit new behaviors, and make some significant changes in mindset and assumptions.

Employees charged with working with the provider have to be able to shift from accomplishing results by directly managing the team doing the work, to accomplishing results by managing the relationship with the provider.

Most buyer-organizations staff their governance teams with subject matter experts who have deep functional knowledge of the areas being outsourced. Unfortunately, it is just these kinds of individuals—those who hold the work near and dear—who often have the most difficulty shifting from a “do the work” mindset to a “manage the relationship” mindset.

Asking individuals to take on new roles or to exhibit new behaviors in a new context or environment is a recipe for failure if they are not provided with appropriate training and coaching to help them learn those behaviors.

Depending on the realities of a particular buyer-provider environment and the kind of relationship that is envisioned, it may be more or less important to equip individuals to deal with some critical relationship dynamics and exhibit some new behaviors.

There will be some differences in terms of which individuals in which roles will need more or fewer of these skills, but generally, these skills are important to most individuals charged with managing outsourcing relationships.

Undertaking a new role can be a daunting task, particularly if the individuals involved lack a shared picture of the processes they should follow; or adequate visibility across the activities and touch points between the parties; or the ability to capture and apply lessons as they learn them.

The more complex the relationship and the more distributed the key individuals, the more the lack of coordination can get in the way of effective collaboration.

Organizations need people with the right behavioral skills and an appropriate set of tools to manage the complex web of relationships and interactions that comprise outsourcing arrangements.

Many outsourcing buyers seem to be putting greater emphasis on enabling those individuals who manage their relationships with a new set of skills.

As outsourcing continues to mature and companies become ever-more systematic and savvy about how they manage their relationships, we believe more organizations will take further steps to “re-skill” their outsourcing relationship managers.

Sara Enlow is a consultant with Vantage Partners, where she is a member of the Outsourcing Practice. At Vantage, Sara focuses on helping partners (in alliances, outsourcing, and other supply arrangements), better manage their relationships.