Manage the Relationship as if It Were Chinese Handcuffs

Remember Chinese handcuffs from your childhood? You stick a finger in each end of a woven tube. They go in easily, but when you try to pull them out, the tube lengthens and contracts. The harder you try to pull your fingers apart, the more stuck they become.

Transformational outsourcing relationships work like Chinese handcuffs. Once you sign the contract, you’re in. No matter how clearly you set expectations, define roles, and specify outputs, there will be disputes—some of them quite acrimonious. Most people—and executives are no exception—respond to conflict by retreating to their corners. They adopt a we/they, adversarial approach and prepare to defend their terrain. Many pull out the contract in order to beat the other side over the head. It sounds a little immature, but the situation funnels responsible individuals down this unproductive path.

A natural reaction to outsourcing I call the ‘‘miracles syndrome’’ makes this tendency even worse. Whenever executives pay for a service— even when they openly acknowledge they could not manage that service themselves—they immediately develop unrealistic expectations about what the provider can accomplish. When miracles fail to materialize, executives’ disappointment turns into recriminations, and the relationship slips into adversarial wrangling.

Leaders resist the temptation to pull back on the Chinese handcuffs. They move toward their partner, instead of away. And they coach their senior executive team to model the same kind of behavior. They open their books. They open their perspectives to appreciate the other side. They open their plans to creative joint solutions.

This kind of leadership works best when executives on both sides behave this way. But either partner can stake out and hold the high ground first. For example, a transportation services company outsourced information technology applications development and support. Executives would admit today that, during the process of negotiating the contract, those in charge gave up their objective of service improvement in order to achieve their cost reduction goals. Unfortunately, they did not communicate this shift in the value equation to the IT users in the company. When the provider took over and service responsiveness dropped—as planned—the users revolted. For an entire year, the CIO held daily meetings with the provider’s operational leadership at which he beat them up for performing exactly as he had contracted with them to do. Needless to say, the relation- ship stumbled forward on rocky footing. One day, the CIO found himself facing an urgent and difficult requirement for which he was unprepared. Hearing of the need, the provider’s account partner stepped in and offered to take care of it—for no fee. This act of rapprochement changed everything. Starting from this simple gift, the relationship grew into a trusting partnership.