Whole Business Thinking Makes the Relationship Work

From the outset of the contract, most of Bareau’s team recognized that they had not shed management responsibility as conventional outsourcing wisdom promises; they had simply traded one type of management challenge for another. Bareau admitted that some things had not gone as well as planned. Initially, both partners acted as if a traditional relationship could deliver the results they expected. Bareau summarized: ‘‘We needed more joint working and joint strategizing, and less passing parcels back and forth. It got very antagonistic in places until we realized that what we were trying to do was ensure success for both of us. Increasingly we realized that everything we do must be holistic, including our business model. We can’t say, ‘We have ours and you have yours.’’’

NS&I and Newport Systems executives began to exercise their joint governance process to actively manage the relationship (see Exhibit 1.8). This included an annual meeting between the Treasury Minister and the head of Newport, monthly board meetings that involved the CEOs of both Newport and NS&I, monthly business management meetings, and meetings of seven or eight task-oriented boards as needed. Owen explained, ‘‘These are all joint organizations focused on ‘whole business thinking.’ Every issue has a home.’’

Exhibit 1.8: Governance of the contract.

Clear objectives and aligned goals were critical to success, but flexibility was as well. The contract established NS&I’s ability to launch a certain number of new products each year for no additional fee to Newport Systems. But the NS&I team learned that they could set back the service-level achievements by defining complex products that were diffi-cult to administer. ‘‘We are contractually cushioned from the consequences of our actions,’’ Owen explained. ‘‘If we introduce a new product that’s great for customers but an operational nightmare, [Newport Systems] pays the price. We learned to sit down together and work through the implications so we could make the right decision from a whole of business perspective.’’

In some ways, Owen asserted, NS&I’s task was easier than functional outsourcing. ‘‘We were business oriented. We described the kind of business we wanted to be and the outputs we were after. You don’t need reams of technical parameters and excruciatingly detailed definitions of business interfaces with this kind of deal. And we didn’t have to be constrained by what was doable. We just sketched out what we wanted.’’ Bareau attributed their overall success to the partners’ commitment, saying, ‘‘This was a seminal contract for Newport. We got their absolute, top-level commitment. Without that, we might have found ourselves with much bigger problems. It carries you through the rocky places.’’ Emphasizing the senior team’s strong commitment, another executive said simply, ‘‘We had our names all over it.’’