Own the Negotiation


In transformational outsourcing, you are not only crafting a contract, you are also establishing a relationship. Make no mistake; the contract is important. You and your partner will live by its terms and conditions for years. However, your process must have a higher aim. It must establish the principles and values that underpin a sustainable working model. Ideally, these are captured explicitly in the contract. In addition, the negotiating process sets the tone for the relationship between the partners. It establishes the way they will work together, they way they will resolve differences, and the way they will treat each other in stressful situations. The senior leaders of the organization are in the best position to keep a company grip on these priorities throughout the contracting process.

Most executives want expert assistance during this critical stage. Often they turn to lawyers, contracting experts, and outsourcing advisory companies. These companies can be quite helpful, especially when executives have little personal experience with outsourcing. Executives tell us that the relationship can run off the rails, however, if they allow the advisers to run the show. If an adviser’s role ends when the contract is struck, their management horizon could stop there, too. Some count their contributions narrowly—scoring a win only if they squeeze an extra concession out of the provider. If they have to give in on intangible, immeasurable principles to win tangible, cost-related benefits, some will. Perversely, hard bargaining that pulls most of the value of a deal onto your side of the ledger may make your initiative worse, not better. Successful outsourcing arrangements provide sustainable value because they are good for both sides.

In some cases, executives simply delegate contracting to specialists or lower-level employees in their own organization with the same unfortunate result. For example, when a major casino entertainment company decided its corporate call center needed a performance boost to support the company’s growth plans, it moved to outsourcing. Now, this is an organization that distinguishes itself by knowing its 13 million customers intimately. Many of its experienced customers call directly into the facility that they want to visit, but new customers call a general toll-free number and end up speaking to the corporate call center. This center was struggling to support 18 or 20 facilities, each of which had its own reservation system, and it was not providing the service that corporate executives expected. They made the decision to outsource.

Senior leadership delegated the process to operational managers. These folks went through the vendor selection process without getting a good grip on the leadership priorities for the initiative. As a result they chose a vendor based on cost. And for the next two years, the organization struggled to teach the provider’s employees how to hold an unscripted, interactive conversation with a customer on the telephone. Eventually, the company’s call center shadow department succeeded in getting the provider to achieve the kind of performance they needed. The accountable manager quipped, ‘‘Their people surely were cheaper than ours, but we spent a lot of time teaching them how to do our business. We sure weren’t saying ‘Boy, are we glad we outsourced this.’’’

In conventional outsourcing, delegating the negotiations has unpleasant consequences; in transformational outsourcing, the results are disastrous. Instead of building a viable business partnership that is launched in the right direction, giving too much latitude to overzealous contracting experts can create a deal that undermines the very purpose of the initiative. Senior leadership must take the transformational outsourcing helm to navigate through these tricky waters.




Outsourcing for Radical Change(c) A Bold Approach to Enterprise Transformation
Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation
ISBN: 0814472184
EAN: 2147483647
Year: 2006
Pages: 135

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