The research found that well managed outsourcing arrangements
based on mutual trust rather than punitive service level agreements
can create a 20%–40% difference on service, quality, cost and other
performance indicators.
“Power-based relationships are poor substitutes for trust-based
partnerships given the high transaction costs of monitoring and
imposing sanctions and the limited goals that can be pursued by
both parties,” warned Andrew de Cleyn, senior vice president,
global service delivery at LogicaCMG.
“Significantly, none of the organisations in the study cited a
good contract as the key factor. Good relationship management
techniques, such as flexible working arrangements, willingness to
change, and frequent and effective communication, were however
regularly highlighted,” he added.
The report, The Power of Relationships, suggests that
companies should agree a relationship charter with their
outsourcing partner that sets a benchmark for behaviour, and that
regular health checks, balanced scorecards and senior executive
dashboards for the customer are introduced as mechanisms for
monitoring success.
Professor Leslie Willcocks from Warwick Business School,
co-author of the report, described ignoring the value of properly
managed outsourcing relationships as “tantamount to corporate
negligence.”
“Real trust is not naïve,” he said. “It comes from planning, is
steered by the right people, structures, processes and measurement,
and is earned from performance. It is clear that relationships are
now themselves strategic assets and demand on-going senior
executive investment and attention commensurate with their
importance.”
The key point is that successful relationships do not happen by
accident, said Professor Willcocks. Overall strategic business
intention must determine the nature of the relationship and the
contract. A detailed design is essential to build effective
relationships throughout the lifecycle of the deal. This determines
the key underlying drivers of behaviour and whether power-based or
trust-based relationships emerge.
An important element of successful outsourcing relationships is
to ensure that the right people are in place to make them work,
finds the study. It identifies a series of personality types on the
client and supplier side, who can make or break a contract.
Professor Willcocks said his study found a number of outsourcing
contracts where adversarial behaviour, inexperience or lack of
confidence led to the demise of a relationship. "Again, it is the
responsibility of the client senior management team to ensure that
the right people are managing the relationship," he said. "It is
also vital that pre-planning work outlines the scope of engagement
and that everyone is clear on roles, responsibilities and ownership
of tasks.”
