Partnership Management

Presented by

Kim Newman – Managing DirectorPML (Programme Management) Ltd

Partnership Management

Views of outsourcing“One of the greatest organizational and industry structure shifts of the century.” Harvard Business Review similarly ranks outsourcing on its list of top business ideas of the past 100 years Dun & Bradstreet estimates outsourcing to be a $1 trillion global market

Partnership Management

And…….“very few decisions that an executive can make have the ability to immediately change every aspect of the operations of a business – its people, processes and technologies; its financial structure; its relationship with its customers, suppliers, and shareholders the way outsourcing does”

So far so good…………….

Partnership Management

Partnership Management

Against this backdrop the topic that’s arising with increasing regularity is outsourcing failures. How often do outsourcing relationships fail? What are the reasons? What can be done to avoid these failures?

Partnership Management

There are a number of surveys that report what appears on the surface to be an alarming rate of outsourcing failures.25 percent of all firms’ reported an outsourcing relationship failure within the past two years. “Failure” was defined as the termination by the client of a contract before its expiration date for contracts that had been in place for at least one year.

Partnership Management

Why do relationships go wrong?

Partnership Management

Failure is most often due to: a disconnect between the customer’s

expectations and the perceived results

customers and providers alike need to do a better job of setting expectations at the beginning of the relationship and

executing and measuring outcomes against those expectations.

Partnership Management

Key issuesRight type of supplier relationshipRelationships vary along a continuumNot all supplier relationships are suitable for outsourcing Market like relationships Intermediate relationships Long Term Partnership

Partnership Management

Partnership Management

The typical outsourcing relationship is an “intermediate” relationship that includes the best of a market relationship (e.g., specific service levels) and a strategic relationship (e.g., building trust and a close working relationship)

Partnership Management

Adversarial – DAISY principle

“Do As I Say You”

Partnership – The term has become somewhat unpopular has it has been devalued through inappropriate action and abuse

Partnership Management

CollaborativePartnering

Behaviours Attitudes

Processes TimeMetrics

Mutual respect

Committed

Open/sharing

Trust

Focus on mutual gains

People involvement

Devolved authority

Pro active

Prevention driven

Relationship positioning

Self regulation

Frequent feedback

Shared success

Shared design

Mutual investment

Learning organisations

Team based

Single sourcing

High switching cost

Infrequent re-sourcing

Partnership Management

intentions and expectations…….Customers look forward to: quality service new thinking extraordinary responsiveness a vendor that shows both a partner-

like caring about the customer's success and an intuitive understanding of the business.

Partnership Management

The provider, in turn, hopes…….. to provide all of that and more while making a fair profit and getting

more business with this customer and others in the same industry

that they can enjoy this relationship for many years-it will be a reference account that they can proudly write and talk about for years to come.

At one time, the management of the relationship simply meant structuring the contract. Today it means much more. Defining and working toward mutually

agreed goals Creating a strong working relationship

between the firms The bottom line - both parties must

maintain a win-win approach.

Partnership Management

Partnership Management

There is no substitute for having clearly articulated explicit objectives where executives focus on the issues. The right issues include: defining the business objectives specifying the functions to be for outsourcing detailing the desired results designating who is responsible for delivery of

what by when setting the foundation for successful

relationship management

Partnership Management

It is also helpful to distinguish those things that relate to the substantive aspects of the arrangement (e.g., ensuring that the terms and conditions of the contract make sense; making sure that SLAs are tight and well constructed), from those that go to the quality of the working relationship (e.g., the extent to which trust and respect exist)

Partnership Management

Thus, the relationship begins…

Partnership Management

Making outsourcing relationships work takes a lot more than good faith and committed people, and too few such arrangements actually come anywhere near reaching their desired goalsRelationships can end up in a "value-shrinking" loop.Both seem to get stuck in negative perceptions and behaviours; find it difficult to share information; waste time on unnecessary activities; and fail to share mutual gains and responsibility for failures.

Partnership Management

Customers and providers fall into value-shrinking loops for a host of reasons and due to a myriad of challenges, yet many of those problems and challenges can be avoided - or at the very least their negative impact minimized - with a systematic focus on building and managing the working relationship

Partnership Management

Fortunately, some relationships get into a different loop, one we call "value-expanding" suppliers and customers work together for mutual benefits. Over time both parties are able to find and distribute joint gain, make more efficient use of time, structure and make wiser choices, enable continuous improvement and share both gains and failures.

Partnership Management

Customer executives need to ensure that their organizations have the ability to:systematically and repeatedly develop value-expanding relationships by focusing on building relationship management capacity at both the relationship and organizational levels.

Partnership Management

Managers who hope to gain the most from their supplier relationships understand this critical distinction and focus on both At core, it is this mindset and approach that gets customers sub-optimal relationships and, therefore, sub-optimal value from their vendors.

Partnership Management

The first step toward building value-expanding relationships is to develop an understanding of the kinds of specific relationship challenges that have the potential to derail or undermine the value of the arrangement. Different challenges exist at different phases of the relationship.

Partnership Management

Organizations that have relationship management infrastructure have a set of processes and tools designed specifically to enable it to systematically build and manage its stable of complex relationships. For an organization to claim true corporate capacity in relationship management, key enablers such as skills, incentives, organisational design and leadership messages must be in place, as well.

Partnership ManagementThe purposes of such a process are:Inclusion: ensure that all appropriate internal constituencies (decision-makers, those responsible to the relationship for delivering a customer commitment, those impacted by the decision) are included in the decision-making process in the appropriate manner (as a decision-maker, as someone to be consulted, etc.)Information: ensure that relationship managers have all necessary information prior to making a decision Communication: ensure that all decisions, and the reasoning behind those decisions, are communicated in a timely way to all appropriate parties

Partnership ManagementA Relationship Due Diligence ProcessThe purposes of such a process are:

Relationship Challenges: identify significant relationship management challenges likely to be encountered with a particular vendorRelationship Risks: assess the risks that those challenges might pose to a successful arrangementSupplier Potential: assess the capacity of the potential supplier to overcome the challenges that may ariseRelationship Mechanisms: preliminarily identify the kinds of relationship management mechanisms that the customer and supplier would need to put in place to minimize the likelihood of such challenges arising and maximize the probability of handling them successfully

Partnership ManagementA Relationship Launch Mechanism / ProcessThe purposes of the relationship launch are to:

Relationship Goals: jointly define the key characteristics of the type of working relationship necessary to achieve a successful relationship, and ensure that all have a common picture of what such a relationship would look like in actionRelationship Metrics: design metrics and tests for monitoring the aboveRelationship Mechanisms: building on the relationship due diligence process, discuss likely challenges to the relationship and design and agree to relationship management mechanisms for dealing with such.Relationship Barriers: proactively deal with any relationship barriers coming out of the negotiation phaseCommunication Plan: jointly develop a communication plan for how all of the above information will be communicated out to relevant parties

Partnership ManagementOn-Going Internal Alignment Process

Without the "buy-in," understanding, and acceptance of key internal constituents (e.g., executives, internal individuals responsible for delivering against commitments, regional offices whose markets are impacted by a decision) on e.g., the goals of a particular relationship, the overall need for the relationship, the reasoning for why the supplier was chosen, the trade-offs made, and the arrangement's implications, barriers to the effective implementation of a decision often arise. These barriers make it quite difficult for the relationship to meet its goals, fulfil its commitments, and meet expectations.

Partnership ManagementStandard Conflict Management Practices and ToolsThe purposes of such a process are to encourage the following:

Working Together: provide a way for those involved in the conflict to collaboratively work together to reach resolutionDiagnose: enable the parties to search, together, for what might be the underlying or root causes of the problemJoint Contribution: help the disputants to look, from a systems perspective, for what role each of them and / or their organizations are playing in creating the problemLegitimacy: ensure that any resolution is one that both parties understand and can accept as being "on the merits" Collaborative escalation: when unable to reach agreement, provide a way for the parties to escalate in a way that is not damaging to the relationshipAggregate: track conflict so that recurrent or systemic problems can be identified and proactively dealt with

Partnership ManagementA Standard Relationship Audit ProcessThe purposes of such a process are to:

Evaluate: evaluate the performance of the relationship by monitoring: (i) the substantive value created and distributed to both sides of the arrangement; (ii) the quality of the working relationshipAdjust: identify ways the management of the partnership needs to be adjusted so as to achieve previously defined goalsSurface Breakdowns: ensure that inevitable breakdowns in communication, misperceptions, and conflict are easily and regularly surfaced and constructively addressedFind Value: uncover new opportunities to expand the scope and/or shift the focus of the relationshipBest Practices: identify effective relationship management practices and tools to share and implement on other relationshipsLearning: provide the basis upon which an organization can look across all of its relationships and determine where it is doing well at managing its relationships, where it is doing less well, and why

Partnership Management

Conclusion - the way forward……

Partnership ManagementSome of the keys to avoiding failures are to:

Approach the relationship as a strategic investment, not as a purchasing decision.

Make the investment to truly understand and align the interests of both parties.

Establish an objective, measurable scorecard in advance and use it as a cornerstone of the management process.

Define the process for escalating problems and negotiating changes and make them part of the regular, ongoing management of the relationship.

Put experienced people in place to manage the relationship—people who have the personal, professional and economic incentives to make it work.