Building the relationship advantage

Abstract

In trying to identify what makes for success in outsourcing, practitioners invariably highlight ‘relationships’ — but the study of how such successful relationships could be developed is quite recent, and relatively neglected.¹ Successful relationships don‘t just happen. In this chapter we show that 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 life of the deal. This determines the key underlying drivers of behavior, and whether power-based or trust-based relations emerge. Positive intervention by top management is vital to make the ‘chemistry’ work. We also point to the criticality of establishing targets. Thus a relationship values charter sets a benchmark for behavior, while regular health checks and contract card monitoring to assess the success of the relationship are crucial throughout. In practice, including relationships into a key metrics scorecard, covering also strategy, finance, and service is a significant move, signaling that an organization is willing not just to speak about how relationships are important, but monitor whether the parties enact the right behaviors to leverage those relationships.

Outsourcing contracts are agreed in concept but delivered in detail, and that’s how the relationship can break down; the devil is in the detail.

— CEO of a major supplier

We had to clean up our act … we weren…t as professional as they were.

— Senior executive, US government agency

We want them to be successful. No-one wants a failing supplier.

— COO, European Oil Company