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Taken from Bold Leadership for Organizational Acceleration by Jim Tompkins. (Available now to order at http://www.tompkinsinc.com/boldleadership)

Revive Your Outsourcing Relationship

Building a Lasting Relationship

As you begin the process of building a lasting relationship with your provider, an important thing to remember is there is no "off the shelf" approach to the relationship. Establishing a relationship that is geared toward long-term success is as much an art as it is a science.

The first step is to give your outsourcer the same acceptance that you would any new member of your organization. You must recognize that you and your provider will disagree, and that such disagreements are healthy. The trick is communicating properly so the disagreements become an impetus for moving the relationship forward.

Once you have adopted an acceptance mindset and have agreed to communicate openly and honestly with your outsourcing provider, you can build the lasting relationship necessary for outsourcing success. This includes:

• Establishing a regular, ongoing process for business planning, evolution and communication. You and your outsourcing provider must decide the levels and frequency of formal and informal communication and meetings.
• Implementing a rewards structure of gain sharing or goal sharing.
• Making sure there are regular, ongoing executive interactions. Executive communication is critical to the success of your outsourcing relationship.
• Reviewing the RFP and the contract after implementation and identifying surprises, changes and problem areas. The outcome of these discussions will be the identification of opportunities for improvement.
• Measuring performance against the initial goals that were established for outsourcing. This needs to be a full, robust analysis of the implementation and the outsourcing initiative.
• Conducting formal "lessons learned" round table meetings with members of your company alone and between you and your provider.
• Encouraging creativity and innovation on both sides of the relationship. You must be flexible and open to new ideas that will develop along the way.

As with any initiative, a key component of a lasting outsourcing relationship is an emphasis on continuous improvement. Basically, an ongoing process of continuous improvement is required for all outsource relationships to flourish.

Continuous Improvement and the Outsourcing Relationship

To practice continuous improvement, you and your outsourcing provider need to understand collaboration, cooperation and true partnership. You can accomplish this by making sure you and your provider have:

The characteristics of a successful relationship:

- Shared vision
- Shared values
- Shared expectations
- Shared commitment
- Shared confidence in one another
- Shared responsibility

Collaboration:
There must be joint participation and cooperation in the initiative and the relationship, along with confidence and commitment to the success of the initiative. Collaboration, which creates the synergy that drives a successful relationship, must be cultivated.

To begin the process of collaboration, you and your provider should foster a collaborative environment by overcoming rigidity, communicating your belief in collaboration, beginning a collaboration revolution and celebrating your success.

A plan for long-term success:
You and your outsourcing provider must have a plan for making sure that the gains made during start-up are not lost. To do this, you must look beyond start-up and make sure you have the elements for the initiative to be successful six months, one year, two years and even five years after start-up.

During this process, you should consider ways to build on the initiative's long-term success. You must work toward an evolution of the relationship whereby you hold on to the gains made during each initiative milestone and never rest on your laurels. As you continually look for new ways to succeed, you and your provider increase commitment, dedication and cooperation.

A true partnership:
In an outsourcing initiative, true partnerships are long-term collaborative relationships between an outsourcer and a provider that are based on trust and a mutual desire to work together for the benefit of the other and the initiative. The goal is to blur identities so that you can focus on the initiative and not on individual companies.

Not making distinctions between companies allows you to improve and grow your partnership and ensures outsourcing success. The objective is to create the same synergy between organizations that the collaboration process creates within one organization. This means understanding that the term relationship is not synonymous with partnership; instead, a relationship must be transformed into a partnership.

The Continuous Improvement Success Path Forward:
The Continuous Improvement Success Path Forward is the methodology for establishing continuous improvement once the collaboration and cooperation between the outsourcer and the provider have been established. The path forward has the following steps:

1. Establish Continuous Improvement teams.
2. Conduct outsourcing roundtables regularly throughout the lifetime of the initiative.
3. Define Continuous Improvement vision and evidence of success.
4. Define prioritized areas for improvement.
5. Implement Continuous Improvement team recommendations.
6. Assess evidence of success.
7. Define new prioritized opportunities for improvement.

Once you have put a continuous improvement process in place, your relationship with your provider has a greater chance of growing, improving and remaining strong. It will also help create a steady state in your relationship.

Steady State for the Outsourcing Relationship

Your outsourcing initiative and the relationship you and your provider create can be bigger than its parts. Just as a family can get more done than just a couple alone, so can you and your provider. What makes a happy family?

The main thing is the ability to disagree while still trusting each other and getting along (putting aside personal differences). This means you and your provider must be flexible and be willing to compromise when a problem or unforeseen situation arises.

Another important thing you both should try is to keep the relationship fresh and not get into a rut. In an outsourcing relationship this could mean reviewing the contract and making adjustments. Also, you and your provider should make note of things that worked in one facet of the project and see if they can be applied to other parts in the spirit of continuous improvement.

You must also learn to deal with changes--in the project and in the relationship. Most outsourcing initiatives are long term, and if you and your provider communicate well and challenge each other, you will be able to take changes and surprises in stride. The result will be a partnership in a steady state that you can manage.

Managing the Relationship

Managing your ongoing outsourcing relationship can be compared to taking care of a marriage so that you can get to your silver anniversary celebration. Some of the challenges an outsourcing relationship must overcome in the years that follow implementation include:

• The outsourcer's leadership adds people who are not familiar with the outsourcing initiative or the operation.
• The outsourcing provider's onsite leadership changes without notice or a clear plan.
• Mergers and acquisitions introduce new outsourcing alternatives.
• The outsourcing provider fails to evolve with the business. Operations does not focus on continuous improvement.
• Costs keep growing without any plan to contain or reduce the trend.
• One side of the partnership does not invest time, effort and resources into the success of the operation.

The keys to meeting any or all of these challenges and ensuring success in your outsourcing relationship are:

Inspirational leadership: The leadership responsibilities for the months and years after implementation are twofold: maintaining focus on the relationship and understanding that business changes.

Therefore, those who manage outsourcing relationships must be collaborative problem solvers who demonstrate their ongoing commitment to the outsource relationship by staying actively involved and investing their time.

They must be able to address performance issues and results, discuss corrective action and the need for improvement, rather than telling those involved how to run the business. This is true for the relationship manager and company leaders.

Continual communication: The key to ensuring that changes do not upset the outsource relationship is open and continual communication between you and your outsourcing provider. Regular meetings are the key to fostering open communication. This applies to all levels of the relationship, from company executives to those working in the outsourced function. Continual communication should not stop at the doors of your company. The users of the provider's services should be brought into the process of improving the outsource relationship.

Change implementation: In a long-term relationship, change is inevitable. You and your provider must be prepared to make adjustments to the process. If you have fostered continual communication, it will not be difficult to develop a process with your provider to implement changes as follows:

1. Have a documented plan that will provide a point of reference and help prevent surprises. While you develop this plan, you should be sure that your company can implement any changes on its end, as they can be the driving force for success.

2. Take your plan, put it in action and monitor performance, cost and attitude.

3. Document what went right during the process change and what went wrong. You and your provider should discuss both aspects, looking for ways to improve.

4. If you encounter resistance from the outsourcing provider, use the spirit of compromise to bring the reasons for this unwillingness to the surface. If it is based on the process, review it and see if a few adjustments can end the provider's push back. If the other party cites personality differences or is unwilling to compromise after the process review, I recommend involving a company with experience in overcoming these challenges.

Future preparedness: It is important that goals for the future of the relationship be established and both the company and the provider accept these goals. Making the future better will not happen unless leadership sets the pace here.

All contracts have life spans. You should openly discuss the end of the contract term to let your provider know what you expect. Developing the habit of continually documenting the relationship will prepare you for the end of the contract life and renegotiation. Part of preparing for the future includes considering the possibility that the contract will not be renewed once it has expired.

Make sure you have a solid, documented plan for managing the exit and transfer costs. At the end of the contract term there are basically three options: bring the functions back in house ("backsourcing"), extend the contract or take the contract out to bid. A good outsource relationship will share thinking on these options, and there will be no surprises.

Signs of a Successful Initiative

You and your provider are likely to have a successful initiative if you follow the plans and processes discussed in this chapter from the time of selection to the end of the contract. You can tell you have a successful initiative by looking for five simple signs:

• All expectations are exceeded.
• All performance measures are made and the bar is raised.
• The outsourcing provider is invisible; in other words, the provider "looks like the client."
• The end of the term is simply a renewal process.
• Every success is celebrated in a fun environment.

If you and your provider see these signs, then it is likely you both will be celebrating every success.

Taken from Bold Leadership for Organizational Acceleration by Jim Tompkins. (Available now to order at http://www.tompkinsinc.com/boldleadership)

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