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According to Danny Ertel’s article on Outsource Magazine, outsourcing relationships are crucial to getting business done. And when they go sour, there’s a myriad alternatives companies and managers can use to keep the relationship alive. Although outsourcing has been around for more than twenty years, most deals go bad eventually. Worse – companies keep repeating the same mistakes over and over again.
Research suggests that a sign of trouble in a relationship is when a buyer demands more from the service provider. In general, there are more meetings, there is a demand for more frequent updates, sometimes there are threats drafted by company attorneys, along with penalties for not meeting standards or deadlines.
Vendors also go through some reflection with reports containing apologies, explanations defending their view of what is going awry, counter threats prepared by attorneys and of course laying off key persons associated with the deal. Presumably, a combination of all these should make things better, but they don’t.
Statistics from academics, the advisor community, and industry associations state that the difference between the value of working outsourcing relationships and troubled ones is as high as 30 percent. This indicates that there is much to be learned about getting the details of outsourcing right.
Some steps for improvement in outsourcing relationships, particularly for those involved in HRO, include the following:
- The first thing to do when facing outsourcing hurdles is to ask the question, ‘why?’
Sometimes the metrics are wrong and this leads to erroneous conclusions among parties involved. Additionally, solutions are not acclimated to buyer business model or circumstances may have changed. The service provider’s capacity may have changed in a prolonged contract setting. It is also possible for outsourcing contracts to oversell, which means negotiations sometimes lead to an over-commitment on the part of the buyers.
- It is often easy to blame a person involved in an outsourcing contract, but the value of the contract is much more than just one person’s contribution. This means that involved parties need to take examine the situations a lot closer. Additionally, it is much more empowering to identify our role in the predicament. Most of the time, we can change something we are doing. But we can’t always convince service providers that something should be changed. We are engaging in a system and changes can take place on both sides.