Six Red Flags to Help Avoid a Bad Outsourcing Relationship from Ever Starting

When you begin evaluating service providers the basic requirements are straightforward. You want a provider with expertise in your industry, a deep understanding of your processes and a proven track record of superior delivery. The provider should be responsive, communicate clearly and demonstrate that it wants your business. However, because these are table stakes in the provider game, the selection process often comes down to “soft characteristics.”

Determining which of the qualified providers will work best with you requires a close eye during the sales process. I’ve identified six important soft characteristic red flags that can lead to a potentially dysfunctional and damaging relationship. Keeping an eye out for these signs can help you spot a problem before it is too late.

  1. Selling rather than solving. Is the provider listening to you and offering what you need to solve your problem? While challenges may be fairly similar from company to company, no two organizations are identical. There will always be nuances in the sourcing context and the organizational culture that calls for more than a cookie-cutter solution. A streamlined, outsourced process may be institutionalized, but how it is applied will be different in each client organization. The provider should be paying close attention to the particulars of how your company operates, not just selling you something that worked for another organization.
  2. Telling rather than listening. During the sales process, does the provider want to do all the talking and follow its 80-slide presentation obsessively, squeezing out every last particle of its sales message before letting you get a word in edgewise? A provider’s listening skills and abilities are critical. A strong indicator that it won’t be an innovative provider is if it sells by presenting to you, rather than engaging with you. This could also indicate an inability to listen to your issues during the actual engagement, resulting in a strained, one-way relationship. Whatever the likely cause – immaturity or lack of skills are two likely possibilities – this behavior indicates fissures in any subsequent relationship.
  3. Homogeneous rather than diversified. Homogeneity has its advantages (system interoperability, for one), but it is not what you want in a service provider, especially if your company is global. You want a provider with sufficient diversity to understand your cultural nuances. You want the provider’s diversity to mirror yours, with people from around the world of different ages, at different stages in their careers, and with different experiences and skill sets. Fundamentally, people develop the strongest business relationships with those who are like them. So a provider’s diversity – rather than geographic and cultural homogeneity – is important for the long-term growth of a relationship.
  4. Complicating rather than simplifying. Does the provider seem to be making the sales process unnecessarily complex? Simplicity is a good thing, and the provider should be able to define its solution in very simple terms. If a provider overcomplicates, it strongly suggests it doesn’t understand your problem. The attempt to add “bells and whistles” and complicate the solution may indicate the provider is trying to exhibit superior insight and intelligence. It is simplicity that demonstrates a clear view, a true understanding of the right path. For example, if you have a simple order-to-cash process and the provider is trying to tack on more features and attachments, with more technology than required, the provider is overselling through a misunderstanding of your needs or because of a desire to broaden the engagement scope. And it’s critical to remember that a complicated solution is less transparent, which in turn creates more governance challenges.
  5. Near rather than far. You want a provider with a geographic footprint such that relationships and decision-making are as close to you as possible. Be very wary if the relationship will require all decisions be made offshore. You need someone near you, onshore, with the authority to make decisions, because the farther away decision-making moves from you, the more it loses context and speed. You don’t want to have to wait until the middle of the night for a conversation with someone several time zones distant; you want a solution at the time you need it.
  6. Arrogant rather than supplicant. The sales process offers excellent insight into the mindset of a potential provider. If the provider’s sales team overpowers you with arrogance – if it bosses you around, boasting it has solved problems like yours hundreds of times – you have a problem. Yes, on a certain level, the provider will be your partner, but its purpose is to serve you and its behavior should reflect that fact. Remember, the term is “service provider.” It is there to serve you, and that is how the provider should approach the relationship.

By paying close attention to these six potential red flags, you can make sure that a bad relationship never has the chance to get started. Even though a particular provider’s capabilities and expertise may appear to be your best choice, it still must be compatible with your culture, accessible, and interested in listening and serving you with straightforward solutions. Otherwise, you’re certain to pay a painful price over time.


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