It’s first and foremost about managing relationships.
A contract is not [just – JV] a legal instrument, it’s a description of the relationship between two parties that want to shape their partnership*.
Typical global IT outsourcing and BPO contracts are hundreds of pages long.
The objective is to capture all foreseeable eventualities and risks on those pages. Sometimes the contract’s goal is to transfer risks to the other party, which isn’t very partnerial.
The intent is to prevent noise, escalations, disputes, etc.
Unfortunately, outsourcing deals are too complicated to be fully covered by a contract.
Therefore, it is pivotal to focus on relationship aspects as much as, or even more than, contractual aspects.
These aspects include:
1. External and internal stakeholder management
2. Business mindset
3. Relationship satisfaction
4. Expectation management
5. Professional conduct
1. Stakeholder management
“Clients are important and we are too.”
In order to be successful, contract managers need to manage both external stakeholders, e.g., clients, and internal stakeholders, e.g., managers, compliance teams, legal, finance.
Despite efforts by business minded managers to put the client first, the bureaucracy in especially large organizations tends to have an inward-looking perspective. Therefore, one might even argue that internal stakeholders are more important for a contract manager’s success (e.g., career advancement) than clients, whether rightly or wrongly.
2. Relationship satisfaction
“I’m happy if you’re happy.”
For contract success, including securing contract extensions, it’s advisable for contract managers to measure relationship satisfaction frequently. This represents how satisfied both client and service provider teams are with the outsourcing relationship. See picture below for a hypothetical score over time.
In the contract management methodology CATS CM “satisfaction of the other party” is one of the essential elements. This is a welcome addition to the typical client centric approach of customer satisfaction. Such approach assumes a service provider should be happy with the fact of having a client at all.
Especially in the current economic environment a client centric approach is not sufficient. Service providers are short on talent and therefore are in a better position to choose their clients.
One of our clients has picked up on this trend and is introducing a 360 degrees feedback mechanism. With this mechanism both client and service provider teams can provide feedback to each other with the intent to build a better partnership.
3. Expectation management
“Say what you do and do what you say.”
Managing expectations can be that simple. It is all about communication. Be explicit about what you are going to do, and then do it.
Later the saying “under promise, overdeliver” appeared. This method is fine, as long as the promise is genuine and not watered down in order to lower expectations with the recipient of the result.
A useful contract management approach to managing expectations is organizing “contract awareness”. This is about making internal and external stakeholders aware of what the contract actually says instead of what they may think it says.
Raising contract awareness helps managing the right expectations. The relevant stakeholders might be as many as everyone working on the outsourcing project. Unfortunately, for global projects with hundreds of team members it is too costly to organize. Virtual meetings and train-the-trainer approaches can help solve this aspect to a certain extent.
4. Business mindset
“What’s good for them, is good for us.”
Successful contract managers apply a business mindset as opposed to a procedural or legalistic approach. This is about concentrating your efforts on positive business outcomes for your client. The idea is that if your (internal) client is happy with your services, you will benefit as well.
5. Professional conduct
“Do to others what you would have them do to you.”
Successful contract managers operate in accordance with the highest ethical standards. This includes:
Aiming for “trusted advisor” status, which means your (internal) clients have near full confidence in your advice based on repeatedly delivered high quality results;
Treating sensitive information appropriately and often confidentially;
Being culturally aware. This is especially important in global projects;
Being unconditionally constructive in resolving issues.
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Note
* This quote is from the book “Contract management with CATS CM® version 4: From working on contracts to contracts that work (Best Practice).” See link below to buy the book. I highly recommend it as it provides a structured approach to contract management.
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