Consulting
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Commercial relationship challenge
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Commercial relationships between clients and service providers based on long-term contracts, for example in an outsourcing situation, are comparable to arranged marriages.
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Parents and relatives of both sides (in our case: procurement leads, sales directors, consultants, managers, etc.) do their utmost to find a suitable marriage partner and create the conditions for a successful marriage. However, success is not guaranteed. This is also not the case with partnerships between clients and service providers. This often becomes apparent quite soon after the contract has been signed by both parties.
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The graph (Morgan Chambers ©) shows the typical evolution of an outsourcing partnership. The x-axis indicates the course of time. The y-axis shows relationship satisfaction.
Client and service provider perspective
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The graph above seems to assume that clients and service providers have the same satisfaction with the relationship at any time during the partnership. Those odds are slim.
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A likely better representation could be the second graph (Rhino Elephant ©), in which you'll see that a client and service provider may have different perceptions of the relationship at any point in time during the contract.
Contracting is an art
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One of the reasons why relationship satisfaction in partnerships could be low and could differ between clients and service providers is the difference in expectations about the partnership.
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My mess for less is a recurring theme. Clients are sometimes insufficiently successful in getting the services properly organized themselves. Outsourcing then seems like a good idea, and is expected to be significantly cheaper.
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Insufficiently accurate mapping of the scope before the contract is signed is another theme on which differences in expectations can arise. See the following figure (Morgan Chambers ©) in which a distinction is made between the services the client expects, the services as contracted and the services actually provided. Ideally, you want these three elements to be perfectly aligned so that there are no frictions, irrelevant services and waste.
Contracting is an art 2
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A common example of friction is a situation in which the service provider meets the service level agreement (SLA) targets and nevertheless the client is dissatisfied.
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An example of this are watermelon SLA's: green on the outside, red on the inside. This occurs, for example, when SLA's are defined at the central level and assessed at the decentralized level (lower management echelon). E.g., SLA's can perfectly meet European level targets and yet miss country level expectations.
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It is therefore important to integrate the various stakeholder interests when drafting a contract.
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Picture source: horsesforsources.com
Trust is better
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In line with McGregor's Theory X (The human side of enterprise, 1960) one could argue: trust is good, control is better. However, control costs time, money and energy and could in itself lead to friction. So it is pivotal to find the right balance between trust and control.
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The graph (Gartner ©) shows that trust can be measured at different organizational levels: individual, group and organization. Influential individuals can set the tone for group trust or distrust, etc.
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Trust, partnership thinking, collaboration and keeping an eye on the interests of (individuals within) both clients and service providers are key concepts of Rhino Elephant Consulting.
