Distressed Outsourcing Relationship Management
If you type ‘distressed relationship management’ into a search engine, the result is 1,330,000 web pages returned in a very impressive 0.24 seconds. But does this apply to outsourcing relationships; are there really that many distressed relationships and, if so, why is this happening?
Research by the CIO Executive Board shows that 54% of organisations report challenges with managing their IT suppliers effectively. According to a survey reported in CIO Insight magazine, a quarter of IT leaders across Europe are dissatisfied with one or more of their IT outsourcing contracts and 99% would like to renegotiate or retender at least one of their contracts.
Whilst carrying out research for this article, I came across a piece called ‘What makes an unhappy relationship?’ The writer suggested that there were five commonly encountered bad habits, and whilst the specific article was talking about interpersonal relationships, all of the habits are very much applicable to the relationships between you and your suppliers. Let’s first set the scene: after the deal is signed and the initial buzz of engaging a new supplier has subsided, it can appear that things start to go wrong. Then, sometime into the deal, something goes wrong. It may be nothing big; the relationship could just have gone stale. There may be small issues initially, but over time these can grow until the relationship feels distressed.
But why does it have to?
In our slightly “tongue in cheek” look at sourcing relationships (and with a nod to Valentine’s Day), use this guide to spot a bad habit in the early stages and you and your supplier could have a long, healthy, mutualistic relationship.
1) Ensure a high ratio of positive to negative inputs
Constant negative communication can be very frustrating for both parties. It creates a bad mind set and will only ever be met with an adverse response. Supplier review meetings can turn into a kicking for the supplier when really, what should be attempted, is to deal with any issues with a positive, constructive action that improves the relationship. When preparing for your supplier reviews, be aware of the language and tone you intend to use. Look to turn the negative communication into a positive action, that not only gets the message across without creating resentment down the line, but gets the issue resolved. If the issues are escalating and communication is not working effectively, consider using independent facilitation to steer through the challenges and help formulate clear action plans.
2) Acknowledge and confront the four horsemen of the “relationship” apocalypse Criticism, Defensiveness, Contempt and Stonewalling
Here we have the classic confrontation situation: the client criticises, the supplier gets defensive, contempt grows and stonewalling occurs. Understanding the impact of these actions is vital, as is learning a process for handling differences. These are important steps in getting the relationship back on track. If this position is left to fester, the relationship disintegrates and
‘management by contract’ can occur. If you get to this stage, it can take effort to get the relationship back on track. One possibility is to change the personnel in direct contact from both sides and to be open and frank about the differences. Work through these differences and ‘don’t get swept away’; again independent facilitation may help.
3) Always make up after a disagreement
Disagreements are inevitable in any relationship. The Supply Chain Resilience 2013 survey of over 500 businesses found that 90% saw failures in their outsourced service over the year; it appears that there are many issues to quarrel about. It is critical for clients and suppliers to have a set process, not to avoid disagreements altogether, but to work on re-establishing a positive relationship afterwards. The best result for both parties is to seek a win-win outcome.
4) Don’t get swept away
Being swept away, becoming overwhelmed by negative emotions and holding grudges will only ever lead to distancing and ultimately a breakdown in the relationship. Just the other day I was told of a company that had been swept away by a negative event three years ago, but were still making their supplier pay three years later! Needless to say, as a third party observer, it is easy to see that this has formed a very unhealthy and unproductive relationship. But how obvious is it to recognise this habit in your own supplier relationships? How many are still being swept away? It can be valuable to undergo periodic health checks of key relationships to ensure that issues are identified quickly and addressed and to avoid potentially irretrievable breakdown in this way.
5) Keep the excitement alive
The often classic supplier statement of ‘we are delivering against the contract’ defence mechanism applies here. Whilst that might be true, the client is crying out for more! You want to rekindle the initial relationship and you want to know that the supplier still cares. According to a Forrester services survey, 41% of businesses surveyed say innovation and continuous improvement is one of the key challenges in their existing outsourcing relationships. There should be opportunities for the supplier to advise you of new developments, either within the bigger IT market place or within their own business. This should not be perceived as 'sales’ but as the supplier providing help, understanding and consulting to improve your relationship. Make innovation an agenda item at any supplier review meeting you hold. Allow them the opportunity to explain what they are working on, what is out in the market place and give them the time to ‘soft sell’. There could be financial benefit for you both by embracing what’s new.
Overall, operating with suppliers, just like any other relationship, can be difficult and requires work from both sides. But by setting the foundations at the beginning, communicating honestly but productively and both envisioning a common goal, you will give your supplier relationship the best chance to succeed.
If this article resonates with you, or if your supplier relationship needs support then contact Quantum Plus and we can help to assess the issues and facilitate improvements to the relationship. Using our tried and trusted methodologies, our experienced consultants can carry out an unbiased assessment, offer feedback and facilitate solutions to getting the relationship back on an even keel.