In my previous post I talked about maturity in outsource planning and wanted to follow up with a little more color from research by CORE, Deloitte and Ryerson University’s Ted Rogers School of Management on their survey report, “The 3 Es of Effective Outsourcing Governance.”
The 3Es are experience, essentials and empathy.
Parties involved in outsourcing transactions “have identified effective governance as a fundamental requirement for successful outsourcing arrangements,” the report says. It continues that there is a “growing body of anecdotal and experiential evidence that points to effective governance as a key contributor to value realization.”
I want to focus on the report’s take on the third of the 3Es – empathy, which the report writers define as the “understanding between buyers and providers.” The key to understanding is trust.
The report stresses the importance of trust in outsourcing planning: “A relationship built on trust and openness can provide a better understanding of needs and priorities to both sides and help to improve the efficiency of the deal by removing redundancies, sharing best practices, collaborating on new initiatives, and generally aligning the needs of both organizations.”
Empathy matters because more companies are “realizing the benefits of developing open, collaborative relationships with their providers.”
The Core and Deloitte survey results found:
- Only 60% of respondents expressed having a good/satisfactory level of trust with their service provider. “Encouraging greater levels of cohesion, openness and collaboration between clients and provider resources can increase trust, leading to higher value from the outsourcing relationship.”
- Only 30% of respondents have established mechanisms to recognize and reward provider’s employees for performance. “Simple mechanisms to reward and engage provider employees, understand their motivations and make them feel connected to the client organization can unlock significant value.”
- Information-sharing between clients and providers was low with less than 40% reporting visibility into pricing models and strategic plans. “Linked to the issue of trust, few clients were willing to take the first step towards the free exchange of relevant information with sourcing providers.”
So there’s work to do.
The good news is that five years into the Vested business model we are well beyond the anecdotal of what a great governance model looks like because the vital importance of a credible and insightful governance framework is well documented, specifically in The Vested Outsourcing Manual (chapter 7) as well as rich case studies provided in Vested: How P&G, McDonald’s and Microsoft are Redefining Winning Business Relationships.
Bottom line – I agree with the CORE research. Empathy thus isa crucial mindset that brings greater trust, collaboration, cohesion and openness within both the client and the service provider organizations.
How do you get there? A great start is to measure levels of trust, cohesion, alignment and transparency through the Compatibility and Trust Assessment (CaT) because fit and alignment are keys to fostering a mature, empathetic and successful relationship. Listen (“A Conversation About the Relationship” and “Shelly on CaT.”) to the power of how a CaT assessment radically changed the discussion for Mondelez International and three of their strategic logistics service providers.
As outsourced services become more complex and of greater strategic importance to retain competitiveness, “governance will only continue to grow in significance,” the CORE/Deloitte report says. The CaT is an essential step to effective governance—it can mean the difference between outsourcing success and failure.
Image: empathy by Sean MacEntee via Flickr