“What was horrible about our outsourcing relationship in the beginning is that our expectations were unclear. That’s a horrible formula for success.” The person stating this assessment described a troubled – but remediated and turned-around – relationship that Outsourcing Center studied in its annual Outsourcing Excellence and Sourcing Awards program. It led to this post about tips for outsourcing buyers.
Like the relationship just described, industry analysts and consulting advisors called in to remediate relationships on the brink of failure often find the root cause of both parties’ frustration lies in the buyer’s unclear expectations of the service provider’s performance. Unfortunately, this is not an uncommon situation at the beginning of relationships.
Regrettably, it’s also not uncommon for this to occur later in a relationship that is successful until the point when the buyer’s vision for its business or for the outsourcing relationship changes due to new needs. When organizations alter their business vision or needs, change management comes into play; and expectation-setting is a top priority in change management. In outsourcing, the more clearly a buyer sets expectations, the greater chance there is for achieving the desired outcome.
Outsourcing Center spoke with more than 60 clients in the nominated relationships in its awards program to identify their lessons learned and best practices in communicating their expectations to their service providers. Twenty responded with information about their best practices in setting expectations around their future vision and changing needs so that their own internal teams as well as the provider’s team embrace change and new ideas.
The next time you’re hit with a need for expectation-setting, follow these tips for outsourcing buyers tailored to achieve the goal.
Methods for expectation-setting
Strategic road map. The first of the tips for outsourcing buyers is to create strategic road maps and plans for three to five years and share them with the service provider. This visibility helps to ensure both parties will be aligned not only with what needs to occur but also the time line. Tips for clarity around expectations include:
- If the work to be accomplished in the next three years substantially differs from the prior three years, assess weaknesses and gaps that need to be improved
- Make sure the service provider clearly understands the business drivers
- Make sure the provider clearly understands the performance measurement for success
- Make sure everyone understands what elements are critical to facilitating successful service delivery
Sharing the plans and road map often occurs in periodic governance meetings. However, some buyers invite management from their provider’s company to attend the buyer’s management meetings where they talk about the strategic direction of the company.
Synch around market changes. Several buyers responding to questions about expectation-setting stated it requires that both companies have frequent discussions to be sure both are in sync with market changes and how rapidly the changes are occurring. The changes now pressuring U.S. medical providers and payers because of healthcare reform are an example of such market conditions. Even if they have not crystallized plans for moving forward in response to the changes, buyers need to set an expectation that both parties must actively seek to be well aware of what’s going on so they can create a plan.
Educate the internal workforce. Nearly all of the 20 buyers sharing their best practices in expectation-setting pointed out the need to gain buy-in from their internal teams regarding future change. Their suggested tips for this activity include:
- Ask internal users what’s important to them in terms of enabling them to do their jobs better. In the second round of communications, play back what they said and point out how the new solution will achieve what they said they needed in order to improve productivity.
- Point out the successes achieved by the service provider to date (especially those where internal users doubted success was possible).
- Help them understand how big a project is and the need to focus on it plus the need for reprioritizing other projects
Mindset around expectation-setting
Most of the surveyed buyers in the awards program who responded to questions about their methods for expectation-setting also cited the need for the proper mindset. They shared four insights from this perspective, as follows:
- Buyers need to be transparent about where they really need their business to go
- Buyers need to provide clarity around terms; for example, if they use the word “cost,” precisely what does that mean in the context for the future?
- Buyers must avoid trying to make plans for the future fit into a structure in the past (such as a particular pricing model) that may not be appropriate for the future. Operating on past assumptions can constrain the future vision
- Buyers should approach expectation-setting from a partnering and long-term mutual-success mindset.
Not doing so will render the future plans into a cost-driven relationship rather than a value-driven, strategic relationship
Finally, a crucial component of effective expectation-setting is listening. The buyer needs to elicit feedback from the service provider to ensure the provider was listening and that the buyer actually provided clarity as to expectations.
What are your tips for outsourcing buyers? Did we miss anything?