Relational Outsourcing as a practical contracting and management model is finally coming into its own

Outsourcing of business operations is a growing trend in the U.S.  In-house employees are replaced by a firm which handles the business using its own staff. Such agreements, writes Dennis F. Penepacker of Chicago’s Meyer Brown Rowe & Maw LLP, require the closest kind of relationships between the parties. He argues that neither the command-and-control mechanisms of in-house operations nor the arms’-length contacts typical of ordinary supplier contracts are appropriate.

As you read the above paragraph one might be excused in thinking that it is a present day recognition of the important role that relationships play in the success of an outsourcing initiative.

After all, and with the recent introduction of a new seminar by SRS that focuses on bridging both the communicative and collaborative divides that have for so many years undermined the promise of the majority of outsourcing programs, its revelatory importance certainly contradicts what for many organizations was an exercise in head count reduction and bottom line savings.

In fact, this abdication mindset was in reality the antithesis of relational considerations in the provider selection process, as there was often times a prevailing good bye and good riddance disposability regarding those functions that were deemed to be outside of the organization’s core competencies.

Of course nothing could be further from the truth in that a dumping of functional responsibility rarely if ever delivered the promised savings, but instead in many instances actually undermined the organizations brand through a decline in customer service levels.  Or to put it another way, passing the proverbial buck without considering the implications beyond the myopic financial impact almost guaranteed failure.

Even in those instances where there was a recognition of outsourcing’s overall strategic importance over and above a dollar and sense perspective, the lack of practical training in critical areas of the contracting process reduced engagement to one of legalize where contract terms and conditions were the driving elements of stakeholder conduct.

The irony of the opening paragraph to today’s post is that a lawyer was the one to point out the inadequacies of the traditional contracting approach to outsourcing.  That he did so close to 7 years ago speaks to how slow the market has been to both recognize and adopt the new protocol for stakeholder responsibility and execution.

Are relationships the key to outsourcing success?

All of this has now changed with the pressing reality of current day demands for greater efficiencies and savings, coupled with the now obvious gaps with the contracting process of the past.

This is one of the reasons why the SRS Relational Outsourcing seminar is both timely and necessary.

It is also the reason why I found that yesterday’s discussion with SRS’ Andy Akrouche to be one of the more interesting interviews I have done of late.

What are your thoughts regarding relational outsourcing?

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2 thoughts on “Relational Outsourcing as a practical contracting and management model is finally coming into its own

  1. You know Jon, it is still struggling!

    As you are aware, IACCM has been championing this cause for around 8 years and certainly we have made progress, but many barriers remain. The examples of success remain anecdotal, rather than institutional. At heart, there is still a perception that relationships are hard work and will take more time and resource. There is also an embedded cynicism within many organizations (and the key professionals) that ‘the other side’ cannot be trusted. And senior management may talk about collaboration, but has done little to consider what that actually means in practical terms, or to develop an infrastructure or measurement system that would enable it.

    So for now, we remain with a slow journey … making progress, but certainly not yet a steady march.

    Like

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