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Outsource magazine: thought-leadership and outsourcing strategy | June 25, 2017

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Of exit and Brexit

Of exit and Brexit
William Hooper

Outsourcing agreements come to an end, just as do some political treaties. What can those steering the perils of partition learn from each other?

There are few experiences as visceral as the turmoil of politics. As a British citizen, I have taken my part and cast my vote on 23rd June, 2016. The comparison of events since with recently managed outsourcing exits is the source of inspiration for this article.

Know The Rules

For The European Union (EU), the rules are defined within Article 50 of the Lisbon Treaty. These 256 words in five clauses define the rules by which a member state may depart the Union. They were written in 2008, attributed to the then diplomat John Kerr. At that time there was a backlog of states wishing to join, and with admirable prescience he anticipated that some may choose to leave. He can have had little idea of who, or when a country, would elect to do so.

Article 50 leaves a great deal open to negotiation. All it does is offer a framework within which the transaction may be exercised. The greatest concentration is upon the decision authority of the remaining EU entity for accepting the departure agreement. The parties can run the departure well or badly, that is their choice.

For outsourcing, the principal source of the rules is contractual, within the context of statute and legal precedent. Most outsourcing contracts contain terms and conditions that define the circumstances in which termination may arise, and a schedule defining the obligations of the parties to prepare for and conduct exit.

It is common practice for there to be an obligation on the parties to prepare an exit plan during initiation of the new service and periodically to revise it. This may appear one of the more tedious backwaters of a fat tome. It is worth paying a little attention to; you may later come to rely on it. At the start of managing a transition for a client’s agreement that had been running for more than a decade, I called for the exit plan. After much evasion, it was admitted that the customer had not insisted and the supplier had not bothered to produce it. The recovery contributed to a rocky start to transition.

During exit, the departing supplier is likely to have costed the resource that it is obliged to supply. The incoming supplier will have assumptions of what it would like to obtain from the outgoing, regardless of the cost, which is likely to be an obligation of the customer to bear. The differences in the interests of the parties (departing supplier, incoming and customer) are easy to anticipate and thus to manage, but this must be actively steered, ideally by someone who knows what they are doing. There is likely, as in Brexit, to be a fair bit of negotiation to be done. General principles are translated into specifics. There is delivery work to be done and accepted. The better prepared you are, the more likely you are to get a good outcome. Designing the game in your favour from the start is a good move.

Vision, Preparation

Any change is likely to combine elements of putting the past behind and building the future. The difference between the visions seen in Brexit and exit have been striking.

For Brexit, the emphasis is overwhelmingly upon departing what the ‘Leave’ contingent saw as un-democratic, bureaucratic, inefficient and working against the British national interest. Beyond the vacuous “Brexit means Brexit” and “Taking back control”, there is a consummate lack of vision of what the future looks like or the means by which it is to be attained. Turning the rebellious body of public opinion takes years, dogged determination and leadership founded upon a vision of something better. Even rabble-rousers need this. A revolution is first destructive of the old. Some go on to liberate and permit successors to build Utopia. The old is being torn down; blood (albeit commercial) will be spilled. Nobody yet knows where either the UK or the EU is going.

Some customers do a remarkably good job in building an internal consensus on what the new agreement needs to deliver to the organisation. They have articulated collaborative working arrangements in which they draw upon the depth of talent available within their new supplier(s), continually reaping the benefit. Some even accept that their partner in such an arrangement needs to make a profit to sustain the relationship. The business case captures this in vision, delivery plans, committed resources and financial projections. Consensus in Brexit is no more than a guttering candle of hope in the storm of debate. Jean-Claude Junker and Theresa May publicly demonstrated mutual incomprehension when they discussed negotiation approaches over dinner on 1st May 2017 in Downing Street, private discussions being leaked to the press. In adversarial Britain, opponents must be able to explore options discretely. In consensual Brussels, coalitions must be built and everything always leaks. Attaining a deal that is sufficiently attractive to the other party to win their approval requires understanding of both one’s own case and that of the other parties.

Common Focus

The transitions I have been engaged in have been characterised by a strong emphasis on behalf of the customer on building the new, often almost to the exclusion of thinking about how they manage the departure of the old. The procurement focuses on the new; the transition is led by the incoming party, drawing on the wisdom of the departing (where the parties have sense). The customer also commonly recognises that if they are to operate the new agreement with the form of relationship they hope for that they too must change. Consideration of the exit and what the exiting party needs to do in this is commonly little more than an after-thought. The customer’s transition manager needs to correct the balance appropriately.

In the Brexit campaign, the emphasis was almost entirely on losing the hated shackles. The debate failed to address what was to follow beyond the partisan belief that it would be either glorious or terrible. Any consideration of the challenges of attaining nirvana and the ability to do so through a planned approach was “campaign fear”. Skilful politics won: effective planning, nil.

Continuity

Good current practice in outsourcing imagines three modes of termination:

  • The whole agreement goes to term and is either renewed or re-let;
  • Partial termination of a service or services, other components continuing; and
  • Emergency termination.

The last of these three is the most alarming, and fortunately also rare. Any transition involves risk to the continuity of service, emergency termination risk is off-the-scale. Occasionally also are the circumstances that lead to its contemplation. If you are there, you need the “A” team instantly and will have to pay to get them. The quality of your preparation will make a great difference to the outcome you attain. Hours can count to secure essential information, people and favourable positions.

In more considered outsourcing, much planning and preparation goes into assuring continuity of service throughout the transition of responsibilities. This is a challenge as the departing supplier withdraws resource. Will projects in-flight be delivered on time? Will service levels be maintained? Will knowledge transfer be accomplished without service levels suffering? Will the competing demands for the incoming party to learn about design and performance be balanced with outgoing concerns about the protection of their intellectual property and hiding failings? Where are those

In Brexit, there are signs of activity stirring in the consideration of continuity. One thing Whitehall can reasonably claim to be good at is testing the water. It engages lobby groups, conducts consultations. Some is played out in the press. When you hear debate about movement across the land-border between Eire and Northern Ireland, or the prospects for lorries stacking behind a customs barrier in Kent, that is what is going on. This is why trade agreements typically take decades to agree; it is in our interests to get the details right and consultation takes time. The detail and horse-trading would drive normal people over a cliff. There are now too few trade negotiators in the UK as we have shared this resource for the last forty years in negotiating as a part of the EU. Recovering the current position is not something that Theresa May can do by clicking her red shoes and dreaming of Kansas (or Maidenhead). Getting anything more than a crash-deal done in two years is looking hopeful.

Learning

It is tempting but unhelpful to conclude “I would not start from here!”

Brexit can learn from outsourcing to construct workstreams to address each element required (migration, finance, trade, customs, legal). If continuity of trade is required, how is this to be achieved? If we are to suffer the blood of revolution, what is the vision to lead us to build the new world beyond?

Outsourcing may also learn some elements from Brexit. Programme management of stakeholders is hard, but has nothing on the challenges of a democratic community. Cameron and Major paid the price of losing the populace. For one used to the volume and precision of outsource contracts, Lord Kerr’s sparse clauses contain efficient principles. Their effectiveness in framing a good outcome for both the remaining EU and departing UK is yet to be discovered.

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