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

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Success through contracts? Think again!

Success through contracts? Think again!
Ashutosh Agarwal

Many years ago, in one of my first stints as a Programme Director, I was onsite at a client location, responsible for the overall delivery of a large global programme. One of the client contacts, who was responsible for a few service areas, was particularly unpopular with my team. The reason? This gentleman had our services contract nicely bound and sitting pretty on his desk. Every time there was a discussion on how something had to be accomplished, he would pull out the contract and show what it said. And sure enough, he would be right as he would have already reviewed it before the meeting. So, my team would comply and complete as per his ask.

Over time however his service areas were suffering with issues in overall services integration, management and lack of alignment with business. His bosses were not happy as business teams were not seeing value with those services. He was lost on why his area was suffering so much internally with the business whereas his peers’ areas weren’t. He prided himself in being methodical and driving his teams as per the contract and was not sure what was going wrong.

The fact was that since he was driving the relationship by the contract, which was a legal document, the teams were also trained (through his repeated behaviour) to subconsciously follow the contract in working with him. In doing so they had gravitated towards the “delivering to contract” syndrome which is a dangerous situation in any partnership. It had shunned the thinking on part of my team for those service areas to improve through numerous insights that kept popping as they went about delivering these services.

Since the contract can never be all-encompassing nor foresee every scenario that would be encountered during the life of contract, “delivering to contract” essentially makes both parties work with a frame of reference which is outdated, limited and sketchy. As a result it misses out on key business drivers, modified expectations due to external factors and a reality that dawns much later and continues to evolve during the period of the contract. Almost all outsourcing contracts start with a fair amount of ambiguity in the finer aspects of scope, outcomes, and expectations. The degree of ambiguity may vary but it is always there. Enterprises can take months and months to “over-engineer” a contract and make it airtight including anticipated changes in future but since no one really has a crystal ball, a lot of evolving priorities will need differentiated efforts and direction from what was baked earlier. It is also not feasible to make every changed requirement into the contract with a contract change.

The biggest impact though is that the partnership between the client and the service provider is lost in the legal maze. Teams are no longer incentivised to bring new ideas which would never have been foreseen. That leads to SLAs being green and project KPIs being met but the business being unhappy!

What has worked best is to have a fairly robust contract with key elements reinforced to provide a broad structure to the relationship. It cannot be ignored but should not be used to drive the execution of services. Mutual trust, transparency and respect are the key pillars to a strong partnership rather than legal mumbo-jumbo. Teams can be motivated to go over and beyond their own expectations and service providers can become true partners with a relationship founded on these pillars.

About the Author

Ashutosh Agarwal 150Ashutosh Agarwal is Co-Founder and Director at Catacient Consulting Private Ltd.

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