The ARC of successful outsourcing
I’ve argued in a recent book that leaders need to be Authentic, Responsible and Courageous (ARC) if they’re to turn the rising tide of mistrust within and between organisations. The same is true in outsourcing relationships, where trust is a critical factor worth far more than a contract born of the blood, sweat and fears of a multitude of highly-trained lawyers. But it’s not just trust that buyers, suppliers and advisors stand to gain. There are a host of other rewards to be reaped for demonstrating these three ARC qualities – pronounced “Arc” not “A.R.C.”, because the former is an awful lot easier to say and remember.
In the course of my work and my research, I’ve found leaders who are ARC are better able to…
- Inspire commitment – in staff, clients, suppliers and other stakeholders
- Drive innovation
- Tackle ‘sacred cows’ and ‘elephants in the room’
- Stimulate information sharing across organisational boundaries
- Reduce the risk of accidents, malpractice and litigation
- Capitalise on diverse styles, perspectives and opinions
- Transform conflict into collaboration
- Enable their organisations to outperform the competition
“Yes, well that’s very charitable of them,” some of my more self-interested clients say, “But what’s in it for me? Why should I go to the trouble of being Authentic, Responsible and Courageous?”
It’s a fair point. These three qualities can be fiendishly difficult to muster when we’re under pressure from above, below and across the organisational hierarchy. We’ll look at some of the reasons why it’s hard in a moment. For now, let us be clear that – as noble and commercially compelling a cause as it is – there are purely selfish reasons to be ARC.
Just for starters, getting it right offers individuals…
- Clarity of purpose
- A sense that they’re doing meaningful work
- Increased energy and resilience
- Enhanced performance
- Accelerated career progression
- Peace of mind
So, what exactly do I mean by Authentic, Responsible and Courageous? And how precisely does this relate to the world of outsourcing?
We hear time and time again that a supplier’s competence is about fourth on the list of criteria a buyer considers when deciding whether to hire or rehire a supplier or advisor. Top of the list (even above price!) is the quality of the relationship. Do I, the buyer, believe you’re being genuine with me? As my supplier, do you do what you say you will do? As my advisor, do I see you working according to clear values or focusing instead on making a quick buck or milking me as one of your great cash cows? Take the case of EDS, which provided services to BSkyB in the days before it was acquired by HP. When BskyB later took HP to court, the court ruled that EDS’s estimates of how long it would take to implement a £48m CRM system were not just incorrect, they constituted “fraudulent misrepresentation” . In short, EDS made woefully inAuthentic claims in order to win the work – and a decade later it cost them a settlement of £318m.
It’s not just the authenticity of suppliers and advisors that matters, though. In buying a significant outsourcing programme, a buyer needs to be careful that the way it is implemented is consistent with their organisation’s values – not the ones on laminated posters next to the water cooler, but its actual values. Culture, as we’ve all seen, “eats strategy for breakfast”. When the values our people live day to day, year after year clash with those of a big change programme, both the people and the change programme suffer. Buyers need to be Authentic with their suppliers, when raising and addressing likely cultural challenges with implementing an outsourced or outsourcing intervention. To do so, they need to demonstrate what I call ‘Authentic Insight’ – they need to be honest with themselves, looking closely at their own difficult idiosyncracies.
It’s easy to see the relevance of responsibility to outsourcing. EDS arguably failed again when its people failed to resource the project properly or respond effectively to being significantly behind schedule. One of Jamie Liddell’s ‘How not to outsource’ stories offers further, all-to-familiar insight into lack of responsibility on the supplier side:
“In the exuberance of a big sale from a new client involving a new service/capability and the eagerness to start billing right away, the company overlooked the basics of process transition management:
- thorough documentation and training
- risk management (i.e. mitigating a technical skills gap, doing a pilot/parallel-run, fine-tuning before full live handoff)
- installing a reliable project manager
- levelling client expectations; and
- finalising key performance metrics.”
But Responsible outsourcing means far more than attending to these run-of-the-mill governance issues or delivering on COBIT 5. The organisations and leaders I work with find being Responsible means attending to four critical questions:
- Where is responsibility best placed?
- What am I/we ultimately Responsible for?
- What responsibilities are we overlooking?
- Where does responsibility lie for the end-to-end success of a programme of work that involves multiple suppliers?
All too often the first question goes unasked: in the interests of time or nice tight contracts, we make far too many assumptions. Take ‘responsibility for the success of this outsourcing engagement’, for instance. All too often, the onus is on the supplier to take the lion’s share of responsibility. The outcome of such an arrangement is fairly predictable: the supplier will eventually burn out or burn up its resources by continually and exponentially over-servicing the client and/or they’ll fail to deliver on the client’s expectations. And throughout the experience, the client will generally feel (at least at times) “righteously screwed” by the supplier. Anything either party can do to shift the burden of responsibility into the space between them, with clear accountabilities on both sides, will pay dividends in the longer term – and that, not buzz-words, is the true nature of partnership.
The question “What am I/we ultimately Responsible for?” is a big one. In my book, I describe Three Domains of Responsibility: professional, personal and societal:
The first of the three is front of mind for many leaders, although they rarely appreciate the full scope of their professional responsibilities. The second (personal) domain I’ll leave for now, but the societal domain reminds me of a blue chip client of my own who espoused clear, impactful CSR policies internally and in its dealings with its customers but had a huge blind spot when it came to suppliers. On the most basic level, despite all its efforts to recycle at the office, it failed to monitor the recycling activities of the countless venues it used for its conferences. All recyclable materials used by my client’s thousands of employees whenever they attended events at a whole chain of national conference centres were thrown straight in the trash. When I asked the venue staff why they didn’t recycle, they told me it was because people had complained the recycling bins were ugly and thus not in keeping with the venues’ upmarket aspirations.
This is a fairly prosaic example of an organisation overlooking some of its responsibilities. Would it make a difference to my blue-chip client’s bottom line? Probably not. Were they wholly living up to their self-appointed responsibility for the green agenda? No. Would it have taken much to address that oversight? Not with the influence they had over the conference centre chain in question. How might this apply to you? Well, ask yourself what your responsibilities are, in the professional and societal domains, then ask yourself how your suppliers, advisors and/or clients are helping and hindering your ability to deliver on those responsibilities. What can you do if you find an answer you’re not happy with? Well, you may need to be a little more Courageous to create a more collectively Responsible arrangement.
When I talk about ‘being Courageous’ to buyers of outsourcing services, it summons images of difficult decisions to contract out processes and operations that many of your staff and peers believe can only be reliably delivered in house – or, indeed, EDS lacking the courage to admit to and address its mistakes. When I discuss courage with suppliers and advisors, they tend to think of staying up late to prepare bold or innovative, challenging the client’s views or pushing back on procurement or scope creep. It’s all of those things and more. My research suggests there are four types of courage. One of them, physical courage, I sincerely hope you’ll never encounter in the course of your work. The other three are very, very relevant:
- Aspirational courage
- Intellectual courage
- Moral courage
Aspirational courage is the entrepreneurial side: the bold decision to take your organisation or your client’s organisation in a new direction; the desire to be something bigger or better or both. Intellectual courage includes the willingness to challenge your own assumptions and perspectives and those of others; to stand up for the correct answer when everyone around you is toeing the dumber party line.
Moral courage was one of the things that was lacking in parts of BP prior to the disaster in the Gulf of Mexico. I say ‘parts of’ because to do otherwise risks demonising an organisation that has, in many respects, taken its responsibilities very seriously and has done a great deal of good work around the world. I say ‘prior’ to the Gulf of Mexico disaster, because BP has since reworked its values to include courage, suggesting it now sees that lack of courage was a contributing factor. The bottom line is: the evidence suggests that if key staff at BP and its supplier organisations had spoken out more courageously about safety-threatening spending cuts, we might not have had to watch 210 million gallons of oil polluting the Gulf of Mexico.
So why did these people not shout louder? Because they were afraid: afraid for their jobs, the income that feeds and clothes their families; afraid of looking foolish, weak, stupid or risk-averse in front of their bosses or colleagues; afraid their assessments of the situation were wrong… the list goes on. There are, after all, so many things to be afraid of in the wild, wild world of work. And that’s why courage is so important: being Courageous doesn’t mean being immune to fear, it means feeling that fear and doing it anyway .
In asking for ARC, are we asking too much?
No. It’s not easy, but it’s not too much to expect of people you’re working with – people you’re paying, clients whose organisations are paying them to do the right thing. And it’s not too much to expect of yourself. After all, you’ve seen how being Authentic, Responsible and Courageous benefits you and benefits others. But there are costs – as you know all too well, very few benefits in the world of outsourcing are genuinely free!
Being a psychologist, I’ve done more than most to understand the potential costs of being Authentic, Responsible and Courageous. In my book, I highlight a range of challenges with each ARC quality and help readers work out which are the biggest hurdles for them personally. That takes more time than we have here, so I’ll give you my top five:
- Being Authentic means risking being rejected or preyed upon by others – because they don’t like what they hear, or they don’t appreciate or respect the ‘real me’
- Being Responsible can be complicated – how do I prioritise between all these people and things that require me to do the right thing on their behalf?
- Being Courageous means overcoming our fears, which are driven by our natural instinct for self-preservation
- We’re often too busy, distracted or depleted to think about the way we’re behaving and making decisions – luckily, though, I’ve found it’s actually pretty quick and easy to ask myself “Is this course of action sufficiently Authentic, Responsible and Courageous?”
- Each of the three ARC qualities sometimes gets in the way of the other two
What do I mean by Number 5? I mean there’s tension between the three ARC qualities. Each of the three is great in isolation. That’s why we have a whole literature on Authentic Leadership, a growing movement trying to get leaders and their organisations to be more Responsible and a few good books, articles and TED talks aimed at helping us be more Courageous.
The problem is, authenticity, responsibility and courage don’t exist in isolation. They’re interconnected, entangled with each other, and there’s tension between them. The most common tension is between Responsible and the other two qualities: when you try to be Courageous, for instance, your sense of responsibility throws up reasons to play it safe – if it didn’t you’d make ill-conceived decisions, just as RBS did when it acquired ABN Amro with unsufficient due diligence.
Authentic, Responsible and Courageous outsourcing
It’s in the tension between these three qualities that you’ll find the real strength of ARC Leadership. Let’s take a simple scenario: you believe your supplier or client has consistently behaved in a way you feel is unprofessional. If you were to be truly Authentic, you might nail them with criticism at the first opportunity, venting all your frustrations in wave of vitriol. If you were being entirely Responsible, you might postpone any feedback until you know you and your organisation have everything you need from this person. Neither approach is optimal. What if, instead of choosing between two binary options, you focused on taking a responsibly Authentic or authentically Responsible approach to that relationship? You’d be looking for an approach that was genuine, honest and consistent with your values and also delivered the required change in behaviour without jeopardising the success of your shared endeavour.
Used well, each of the ARC qualities feeds the others. When we’re struggling to find the courage to take a stand, for example, we can draw on authenticity – by asking what our values say we should do – and our sense of responsibility to something bigger than ourselves. It’s this that helps us overcome the fear of saying ‘No’ to a superior or client who’s demanding something we believe is wrong or unfair, for example: we test their request against our values and ask what our responsibilities really are – to the organisation and its reputation, to our profession, to the colleagues who rely on us and the staff and colleagues whose future conduct we influence.
It’s this non-binary way of thinking about ARC that leads us to Second Generation Outsourcing – the use of complementary organisations to take our own organisations to places we couldn’t access without their help . When buyers, suppliers and advisors are Authentic about the needs and aspirations of their organisations, they’re much more likely to find a common goal. When they commit to shared responsibility for each other’s success, they create the foundations of a promising partnership. When those partners insist on intellectual and aspirational courage from everyone involved, they forge a winning coalition in which every member has the potential to dominate their respective markets.
With that in mind, whether you’re a buyer, supplier or advisor, I’m asking you to ask yourself and your outsourcing partners the following questions:
“How Authentic, Responsible and Courageous are we being in this relationship? And what more could we achieve if we brought just a little more ARC to the table?”
But maybe you won’t. After all, they’re Courageous questions in themselves – and maybe you’re simply too scared to hear the answers.
About the Author
Richard Boston is a psychologist who coaches leaders and leadership teams across the globe, for household names like Gucci, Heineken, the NHS, Siemens and Shell, as well as SMEs, charities, governments and various nations’ armed forces. He is founder and Managing Director of LeaderSpace, his own consultancy firm, acts as external faculty for select business schools and sometimes partners with other consulting practices. He’s also a speaker and mudrunner, and he once won four awards for bravery.