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Outsource magazine: thought-leadership and outsourcing strategy | June 26, 2017

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Why do we so dislike outsourcing suppliers?

Why do we so dislike outsourcing suppliers?
Outsource Magazine

Outsourcing is a long-established business tool.  However, customers rarely sing suppliers’ praises.  Many relationships are difficult and customers often complain, but usually don’t raise concerns directly until it is too late.

The key question is why does this happen and how can we improve the situation? We need to start by looking at some of the common causes of customer complaint, the underlying reasons for them and what drives the supplier response.

 

John Creaser Mke Dodd May 2015 graphic 1

The heart of all these complaints is that customers feel that they have articulated clearly what they expect, but these expectations are not met. Part of this mismatch lies in a lack of understanding that suppliers have the same needs as their customers:

  • Reward: few people get out of bed for nothing and few organisations exist to break-even so suppliers will need to  generate income and profit
  • Recognition: humans are sensitive, we take a significant amount of satisfaction from a ‘thank you’ and a compliment, suppliers are the same
  • To feel part of the team: most people, including suppliers, want their colleagues and clients to succeed.

So how can we break out of the negative cycle of complaint and disappointment?

The first step is for customers to make sure the contracted services reflect their business needs and are aligned with stakeholders. The contracting process may well have resulted in a deal which doesn’t really meet these needs and this has to be addressed and contracts updated if necessary.

Managing the contract is also critical and customers should take a long, objective, view of their retained organisation and check it has the skills and roles to do this effectively.

Underpinning all this is a need to stop thinking about the supplier as just a supplier. There are real benefits to be gained from treating the individuals, teams and organisations that work with you as partners. That should then enable you to make your supplier(s) feel like they are part of your organisation and encourage collaboration.

Creating that positive relationship will mean paying the supplier a fair price, based not just on the bottom line but the value they can bring. So when negotiating the price, there should be some room to manoeuvre, recognising that if the supplier is making a profit, they will be more likely to be flexible. Equally, while traditional SLAs are great at measuring performance and penalising failure, customers should ensure that there is some upside for outperformance. And remember to say ‘thank you’ when they do. Then, if things go wrong, customers should learn to complain constructively.

As Debrett’s puts it: “The British love to complain, but we’re not very good at it – our natural reticence and desire to avoid confrontation makes complaining challenging. Although we like a good whinge, we’re more likely to moan at someone else than complain directly, through the proper channels or in a way that might actually fix the problem”

In many cases, the problem lies in an inability to understand the difference between being assertive and being aggressive. Customers who don’t want to be aggressive are often not assertive so nobody listens until the issues become serious.

All these elements underline that the key to a successful relationship is finding a supplier that you can work with, taking the time to build (and periodically update) a contract so that it meets both your needs. Then you can focus on working with them, not alongside (or against) them and so make it more likely they can meet your expectations.


About the Authors

John Creaser 150John Creaser is a sourcing expert at PA Consulting Group. John works with clients across various industries and geographies, throughout the entire sourcing lifecycle from strategy to transition, drawing on operating experience within the sourcing, service management and back-office service arenas. John has significant experience in the assessment and design of operating models and defining requirements for service management and technology services.

 

 

 

 

Mike Dodd 150Mike Dodd is a sourcing expert at PA Consulting Group and has developed and implemented sourcing strategies across multiple service lines and multiple continents, negotiating complex outsourcing deals up to a value of $2 billion. Mike has an ability to engage from board level to shop floor, combined with experience in designing, delivering and negotiating deals from both client and supplier side. He has worked extensively in the UK, Europe and North America and across multiple sectors.

Comments

  1. Maximilian

    Great article, but I don’t think this situation applies to all outsourcing contracts especially those where the measure of success is not so ‘subjective’ but based on a measurable deliverable as is the case it outsourcing certain IT functions. With managed IT services it behooves the contracting business to have thoroughly understand what their needs are and to have their service level agreement accommodate those needs 100%. One pitfall I notice is committing to protracted agreements of a year or more without consideration of evolving technologies or expanding or diminishing needs.

  2. John and Mike,
    Very well stated message. I’m a forty year veteran servicing the auto industry and the theme of your article actually pushed me into a sabbatical to write a book about.

    Keep writing.

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