In the last of the three part series on adjusting the fundamental approach when establishing sourcing relationships, Tim Palmer, the Lead in HR Transformation at PA Consulting Group, details the two final steps in ensuring objectives are mutually agreed and achieved.
Step 3 – CRITICAL! Check approach and contract align with intent
When you have made your decision, agreed your pricing and are finalising the arrangement, take time to reflect on where you are in the process. We mark this as CRITICAL! because it is the hardest thing to do; your project team will be fatigued and the service provider will be pushing to start (if they haven’t already). However, it is important to sit back and take stock before signing and starting. Almost all of PA’s sourcing remediation projects, where we help fix broken relationships, have at their heart unmet expectations and misunderstandings. One multinational has had three key problems in their global outsourcing contract. These are the same three areas that felt wrong when they signed – but under pressure from the board to ‘get on with it’, they proceeded anyway.
Due diligence should be about preventing such surprises; a key element is to validate that the original sourcing intent is achieved in the arrangement. This can include going back to the scenarios used in the selection process and checking that the solution still holds. It can also involve finalising the end-to-end metrics that will measure (and potentially incentivise) success.
Of course, there is always the possibility that these tests show that your intent is not met by the final proposed arrangement. In this case, you have ‘sourcing programme manager’s dilemma’. You have worked hard at something for a protracted period, cost your organisation a lot of money, and now have delivered something that doesn’t (yet) meet their requirements.
What do you do? From our experience, it is wrong to persevere with something that is doomed to fail, so however painful it might seem, we would stress the importance of going back through a loop, checking the intent and proposed course of action before proceeding and then coming to an agreement that puts the intent at the front of the mind of the team preparing the implementation.
Step 4 – Implement the business change in line with the intent
Planning and agreeing a sourcing approach is one thing, but there is no value created until the solution is implemented and the benefits are flowing. The way in which the implementation is managed needs to be in line with your intent. You should find ways to bring it to life, such as the creation of a ‘working guide’ that can be shared across all staff, that starts with the joint intent statement and sets out how it will be realised through its implementation. Whatever the solution, the intent needs to be understood and adopted by both the service provider and the customer organisation.
The current global economy presents the chance for sourcing techniques to prove their worth, by creating and realising value through a reduction in costs, increased performance and the provision of flexibility. If companies follow the four key steps outlined in this article then they will benefit from the wealth of opportunities that sourcing presents in the current environment.
This article is an extract from PA Consulting Group’s book, ‘Surviving and thriving in the economic crisis: The sourcing opportunity’, and is available free of charge. To request a copy of the book, please visit http://www.paconsulting.com/sourcingopportunity