By Kathleen Goolsby
For a host of reasons, many people mistakenly believe an outsourcing service provider's poor performance is the primary cause for a failed relationship. Root cause analyses, however, most often identify poor communication as the biggest culprit. Through decades of case studies, clients and service providers are awakening to the problem. Essentially, effective communication in outsourcing is like chlorophyll, the substance that transforms carbon dioxide from the air into food flowing through a plant's vessels. With effective communication, a relationship can grow and thrive; without it, an outsourcing relationship will become diseased and may die. If effective communication exists, the parties can discuss and resolve performance problems and other challenges.
"I don't think I've encountered a problem yet that couldn't be resolved through continued conversations," states Mary Vaughn, Account Executive for Computer Sciences Corporation (CSC). "When people's minds are closed, their focus is too narrow. If they open their minds to the bigger picture beyond the immediate point at hand, they can find a starting point for bridge-building."
Kathryn Hendricksen, Director of Marketing Services, HP Managed Services, agrees that communication is crucial to success. "If communication goes well and smoothly, it helps manage change. If it doesn't go well, it wreaks havoc for both the buyer and provider because not enough information is shared."
"If either party is not up to speed on methods that facilitate effective communication," warns Cal Braunstein, Chairman and CEO/Executive Director of Research at Robert Frances Group (RFG), "together they will fail to achieve their objectives."
Although it's crucial, communication doesn't come easily or quickly. It is deeply dependent on mutual trust—something that has to be demonstrated over time. Nevertheless, some companies understand exactly how to build and sustain effective communication to achieve outsourcing objectives. I spoke with advisory firms and provider firms that have been involved in building highly successful, long-lasting outsourcing relationships to learn their advice for buyers. Here are their practical, yet powerful, insights.
Where It Starts
Greg Amos, a principal with Daedalus Group, Inc. and 25 years of experience in business advisory services, says both parties must practice effective communications as early as the provider-selection and due-diligence phase. At this early stage, there is a high level of suspicion and uncertainty regarding what is potentially to be bought and sold. Amos says it's often advisable to use "back-channel" communications. While the parties may not have reason, yet, to trust each other enough to be honest and direct about their predisposed beliefs and desires, they can both place a level of trust in the objectivity of an advisor.
Taking the back-door route to obtain information, by asking an advisor to confirm or explain the other party's beliefs and intentions, is a less direct but still effective communication bridge. "In a progressing relationship," Amos explains, "once the parties realize they have been told the open truth throughout the negotiations—even through back channels—some level of trust will have developed between them."
Ed Horton, Account Executive at Acxiom Corporation, agrees that effective communication is a trust issue. "Both parties have to be fair, honest and forthright from the beginning," he asserts.
Aligning interests between buyers and service providers is a tenet of trust-building communications in relationships involving Deloitte Consulting LLP. Indeed, Daan De Groodt, a Senior Manager in Deloitte Consulting's Outsourcing Advisory Services practice, says good communications are not a "given" at any point in time in outsourcing. The parties must proactively execute on the communications framework they have established at the outset, but the starting point if things go bad is always to build the trust base back up.
The Framework
The devil's in the details, as they say; so are the factors for building effective communication. Even an invoice is a mechanism of communication. Is it clear? Is it paid on time? In either instance, a party's reaction communicates in a manner that helps the relationship—or does the opposite.
Parties to successful outsourcing arrangements make sure their communication framework (including such items as committees, forums, frequency of meetings, individuals responsible at each level, and escalation of issues) is detailed in the outsourcing contract and/or the governance agreement.
Acxiom works with its clients to make sure everyone's expectations are communicated and reflected in the contract as guiding principles. "We over-communicate expectations early in the sales process," states Horton. This is especially important where the provider is responsible for a client's mission-critical processes. The contract also details the parties' understanding from their up-front communications about what "success" means. The firm then constructs some components of its long-term contracts around milestones. Those key dates include communication deliverables to ensure things are properly communicated so there are no surprises. As they near a major milestone, the frequency of touch-base meetings increases.
Things usually go wrong in an outsourcing effort where assumptions are involved. As RFG's chairman explains, most companies have a standard operating procedure (SOP) that includes a lot of assumptions everyone understands. But the outsourcing service provider does not have that knowledge and history of the buyer organization.
"Things go wrong when the buyer continues to assume the SOP is in place or when an outsourcer doesn't want to ask about something and, instead, makes a wrong assumption," Braunstein explains. "All the little things either party doesn't think to communicate because someone made an assumption will end up being critical points somewhere along the way." The more both parties understand about each other's jargon and their manner in communicating about decision-making will increase chances for success.
Outsourcing forces buyers to do things in a more process-oriented manner. While this is a desired objective, issues can arise if communications about processes are inadequate. Braunstein counsels buyers to make sure the contract details communications about who does what, who owns what, as well as the metrics and measurements required to ensure these tasks are handled effectively.
In offshore relationships, RFG advises buyers to build additional bridges up front to facilitate communications. Sending a few people to the offshore location and bringing some of the provider's personnel to the buyer's location eliminates a lot of miscommunication issues, as well as lag time.
Most advisors agree that meeting forums should be on three levels: strategic/partnership, commercial business and operations/technical. Performance reporting, service level agreements (SLAs) and areas where either party feels the other is not complying with contractual obligations are often on the agenda for formal meetings; but this can become fodder for conflict, rather than collaborative partnership, if communication is poor. Sharing his advice, De Groodt at Deloitte Consulting says both parties must always recognize each has a vested interest in the success of their relationship. A buyer wants good service; a provider wants a satisfied customer. "If the parties establish customer satisfaction as one of their SLAs, they have a skin-in-the-game discussion point from which they can be proactive."
At HP, learning to communicate with each other begins at top executive levels; in contract negotiation, the executives collaborate and begin designing their communications framework. "We ask a lot of questions," states Hendricksen. "We want to make sure the buyer communicates its expectations, and we want to get an understanding of how things currently happen in their company culture." Their collaborative approach includes sharing information about what has worked in other client scenarios, rather than saying, "here's what we're going to do."
HP focuses much of its communication efforts and resources in managing the massive amount of change that takes place for buyers entering into an outsourcing relationship. When contract signing is imminent, the provider partners with a buyer's communications team to jointly develop a plan for internal communications at the buyer's company about the outsourcing initiative. The goal is to communicate in the manner to which the buyer's employees are already accustomed.
"We have a lot of resources at HP dedicated to communications because it's critical to do it well. We consider communications a differentiator, and we want our clients to perceive communications as a true value-add," states Hendricksen. Activities during a transition phase are especially supported by these resources.
HP develops a transition Web site accessible to employees transitioning from the buyer organization to HP. It's full of information on various aspects of HP, the upcoming changes, question-answer mechanisms, and updates on transition progress. This tool has been very effective in helping to ensure transitioning employees have the right mindset at Day One of cutover to to the provider's services. On larger accounts, they also assign a dedicated communications person (or team) to ensure integration goes smoothly for transitioning employees.
In addition, the firm leverages its extensive knowledge to its network of communicators who support various HP accounts. They meet twice monthly and share best practices and tools regarding communications methodologies. Any effort at communicating more effectively, says Hendricksen, results in a buyer's earlier adoption and buy-in to change.
Deloitte Consulting's mechanism for ensuring both parties' interests are well defined and clearly communicated in the contract is to develop a "benefit-risk profile" for both the service provider and buyer. "We ask the parties to tell us what they see as their risks in the relationship," De Groodt explains. "We also ask them to talk about the benefits they want to achieve. Then we discuss how to reduce their risks and increase benefit realization through better communication."
Willingness to reveal one's risks is dependent on trust, which often is minimal at this early stage of the relationship. To encourage a more open conversation, De Groodt says they brief clients on the best practices and experiences with similar clients and how building communications processes and procedures into the contract will help in dealing with problems later. "We help them understand that building a partnership-style of relationship means they need to invest communications efforts into the relationship."
Deloitte Consulting's advice includes making sure the communication framework has a communication stream at each stage of the transaction, especially at times when processes or technologies change. Communications in such instances should occur with a variety of stakeholders on a daily basis to ensure everyone has a heads-up awareness of coming change.
Content
Which is more crucial to success in outsourcing—what is communicated, or the manner in which it is communicated? The answer depends on the nature of the relationship and the services performed.
"Whether it's a written or verbal communication, it's not what you say but how you say it," believes Acxiom's Account Executive. "And timing is everything."
Horton adds that he continues to be amazed at how differently people interpret what they hear. This is especially true in global situations. "You can communicate all day long and think you're being very clear about the facts and issues. But you need to be sure everyone is interpreting what you said in the way you meant it." He suggests following up with questions such as "what does that mean to you?" or "what action do you understand we need to take?"
"The manner in which something is stated always counts," says RFG's chairman. "But the 'what' is the main issue; otherwise, people will make incorrect assumptions." Content and the manner in conveying it go hand in hand for importance in scenarios where work is sent offshore. Because of cultural and language challenges, clear communication regarding the 'what' is crucial in avoiding costly errors. At the same time, buyers need to remember that "senior"-level executives in offshore locations have most likely been in the business only a handful of years; thus, they may be at a different skills level in understanding executive communications and decisions.
Through the transition phase, HP places strong emphasis on the manner in which communications are conveyed to ensure understanding by the transitioning employees; as the relationship matures, the 'what' of communications becomes more important. Hendricksen says their efforts focus on making sure a communication conveys clear, crisp information that has anticipated questions someone might ask and that it also includes a call to action.
Behavioral Aspects
Perhaps the most important aspect of building and sustaining effective communication in outsourcing is to bear in mind the relationship itself. A key behavior that will enhance the relationship is eliminating defensive attitudes. Isolate the message from the messenger and focus on the issue rather an attacking an individual.
The relationship perspective is the primary focus of communications at Acxiom. On a scale of 1-10 (one being low), upfront planning for the mechanisms of communication rank an eight, in the opinion of Horton at Acxiom, "I don't rank it at 10 because, in the real world, circumstances change. Both parties must be flexible and willing to change." How such changes are conveyed, discussed and documented depends on the companies involved and the relationship's maturity. "Sometimes changes are handled in a formal manner and in writing; sometimes not," he says. "But our company's business practice is to do the right thing in making the change and in talking about it. Communication is not just about issues and change. It's a means of enabling collaboration and enhancing the overall value of a relationship."
In a similar vein, De Groodt at Deloitte Consulting believes the best practice is not to bring up every little issue that comes along. Focus instead, he advises, on patterns that form; then start the communications when a trend becomes evident. Otherwise, it can become an administrative encumbrance to have to communicate about everything that comes up.
Mary Vaughn, author of The Gruntled Employee: A Holistic Model Addressing Behaviors in Outsourcing (to be published later this year by Metargy, Inc.), believes communication problems result from the way we filter information we see, hear and feel. "According to motivational guru Tony Robbins, we generalize, distort and delete information before tucking it away in our memory," says Vaughn. Those memories then form our beliefs for shaping future transactions.
Beliefs such as "I'm Okay, you're not Okay," for example, hinder effective communication. There must be mutual respect between the parties. Detailed thinkers often discount the ideas of big-picture, strategic thinkers. Analytical people tend to discount opinions from the warm/fuzzy type of person; conversely, the interpersonal thinker will probably discount an analytical thinker as being cold and calculating.
For communications to be effective, explains Vaughn, people need to understand each other's perspectives and speak each other's language. That necessitates addressing the values and beliefs behind the content of the communication. She cites joint decision-making (rather than one party being dominant and one being submissive), teamwork, and joint responsibility for the full effort of a task or vision as examples of ways to enhance understanding and improve communications. These collaborative behaviors are key components of an interdependent operating model her book describes.
Vaughn stresses a holistic approach to building effective communications. "Culture, governance structure, processes, information systems and management systems comprise the communication framework; and all four drive behavior," she says. "By implementing an interdependent operating model with an effective communications framework, providers and clients will be promoting the kind of communication and behaviors that lead to mutual success."
David Greenwald, an executive with a CSC Program Management Office, believes a key aspect of effective communications is understanding the difference between conversation and dialogue. Greenwald has experienced successful relationship outcomes in many contexts by implementing the Dialogue Model detailed in the bestselling book, The Crucial Conversations—Tools for Talking When Stakes are High," by Kerry Patterson, et. al (McGraw Hill, 2002). The model emphasizes such matters as how to speak persuasively, rather than abrasively; how to listen when others blow up or clam up; how to stay focused, how to apologize and fix misunderstandings, how to move to action, and other crucial aspects of dialogue.
Aimed at Remediation
The minute either party starts being untruthful or doesn't disclose necessary information, seed for problems is planted. This phenomenon placed one outsourcing relationship in peril at Day One of services, and the deal went downhill rapidly. The service provider had underbid its services and quickly learned it couldn't deliver on that price; the situation was exacerbated by the fact that the client had not imparted its true expectations of differing service levels at its various subsidiary operations. In just a short time, both were dissatisfied with their arrangement. They graduated from frosty statements beginning with "the contract says . . ." to not talking at all.
Remediation experts were successful at bringing both parties from their separate corners back to the table to communicate. Step one was for the mediator to earn the trust of each party so they would be comfortable in discussing the issues. They had to believe that a solution could be developed, that it would be workable and would be economically fair to both. They learned to leave emotions out when they talked and cast their comments in a manner that focused on objective assessments of potential solutions, rather than talking about the problem. Thus, they were able to identify and communicate with each other about the barriers that were keeping their relationship from being successful.
Conclusion
At the start of an outsourcing relationship, both parties usually have something different in mind. Effective communications will build a bridge between those differences. Ineffective communications, however, will widen the chasm that needs to be bridged. Where mechanisms are put in place to understand each other's perspectives and behaviors are focused on building the relationship for mutual benefit, communication will become a bridge to achieving the original vision as well as increasing the ongoing potential for added-value outcomes from the relationship. And when it comes to outsourcing, that's not small talk.
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