How to Use an Expert to Fix a Failing Provider Relationship
Byon November 27, 2012
It’s a common situation. An organisation is very disappointed with what they perceive to be unsatisfactory service delivery from a strategic provider and they want out of the contract. They appreciate that exiting a service provider, complex IT or strategic commissioning contract can open up a proverbial hornet’s nest, so they bring in an expert to assist in facilitating a relatively smooth process.
If at that stage Best Practice Group was contracted, we would in all but the most extreme cases advise that you consider rescuing the relationship, as opposed to terminating it. In this post I want to explore the reasons behind our thinking along with why our approach can often result in a far better outcome for both you and your provider.
An Example of a Commissioning Disaster
Not too long ago we worked with a City Council that had outsourced 64 of its major services to a primary supplier. One of those services was ICT; a crucial service spanning all 63 other outsourced services. This included managed help desk and fault resolution for the entire Council encompassing infrastructure, network connectivity, all of the servers and printers, maintaining and upgrading mission critical applications, internet, email, and so on.
Tactically the provider would be responsible for business continuity, disaster recovery, refreshing the technological estate (servers and PCs), selecting and implementing new fit-for-purpose systems and upgrades, and resolving all user base issues and first line support into third party providers.
Strategically the provider was tasked with the expert role along with providing plans for how the service would continue to improve over the life of the contract by increasing efficiency, whilst reducing costs (a downward glide path).
Fast forward to our introduction to this project. The service was performing very poorly:
- The annual cost per user was £2,000.
- Customer satisfaction ratings were averaging 28%.
- The technology estate was ageing and unreliable.
- There was an absence of strategic input and a history of failed projects.
- There was a significant backlog of requested changes — the change control process was out of control.
- Confidence in the provider improving was low, as was the perception that they had the desire to improve.
People weren’t even using the help desk — instead they attempted to figure out problems themselves or asked colleagues for help. In short, the underpinning architecture was failing, as was the service and the relationship.
The Council was seriously considering terminating the contract. This would have been the worst possible thing to do given the circumstances. Other parts of the contract were operating smoothly and carving out the IT section alone and launching into re-procurement would have been unsustainable in practical terms.
What Happened Next
An expert coming into a situation such as the one described above has the benefit of, (a) not being emotionally involved, and (b) being able to more easily step back and take a look at the big picture.
Our first step was to make the implications of contract termination clear to the client. Was it really the best option? The answer was no, but we needed evidence to back up our assertion. We did this by:
- Carrying out a technical review of infrastructure, comms, and technology, along with the help desk and customer service centre
- Benchmarking performance
- Assessing contractual obligations
- Hiring a QC to clarify key legal points regarding how the parties’ behaviour may have impacted on the contract
- Considering which of the other 64 services were performing below par
- Providing a clear prediction of what contract termination would result in (huge liabilities and full re-procurement)
Once the Council was onside with the concept of fixing the relationship rather than terminating it, a plan was needed to get the service back on track. This stage typically follows a two step process:
- Engage in dialogue with the provider. Ask if they want to improve, but incentivise the question appropriately in order to gain an affirmative answer.
- Agree a fixed period improvement plan with clear and quantifiable quality criteria (aligned with contract obligations).
The result was a resounding success.
Customer satisfaction rose to 70% within the improvement plan period and continued to rise to 93% beyond that period. The relationship between the Council and the provider improved immeasurably. New projects contributing £2.5m in savings to the Council were devised, but the provider also benefitted from increased margins.
But perhaps most importantly, as a result of the mutually beneficial outcome, both sides’ reputations were not only left intact, but were stronger for having resolved the situation in such a relatively smooth fashion.
When it comes to faltering service provider relationships, the manner in which the two parties communicate can have as big an impact as the technical actions carried out on the front line. To put it another way, relationships can often be as much the problem as strategic or tactical issues — and that can be as much the client’s fault as the provider’s.
In the above case study, as much as the client blamed the provider for perceived wrongdoings, blame could be apportioned across both camps. Our focus was on a mutually beneficial outcome — not a fight — and ultimately that was achievable. The alternative, which was at one stage seen by the Council as the best resolution, would have been unthinkably costly and litigious and a huge risk of business as usual services provision falling to pieces.
Creative Commons image courtesy of CarbonNYC