How having a strong intelligent client function will save you millions
Byon August 18, 2014
As outsourcing continues to gain popularity with both commercial-sector businesses and public-sector bodies, the importance of a strong and well resourced intelligent client function (ICF) team that has the skills and commercial awareness to drive maximum value from complex client/vendor relationships, has become more and more important. With a strong ICF in place, evidence suggests that organisations are clearly much more likely to drive innovation in service delivery, save money, reduce wastage and achieve their proposed outcomes.
However, in our experience, without the appropriate funding and resources set aside for an effective ICF team, all too many relationships can rapidly turn problematic. We often find this leads to lower service levels and increased costs from major strategic partnerships with external providers.
Recently, an All Party Parliamentary Group commissioned a report into just this issue to highlight the importance of critical thinking within the often-beleaguered public- service outsourcing sector. The report – How can the public sector become a more intelligent customer of outsourcing and shared services? – highlighted ten key recommendations for forging, maintaining and sealing vendor relationships, in a bid to help organisations avoid the pitfalls that many see as crippling the UK outsourcing field.
These recommendations were to:
- Take a more considered and informed approach to outsourcing.
- Clearly and simply communicate business objectives throughout.
- Focus on outcomes over process to ensure contractual clarity.
- Identify and celebrate social benefits of a project/relationship.
- Ensure greater understanding and clarity through supplier training.
- Conduct all discussions in a timely, flexible and transparent manner.
- Standardise requirements where possible for the economies this offers.
- If possible, utilise existing service models to save time and money.
- Seek out government’s best practice guidance for procurement teams.
- Ensure that all parties are aware of the benefits of working together.
If you have a strong team, an experienced and well-trained/resourced ICF can help your organisation at every stage of the strategic-partnering process, from successful pre-procurement negotiation to achieving the desired business outcomes through the life of the relationship. If necessary, a successful ICF team can also help organisations to swiftly negotiate their exit strategy from a toxic partnership, or one that has naturally reached the end of its shelf life, by maximising the upside and minimising the downside. This article will show you how a successful ICF strategy can help you drive maximum value from your vendor relationships and assist you in achieving the outcomes that you want and expect.
Why UK business is suffering from a lack of strong ICF teams
The main emphasis of the All Party Parliamentary Group report was to highlight the fact that the UK is suffering from a distinct skills deficit within the public-to-private outsourcing process, especially when compared with their EU counterparts. The report also emphasised that organisations often ‘bought in’ help for particular strategic partnership projects, resulting in huge teams of people working on these initiatives, when a small, highly specialised group would be much more cost-effective. This is often a result of the big firm ‘land-and-expand’ policies coming to fruition.
A lack of knowledge of EU procurement directives was also underlined in the report, which stressed that these failures were not only slowing down projects but also causing vendors great frustration, affecting internal relations between public-sector and private-sector bodies. With a successful ICF team potentially able to save you up to 8% in our experience, investing in the time and resources to train people in procurement law (public-sector-related), and the soft skills necessary to be strong negotiators, is essential for effectively managing your vendor relationships.
The report also indicated the problem of having two separate teams involved in the process of procuring strategic partnerships, such as outsourcing or major projects – one involved in the bidding process and the other in seeing the project through. This lack of continuity makes it harder for client organisations to build up trust with individuals on the contractor side, and the switch over may cause projects to stall before they have even had time to begin.
How an intelligent team will improve your strategic partnership experience
With the inherent cultural differences between client-side delivery and objectives and those of the service providers or strategic partners, aligning them during the service-delivery process is challenging at the best of times. Without a strong emphasis on partnership and joint enterprise from the pre-procurement process onwards, many relationships are destined to run into issues further down the line, or fail completely.
Building a strong ICF team who are able to successfully engage in pre-procurement constructive dialogue is therefore essential if you wish to avoid problematic relationships later in the project. Unless the expectations and contractual obligations of both parties are laid out before the contract is signed, there is a good chance of misunderstandings creeping in which could lead to the development of defensive behaviour. It is therefore crucial for your organisation to have a best-practice policy in place for the implementation of pre-procurement conversations, along with a structured pre-contractual due diligence process. In this way, all members of your ICF team are on the same page and able to build up a trusting relationship with the vendor.
A mutually trusting relationship between your ICF team and your vendor will not only help you to avoid future tensions, it will also serve to keep any rogue members of the vendor company in check, as they know they are being critical friend challenged.
The value of outcome-based thinking
Despite the many advantages of having a crack ICF team on board, the collective skillset of your team can also lead to problems, as they may wish to become more involved in the project than would be sensible from a legal standpoint. With extensive IT, technological and business process knowledge prerequisites for an ICF team, it can be tempting for members to get involved in the ‘how’ of a project’s delivery if they become aware that your vendor is not doing things as smoothly as you might like.
When involved in a strategic partnership, the ‘how’ of a project being delivered should not be your concern. Any interference by your ICF on the ‘how’ rather than the ‘what’ of service delivery will weaken your contractual position should you wish later to hold the vendor accountable if its mechanism of delivery process is unsuccessful. However well meaning your intervention may be, it could actually disrupt vendor plans that could have achieved your expected outcomes. The value from an ICF team should ultimately be placed on outcome-based thinking, helping to steer the vendor towards the project outcome that you desire.
While the practical resources of the project may have been outsourced, you should not outsource the overarching strategy, as only your organisation knows what is best for it in the long term. Focusing on strategy will also help you to reduce manipulative or negative behaviour within the project, while mutual respect will help to build trust and therefore drive the vendor to help you to keep costs down for the mutual benefit of both parties.
The importance of ongoing training for your ICF
In order to keep on top of all strategic relationships, it is essential that your ICF team members are kept up-to-date and have regular access to training. Since the closure of the National School of Government, access to public-sector training has been reduced, as all emphasis is focused on cutting the budget deficit. For both private- and public-sector organisations, in-house training schemes are integral to the success of your organisation. ICF members need to keep on top of updates to procurement legislation, EU directives and other evidence-based industry good practice. Failure to do so will often result in an ineffective partnership that costs you more for lower service levels – and is unlikely to yield any innovation. For public-sector organisations, you have the added risk of the pre-procurement process being rendered useless (and your organisation being fined) if your staff have failed to reflect the new legislation or regulations.
Ongoing training will also help your team to develop the necessary skills to carry out a successful exit strategy if you encounter material performance or value-for-money issues with your vendor. The development of successful relationship-management skills may help you to avoid having to implement an exit strategy, but as problems are sometimes unavoidable, it is crucial to have a team in place that have considered exit strategy options from the onset of the bidding process.
In the long term, it is also the task of the ICF team to ensure that any potentially positive social outcomes of a project are articulated to the public at large so that the positive aspects of public-sector outsourcing can be bolstered and celebrated. With so much negative discussion surrounding public-sector outsourcing, it is also crucial to ensure that your team is aware of the potentially positive outcomes that they can help to achieve and begin each new project with a positive outlook. Our experience is that having an intelligent and well-resourced ICF team is pretty much guaranteed to save you short-term money, time and potential legal issues further down the line. But, most importantly, with your ICF team driving innovation and building commercial trust, you will significantly increase your organisation’s reputation and effectiveness.