The degree to which organisations engage in the strategic commissioning process can, however, greatly affect the future of their relationship with their service provider, and can even dictate whether they save money or incur costs that they never budgeted for.
While saving money is often the main reason that companies go down the external service provision (or outsourcing) route, there are other potentially positive factors to consider. Outsourcing could improve the quality of your company’s service delivery; with more people, training and technology to tap into, a private service provider may be able to offer greater flexibility, responsiveness and innovation. It may also be possible to acquire better management structures as a result of partnering with an external provider, and by doing so achieve a more focused and concise approach to the issues at the heart of your organisation. Many companies also benefit from improved credibility after partnering with a well-known provider, which in turn can increase levels of capital investment and provides a great PR opportunity for organisations that may have previously suffered from image issues.
Typically the size and value of an outsourced contract is one that would result in a very large dent in the budget of an average organisation; therefore, it is essential to understand the pitfalls that need to be avoided during the strategic commissioning process. Unfortunately, there are many recent examples of service provider partnerships that have turned sour after the initial ‘honeymoon period’ has come to an end. While the many negative examples of service delivery partnerships in the media may seem off-putting, they do provide valuable lessons. It also highlights the importance of understanding what business outcomes you are trying to achieve, an effective market engagement and procurement process, successful negotiation, communication and contractual agreement.
In order to avoid problems from the outset, or much further down the line, particularly as most service provider contracts last for many years, we have drawn up a list of the five most important enablers to consider during the strategic commissioning process.
1. Define clear business outcomes from the outset
Whatever your organisation is looking to gain from the outsourcing process, it is essential that you have a clear picture of what you wish to achieve from the very beginning. The more time that you put into this process now, the less likely it is that you will have to renegotiate with your service provider further down the line. Fundamental to this is to establish a team dedicated to the task of not only uncovering the true objectives of such an arrangement, but who are capable of looking into the future to determine objectives years down the line to ensure that service providers and the contracts that bind you to them are future-proofed to fit your needs.
2. Quantify the commissioning remit
After you have defined the necessary outcomes for your organisation it is important to take time to define the levels of service that you require from your partner, including the quality and the quantity elements of these services. Many organisations are guilty of being too aspirational, and putting forward either unquantified service levels, or service monitoring that drives the wrong behaviours. Ultimately, they find that further down the line, they are unable to hold their service provider accountable to achieve expected business outcomes, as they did not clearly define them from the very beginning. The key here is to make everything quantifiable so that (a) both you and your provider understand what is expected and the actions/behaviours necessary to achieve those outcomes and (b) if things do go wrong, everyone knows exactly where they stand and why. Expectations should be clearly communicated and recorded for reference later on. Even if they are not included in a formal written contract they can still be part of a service provider’s responsibility to you in law.
3. Draft your requirements and go to market
When seeking the ideal service provider for your now clearly defined needs you should produce a concise and detailed tender document. It is crucial to present your expectations in an unambiguous form, and to discover whether the tendering companies are of the right size, have the right culture, and understand the needs of an organisation such as yours. Only by asking the right questions will you gain the insights you need to be able to select the best partner for the project.
Ensuring that you approach the vendor market with clear and quantified business outcomes, requirements and an appropriate and transparent procurement plan, helps to build your own organisation’s credibility with the market, and helps the vendor understand much more clearly about the business outcomes you wish to achieve.
4. Contract negotiation
The negotiation stage of a contractual agreement is all too often rushed through, with pressure being placed on clients who wait until too far through the procurement process before starting. Clarity in your written contract is essential, but so is a complete understanding of the ‘expert responsibilities’ implied by law on all service providers and an awareness of whether any of the terms being negotiated by them run contrary to their legal responsibilities as experts in their field. Know your exact needs, quantify them, then make sure you get specific and finite responses on costs, delivery periods and service levels from those tendering for the partnership.
5. Implementation and transition
All of the above will prove futile if you do not have a strong project, contract and intelligent client function management team in place once the relationship has been entered into. While it is inadvisable for you to get involved in ‘how’ your service provider is to achieve the results and objectives you have set them, you can and should monitor their performance and output, and doing so is crucial if you want to spot any potential issues before they snowball. Your governance team must build relationships with key people on the vendor’s side, meet regularly with them, and report on progress. They are the early-warning system for your project, the connected individuals whose intimate knowledge of the project and all its players are what could be the difference between a successful relationship and one that degrades into a messy failed outsourcing agreement.
For a more in-depth analysis of how to build and maintain a successful relationship with your service provider, see our Strategic Commissioning white paper.