Substance over form; Outcomes, like size, matters

The recent Local Government elections caused me to reflect on just how alike Outsourcers and Politicians are:

• Politicians produce a manifesto; outsourcers produce a proposal
• Politicians get a term of office ; Outsourcers get a contract term, both are measured in years
• Politicians are expected to deliver on their promises; Outsourcers are expected to meet their SLA’s
• Politicians come up for re-election ; Outsourcers get contract renewals

We ultimately judge Politicians on the outcomes of their time in office. The newspapers often attempt to judge the feel good factor, …or otherwise, engendered by their actions. This impression is built up as a result of their actions over a period of time, and not, as Politicians would like to believe, by their activities in the 3 weeks of campaigning immediately prior to an election.

Councillors in Warwick and Stratford upon Avon were judged, amongst other things, on a planning decision to go ahead with the Barford village by pass. This is generally thought to be “a good thing”. This was weighed in the balance with the news that they are considering following the current fashion of moving to fortnightly refuse collections – this is not viewed favorably locally. The glossy pamphlets extolling their individual virtues and poking fun at (say) the green candidate who would have to drive halfway across the county for each meeting, were not hotly debated in the bar of the Black Horse pub in our village. Instead, it was the hard outcomes, the personal experiences of each individual affected that were the items that actually got discussed over a pint of Hooky.

In outsourcing, Clients judge Service Providers (SP’s) by the contribution made to their business over time. The governance process is interesting only in the amount of time it occupies in the diary, and as a mechanism to get things done. At decision time, the Client will ask themselves questions such as:

Did the SP contribute to developing my plans for launching my new product line ?

• …..or did they rub their hands and treat it as a distress purchase?
• ..…was it seen merely as a good opportunity to improve revenue and margins ?

Did the SP step up to the mark when we sold that other business division ?

• Did they make my life easy or hard ?
• Were they on the critical path all the time?
• Did the other side notice that we had outsourced X function?

In the event of poor outcomes at key business events - so called “moments of truth” - consistent, compliant, SLA performance will not be enough to balance these out, and the quality of governance processes or the degree of (say) ITIL compliance in IT service operations will count for even less. Palliative actions in the last weeks running up to a renewal decision will not suffice for an incumbent to overturn the impression built up over years.

My message can be summarised as:
Service Providers: If there was a snap election on your contract this Thursday, what are the business outcomes that would demonstrate your fitness for re-election ?
Hint – you will not find the answer in the service reporting section of the contract

Clients: Would you campaign for your Service Provider to be re-elected this Thursday ? If it was a free vote, how would your organisation’s employees vote ?


In Conclusion: Good outcomes deliver good incomes in the long run.

Kings, Castles, Cows and ……Computers ?

I live near Warwick Castle and at this time of the year the staff perform lots of pageants and battle re-enactments with Knights jousting, pig roasts and “ye olde country faire” type activities. All good fun. Seeing the Knights and watching the displays got me thinking about history and what happened back home when the Knights went off to fight. Where did they get the money to raise their armies? Who looked after their property whilst they were gone? The answer, I remembered from my O Level history, were the Stewards.

In order to respond to the call from the King to join him in battle, Knights used to appoint a Steward to look after their estates (the castles and the cows) whilst they went off to war. A Steward had a duty to manage the Knight’s estate to the best of his ability, and wherever possible, to better it for when the Knight returned (larger; more profitable; more productive). Often these duties would involve management of the whole household (the family, the household servants; the tenant farmers etc etc …) as well as the physical assets. There was, in effect, a duty of care that a Steward had to observe in carrying out his responsibilities. This would often go above and beyond simply “care and maintenance” but also require the Steward to balance the many, often competing, desires of different groups of people affected (arable vs livestock farmers; freeholders vs tenants; householders vs local villagers). In addition, the Steward was expected to do this for the benefit of the Knight’s estate alone, and not to take advantage of his position of trust by making a personal profit without the consent of his principal.

In effect, the Knights “outsourced” estate management in its entirety, whilst they concentrated on their “core skill”, namely fighting battles. Whilst there were no measurable and regularly reported SLA’s in place for this type of arrangement, a Steward would very quickly get “feedback” on his performance from the Knight on his return – success was often rewarded by the grant of land or a share of the spoils of war; failure, however, would often result in summary execution. Perceptions would have been more important here than the number of sheep pens successfully repaired as shown in the accounts. The report by the Lady of the House or the gossip from the Local Innkeeper would often be the more crucial evidence – especially in the judgement of whether the Steward had acted fairly or for personal profit at the expense of the Knight’s dependents.

It strikes me that this concept of Stewardship could be adopted in outsourcing arrangements. A Service Provider becomes such an integral part of the Customer’s business, that they must accept that they have a similar sort of a duty of care to that business. I appreciate that this is something terribly difficult for the Lawyers to define, but I think that a legal definition would be irrelevant. The actual behaviours of a Service Provider matter more than any finely crafted words. I firmly believe that a Service Provider operating with the mindset of a “Steward”, regardless of the finer points of any legal contract, would serve both parties well. Such a mindset would trigger any number of conversations between Service Provider and CXO that would only serve to build up the good faith necessary for a successful outsourcing engagement. Improvement in the level of trust between the parties is likely to be rewarded with a higher degree of loyalty to the incumbent Service Provider at contract renewal time. Consistent and well meaning behaviours through time are crucially important at such moments of truth, and no amount of PowerPoint slides showing SLA targets met ever defuse perceptions of poor behaviour.

My message can be summarised as:
Service Providers: If the penalty for perceived failure to deliver value was the loss of your Senior Account Director’s head at the hands of an irate CxO, what would you be worried about as he/she rode up the driveway and past the gatehouse of the castle?
If you are not performing well, what should you do differently?
Even if you believe you are doing well, how is your performance perceived ?

Customers: Is your Service Provider acting as a Steward or as a Transactional Supplier ? Are you sharpening your sword ? ….or are you consulting the map for a nice little parcel of land with which to say “thank you” ?

In conclusion; Good Stewardship will keep you ahead

I used to be an Accountant, so why am I blogging on outsourcing ?

Outsourcing is still a young industry – we are still only at the 3rd or 4th iteration of ITO contracts and even fewer for BPO work. Accordingly, the body of knowledge is still evolving. Compare this to retailing which has been going as long as people have had surplus subsistence goods to sell, and the “personal services” industry that has been going as long as their have been people. As a result, the body of knowledge about outsourcing is thin on the ground and remains fragmented. One major source of information about outsourcing is the service providers in the form of case studies and other marketing material. An alternative source is provided by the usual market analysts and commentators. These sources are useful, but outsourcing has such a deep impact on an organisation that the personal, emotional and ethical impacts need an airing as well. Blogs from the growing body of people that have actually “done it” can be helpful here in a way that marketing and technical thought pieces cannot.

I have “done it” now for the last 10 years, and I am still involved in the industry, “shaping” deals and specialising in the financial and contractual elements of outsourcing agreements. In the past, I have worked for service providers and consultants as well as operating on the client side. I have bought and sold outsourcing. I have been through both insourcing and outsourcing transactions….from both sides of the fence. In short, I have been through the mill of outsourcing….and I still believe passionately that there is, and will continue to be, a healthy market for ITO and BPO services. I find that it is a fun place to work, simply because the market is immature and the body of knowledge continues to develop. I believe that my experiences give me a wide, and potentially balanced, perspective on developments as they arise. To date these have been shared within the Finance Director community through conferences and round table discussions. This blog, and your feedback comments, will determine whether they are useful and worth sharing across the wider business community.

What will I cover ? Well, I will blog as the fancy takes me, based on ideas that come to me as I mow the lawn or run down the country lanes of deepest Warwickshire, however, expect a few recurring themes to arise such as:

• Stewardship
• Outcomes
• Passion
• Business Value = capability x usage
• The eternal triangle of trades offs between time, cost and quality

The first one is about Stewardship – an old fashioned concept, but readily adapted to our time and industry.

Let me know what you think and together we can contribute to growing the knowledge base of this young and dynamic industry. All my views are, of course personal, and cannot be attributed to either my current employer, or any of my past employers, customers or clients. Nor can they be interpreted as criticism of any contracts or parties to those contracts that I have been involved in in the past. They are merely the musings of an Accountant who found an industry specialism and is thoroughly enjoying being involved in a developing field.