Turned out nice again.....

We English have an obsession with the weather. My friends from other countries tease me rotten about it, but I have just been away for a weekend in York and this short break emphased how much it is a matter of necessity in this country to plan and then adjust according to the weather rather than just let (say) rain ruin an activity for the sake of not thinking about alternatives.

Remember the old tongue twister rhyme that we learned in nursery school ?

Whether the weather be hot,
Or whether the weather be not,
Whatever the weather,
We'll weather the weather,
Whether we like it or not.

And that brings me to my point about Outsourcing. However well we write the contracts, however good we are at foreseeing the future industry issues and specific business changes, the future will be different from how we think it will be. There are many contracts (and sub-contracts) in place right now that did not foresee the global Credit Crunch, or the weakness of the US Dollar, or the rates of inflation now being experienced in India and China.

The law of unintended consequences is immutable and these (and other) unforeseen economic issues are now having an impact on deals signed anywhere between 12 months and 7 years ago. Such issues can affect any or all of the parties concerned in a deal; be it the Customer; the Supplier; a sub contractor; the employees; in fact any one who is a significant stakeholder in a business affected by an outsourcing deal. Dealing with these issues on a timely basis is important - a party that is apparently unaffected by the issue ignores the impact on another party at their peril.

For example, a sub-contractor who is the unwitting beneficiary of an exchange rate movement may feel good about it, and refuse to acknowledge that the prime contractor may be making a loss on their services with the Customer. Sticking rigidly to the contract may earn some short term benefits, but may ultimately result in the prime contractor blowing an unrelated minor performance issue out of all proportion in order to terminate the contract for breach. As a result of the sub-contractor's intransigence, the consequences could include loss of the contract and a damaging affect on their reputation in the market.

The point is that if there is an unforeseen event that has a significant enough impact on one party, then the other parties should take note and be prepared to adjust in some way, otherwise the affected party is unlikely to take it lying down. Even if the contract places the risk entirely on one party, if the impact is damaging enough, then it is naive to think that that party will suffer the consequences entirely without taking some action to mitigate its losses. This is where Outsourcing is fundamentally different from a transactional business relationship as a result of the timescales involved. Taking a loss on a single sale or purchase is one thing, taking consistent business damage for a period of years is another.

This is not a call to ignore all contracts as soon as they have been signed, but a simple recognition that the sooner the issue is dealt with, typically the less drastic is the action/reaction required.

So my message is simple:

Customers: Is your supplier hurting ? ....badly enough that delivering consistently poor service in order to reduce costs to an acceptable level to match the income being received is the best alternative ? ...then get in there and try to work something out before their behaviour has a lasting impact on your business. .

Suppliers: Is your rigid contract compliance conflicting with, or preventing your Customer meeting their desired business outcomes ? ...then get in there and try to work something out before your behaviour endangers the overall relationship and kills the deal.

Contracts cannot guarantee behaviours, only the fundamental economics will....so deal with it.

As a certain English old style music hall and film artist used to say whenever it stopped raining in his films, "...turned out nice again !"