3 Relationship Pressure Points Enable Contracted Operations Success
When strategic relationships don’t deliver to expectations, there is a reason, and therefore a solution. But often, the reasons can be hard to find and agree on. This challenge drives frustration degrades relationships drives value out of operations as teams run in circles for months, even years, looking for answers. Or worse, the lowered performance is accepted as the status quo, impacting firm competitiveness, and lowering morale.
I tend to use a systems approach to help add perspective to the profile of these strategic suppliers, to provide context when issues arose for engagement by the organization. This framework provides an explanation for most performance based problems and speeds root cause analysis which usually tends to validate where the problem is. They might be great candidates for a risk monitoring effort!
This analysis focuses on three critical areas that can set up relationships for success or frustration from the beginning of the lifecycle. I call these critical areas pressure points, because applying focused attention and countermeasures in these areas, has a profound impact on the relationship health after the intervention.
The below systems map shows the three critical areas that frame systemic relationship performance risk or resilience, impacting both parties.
These areas have some key characteristics in common.?They tend to have a high impact on the relationship if not built out to a minimum core capability. These pressure points also tend not to have a discrete owner in the firm or in the supplier. They usually reside in the domain of the Vendor Management Organization if it is forward thinking enough. Lastly, they tend to defy easy solutioning and but rather represent a capability journey that must be undertaken, some with significant investment.
1.??????Commercial Standards & Controls
Do you set up commercial contracts with standards and corresponding compliance oversight?
Legal will usually have their standard Master Services Agreement. But standardized ways defining, measuring, and monitoring the daily delivery of services will determine how issues will be resolved on the contract by the operations team. If not done well, the ability to find real problems in the relationship is hampered as real issues grow in size and impact without proper intervention.
For more specific examples, just ask me for my free Contracted Operations Pressure Point eBook in the comments and I’ll send it to you in an InMail!
2.??????Supplier Sizing and Estimating
Sizing a project is a key step to determining the resources and time required to achieve a certain level of delivered quality.
Sizing is done for every project, but it varies greatly in its accuracy. The more inaccurate the sizing effort, the earlier the project runs out of resources, or time or both, before the finish line is reached.
I have a list of question to ask your PMO and your supplier to test the current alignment. Just ask me for my free Contracted Operations Pressure Point eBook in the comments and I’ll send it to you in an InMail!
3.??????Delivery Monitoring
Standard monitoring is usually inadequate, focused on canned relationship level SLAs. Performance is deeper, at the project and application level. These measures are established earlier in the first step (Commercial Standards and Controls), which aligns progress tracking to the already established contractual standards and process controls. Working with operations teams to verify that weekly operations dashboards and tools align to expectations is usually a missed step.
Commercial expectations (and value) are lost when delivery changes occur without the guidance of the controls, which were designed to shape decision making.
Verifying the agility of the commercial and operations pressure points early in the relationship rapidly speeds up issues resolution and will be a key resource to keep the relationship and the delivery on track and avoid costly escalated dispute and transition scenarios.
I’ve used a compliance monitoring framework to keep alignment to the contract easy to maintain and share with executives. Just ask me for my Contracted Operations Pressure Point eBook in the comments and I’ll send it to you in an InMail! Compliments to my Contract Operations Weekly subscribers!
I’d be curious to hear what you think of this approach!
Do you use a similar approach keep ahead of issues and performance challenges?
Industry Research for the Readers of Contracted Operations
IT Outsourcing Relationship Management and Performance Measurement System Effectiveness
An outsourcing study on several European financial institutions has identified drivers of sustained relationship performance expectations.
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Implications for our Contracted Operations Weekly readers? Add the following capabilities to your firm’s relationship readiness assessment and to your bidder capability assessment models.
Develop corresponding controls to update capability in these areas after contract execution.
The controls that have been proven to have a direct impact on outsourcing performance are:
1.??????Communication
Effective communication (formal and informal sharing of pertinent and timely information) is essential to the success of the outsourcing relationship between the client and the vendor
2.??????Commitment
The willingness of the client and supplier to willingly cooperate to meet each other's goals and advance the relationship.
3.??????Resolution Of Conflicts And Disputes
The degree of conflict in a relationship has a negative impact on the success of the relationship. Predefining and using escalation procedures for issues in dispute reduces this risk.
4.??????Satisfaction
The better the supplier relationship is managed, the better the performance measures work for the relationship.
5.??????Trust
Trust was not present at the start of the contract, but it did grow over time. High levels of trust made it possible for the parties to collaborate effectively in problem-solving.
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A Resource for Your Consideration
I found this in my research for a solution to walk business and IT through an exercise to validate measures in place for a relationship and to design measures from scratch for a completely new project. I liked the simplicity and breadth of the solution below.
The below is and excerpt from the attached 1-page Pump Method summary:
We can’t wait until we have a performance culture before we focus on measuring performance. Good performance measurement is what builds a performance culture:
It starts by replacing fear of judgement with a passion for learning how to lift performance.
?To build a performance culture, our bad KPI habits must be unlearned, and replaced. The PuMP? Blueprint is the easy, fast and engaging way to replace them.
See the attached PDF for your review.?Tell Stacy Barr who sent you!
Have a great weekend!
Kirk