Most of us have been down on our knees praying that the relationship does not blow up over an error. Perhaps the cutover was delayed because the provider did not conduct sufficient user acceptance tests, or an employee committed fraud within a client account because controls were inadequate, or the client did not provide the entire list of company codes, delaying payment which got the business lines up in arms. Then several courses of action kick in: a), sweep the incident under the rug; b), start pointing fingers; c); blame the root cause on a decision that was taken some months back; or perhaps even d); fess up like a man and say mea culpa.

Despite the fact that our mothers taught us to take responsibility for our actions, in the complicated relationship pas de deux that is outsourcing, we tend to feel that apologizing and making reparations is not the way to deal with the other party.  Despite protestations of partnership between provider and client, our tendency is to frame outsourcing relationships as a constant you win, I lose. If we let the other party have the so-called upper hand in the relationship, we frankly think that we are abdicating terrain, to use a military term.

The prevailing governance structures superimposed on outsourcing relationships don’t foster an admission that sourcing will go wrong from time to time. Governance as we practice it today is predicated on the concept that perfection is a given, and any and all mistakes are a major screw up.. The health of the relationship is boiled down to a green-yellow-red scorecard.  Obtain as many greens as possible permitting an occasional yellow to demonstrate a degree of humanity is the goal.  It’s a game that leaves no room for, and ascribes no value to honestly admitting to a good, old-fashioned screw up.

But in any endeavor, driven by either humans or technology, there is no such thing as perfection. Taking responsibility for a snafu is painful, but it signals that you live your value statement to the injured party and your employees. But it is not enough to apologize when you think sufficient time has passed, waiting until the injured party has moved onto other concerns and has enough perspective to brush the infraction off. It is necessary to act immediately and with sincerity.

Without sincerity and, depending on the context, either a willingness to take on responsibility for the problem or meet the other party at least half way, there is no apology. Unfortunately the concept of amnesia does not exist in a sourcing relationship; the damage caused by empty gestures just festers over time.

A little bit of penance is always helpful. Remediation is good; a bit more “give” than absolutely necessary indicates that the severity and impact of the fault is understood, and that the transgressors take it as a first principle to act in good faith.

Saying we screwed up actually earns the erring party relationship credibility over the long haul. While the short term impact—additional cost or delay, a plethora of sharp emails and calls, perhaps a closer rein on decisions, and greater supervision—is painful, over time, a straightforward admission of responsibility pays off in a better working relationship, deeper trust, and an overarching belief that the parties will always strive to act in the best interest of the partnership. Admission of guilt also builds employees’ faith in the errant company and its leadership, and teaches lessons about customer service and value.

Next time you think that the course of true outsourcing relationship should always run smooth, think again. But saying you’re sorry can go a long way.

What does Burnham’s quote have to do with outsourcing and shared services implementation?  After variously laying the blame at the feet of recalcitrant business units or geographies, poor systems, or seemingly incompetent providers, the root cause of the failure to implement enterprise-wide change may lie in the inability of the sponsors or business owners to understand that what they ultimately get is the change they aspire to have. Without a predefined business architecture upon which to build, organizations find themselves with ad hoc operations all over the world, with no implementation or operations synergies, duplicative management, and higher cost.

Why are big globalization plans so very important? Quite simply, their scale, and only their scale, has the power to move the dial. Yet we are in terror of doing something big, and hope a small pilot will achieve the same sourcing objective. And it won’t.

Corporate change must have context to deliver the maximum stream of benefit Without a line of sight into an operating model’s end state, functions generally move offshore singly, rather than as vital component of a business architecture designed to affect cost, increase productivity and change ways of working across the enterprise.

Commitment is synonymous with scale.  If the organization is truly committed to changing its architecture, it understands the importance of scale. If not, the planning quantum is merely an experiment which can be quickly stopped when resistance crops up, or other corporate initiatives seem more critical. Small is not beautiful.

To read more about the missed opportunity represented by thinking small, go to my column State of Change at http://www.ssonetwork.com/topic_detail.aspx?id=10102&ekfrm=6

Author:  Deborah Kops

2010 saw us conduct exhaustive studies of enterprise sourcing customers to understand better how they can find new ways to drive productivity and revenue growth (innovation) and take better advantage of Cloud business services.

The one common theme that kept cropping up, was their overwhelming admission for  more effective change management and communications, business transformation and governance programs.  To put this all in a nutshell, many customers must radicallychange their whole approach to sourcing to break free from inflexible old-world business models, IT strangleholds and rate-card purgatory.

So this year, we are putting a major research emphasis on what measures customers need to address to get moving with their sourcing agendas.  And, as if by some higher form of sorcery, we’ve been graced with the presence of Deborah “Sourcing Change” Kops herself to help steer our sourcing change research agenda this year. Over to you, Mrs. Kops…

Happy Sourcing Change Year

My friends at HfS are forecasting a meteorologist’s dream for the sourcing industry— high pressure combinations of Cowboys and Indians, a blizzard of new deals, and very Cloud-y days. In the face of these anticipated patterns, how should buyers prepare for the stormy weather that ultimately impacts results for their organizations? Perhaps it’s time to prepare for the change sourcing represents a bit differently. Here are my top five recommendations for staying warm and dry in 2011.

Approach sourcing as “disorganizing event” Buyers usually restrict their ambition for sourcing to make existing conditions a bit better, faster and cheaper in a more scalable structure.  Yet the act of sourcing is a profound opportunity to make indelible changes to the way the organization works—enabling work in new ways, setting new rules, delivering different outcomes, even changing the culture. Think about how you want to change the organization, and solve for it, rather than build a better mousetrap. What do you want sourcing to enable you to do?

Focus on “worst practices” Think about it–the best practices always take care of themselves, yet the worst practices fester and fester. Want to delight your customers by making their lives better? Stop painting a picture about a sourcing nirvana where 200 basis points of the cost of an invoice will solve all ills, and design a solution to get rid of their biggest headaches—inaccurate data, late close, lackadaisical staff on boarding, excessive system downtime. First fix what is inexcusable and downright awful, and customers will start to believe the vision.

Allay all fear The aim of sourcing is about as altruistic as corporate initiatives get. Few dare to argue that the business case benefits aren’t exceptionally compelling. Yet what stops it in its tracks is fear—fear of pushing too fast or treading on important corporate toes on the part of the sponsoring team, fear of not performing on the part of the delivery team, and fear of loss of control on the part of the business lines. If you can allay your own fears, and those of your internal customers, you’re halfway there.

Ditch procurement Is traditional procurement deeply involved in M&A activity? Corporate strategy?Business transformation? Not a chance. While our friends in the CPO’s office have an important role to play in procurement process and governance, they cannot be the major arbiter of taste when it comes to sourcing true corporate change.

Deborah Kops, Contributing Analyst, Sourcing Change Management, HfS Research (click for bio)

Get moving The mantra for sourcing change is the opposite of “speed kills.” Take it as a given that you’ll never please everyone nor get all aspect of the solution right. The sourcing exercise is not a proxy for singing a kind of corporate “kumbaya”—sitting around until everyone holds hands around the campfire. Obvious change is like a revolution—there is a before and an after. Everyone may not like the after, but there is movement, ostensibly to something better.

During the course of the year, Sourcing Change will be working closely with HfS Research to not only help you think about change management differently, but also dimension similar challenges. You’ll know when to put on those boots, and when to put on sunscreen, when an umbrella is in order, and how to batten down for a tornado.

I recently read one of those elaborate corporate leadership books that was trying to boil down 300 pages of common sense into one list of 10 inspiring points. If you are like me, many of the business books you read either oversimplify a very complex problem, or attempt to restate the obvious in new jargon.

However, I did come across a gem that has resonance in sourcing change management: small numbers, also known as the sponsoring or sourcing team, make fairly significant business model decisions, and expect a broad range of stakeholders to (cheerfully?) execute.

Absolutely true—corporate decision making cannot not scale to the extent that everyone affected has a seat at the table. It’s completely impractical. But expecting business lines, enabling functions, process owners, and all those employees affected both up and downstream to just execute like automatons is more than a bit on the naïve side.

Over the course of any sourcing implementation, challenges will inevitably crop up. However, starting off on the right foot with the large numbers is critical—there are no second chances to make a first impression. Here are three imperatives for putting best feet forward with the masses:

Kick off formally Don’t keep them in the dark because it’s easier for the small team to manage. As soon as the strategy is agreed, and the implementation plan is clear, bring the large numbers into the fold in a respectful, orderly fashion. The gossip is already out there; trumping the water cooler gossip with fact puts the change on your footing. As Daniel Patrick Moynihan, noted American statesman, said, “everyone is entitled to their own opinion, but not their own set of facts.”

Market! Understand that it’s imperative to market the change at announcement, not just send out a perfunctory email. Most willunderstand the base rationale for a change in operating model, but not automatically embrace the implications for themselves, their teams and their business. That’s where marketing comes in.  Most stakeholders want to be sold on an idea, even if the mandate comes down from on high. They demand the respect of having the who/where/what/when and why presented to them formally through media they are accustomed to. Once this hurdle is crossed, they can start exploring the personal implications of the change.

Influence Ensure that you’ve convinced key individuals of the imperative for sourcing change in advance, or immediately upon announcement, and planted them across the landscape of affected functions and customers. Stakeholders emulate the behaviors of those whom they respect and wish to be like, so mapping key influencers and getting them on board with the rationale is a precondition to change management success.

Author:  Deborah Kops

Excuse the excrable use of grammar to make a point. So much fault in outsourcing relationships is laid at the feet of what we call culture–the provider team do not know who the Yankees are, they don’t celebrate Christmas, they have too many holidays.  In other words, they just aren’t like us. And the latest NBC offering “Outsource” doesn’t help; making poor jokes out of young Indian call center staff who haven’t figured out Halloween or why Americans think it’s cool to wear aprons with curvy female shapes.  But the fact of the matter is that culture is not the only divide between client and provider staff.

So much of the disconnect between the client and the provider team is due to a generation divide. When 40 or 50 year olds directlylmanage 20-somethings who think careers are fungible, who have no idea about ‘paying it forward’ and little loyalty to an employer, issues naturally crop up. It’s the workplace version of communication between Mars and Venus. It’s not obvious in the Western workplace; we still accomodate 3 or 4 work generations in our companies. And the staging of ages buffers some of the problems which occur when Baby Boomers rub up against Millenials. But it’s not the case when work is outsourced offshore.

Perhaps you’ve run into a provider–or been a client for that matter–who understands the seriousness of the divide, and its implications for a good sourcing relationship. I haven’t–all I’ve experienced is cultural training that fronts the first few days of provider staff client induction, or a crash culture course for the retained client team. Why can’t client and provider include generational training in transition planning? Or even acknowledge the challenges in relationship building?

This is not to say outsourcing is not the right business model; what we need to acknowledge are its challenges. And the generation gap is great. To better understand the gap, go tohttp://www.sourcingchange.com/wp-content/uploads/2010/09/imperfect-arbitrage.pdf

Author:  Deborah Kops