Consider this scenario: A U.S.-based Fortune 500 firm and its India-based service provider partner to run a global ADM operation under a managed services model. Analyses conducted a year or so into the relationship show that both parties are committed to the partnership and are proactively working to improve and optimize. Customer satisfaction is good, and customer and vendor laud one another’s efforts.
Sounds great, right? Unfortunately, there’s a downside. In many instances, outsourced environments that rely too much on well-intentioned individual initiative and ad hoc heroics to solve problems are often beset by high costs, low productivity, and general inefficiency.
Here’s what can happen: Senior staff members on the client side go out of their way to “help” the inexperienced service provider team respond to incidents and problems. While the willingness to provide mentoring is laudable, the process discipline, consistency, and standardization that are the bedrock of the service provider’s model are circumvented. Moreover, the high-level, highly-paid senior people on the client side are doing menial tasks, duplicating the efforts of the service provider and creating confusion on who’s responsible for what. All of this means the vendor’s business model – which requires standardization and repeatability to be successful – is no longer viable.
ADM Service Providers need the process discipline, and CMMI maturity, to effectively delivery services according to their business model.
The problem with rewarding heroes
The problem can typically be traced to the business culture of client organizations. Successful companies, the ones that attract the most talented and ambitious individuals, often develop cultures that are people- and achievement-centric. The stars – the people who work all night to fix your problem – get noticed and rewarded. The people who tell you to submit a problem ticket – not so much.
The trouble with this approach of rewarding “heroes” is that it’s reactive and inefficient. Rather than find ways to prevent problems from happening, the IT organization thrives on crisis, and both client and service provider lose sight of a disciplined process. An IT organization can’t predict performance and the execution of tasks when everyone is reacting to the moment and earning a reward.
Service providers, meanwhile, have to be very process-oriented and disciplined, particularly in managed service models. Ultimately, the purpose is to measure and manage service and performance against service level metrics. ADM Service Providers need the process discipline, and CMMI maturity, to effectively delivery services according to their business model. They need consistency, repeatability, and predictability in their operations. This requires commoditization of knowledge, and the ability to leverage the knowledge of a handful of highly skilled individuals and to allow less-skilled individuals to deliver services.
What happens when these two conflicting approaches collide? Typically, the client’s hero culture prevails, since the service provider is naturally inclined to please the customer and do things the customer’s way. Also, the fact that the hero culture is championed by the leaders from the client side can be intimidating to the service provider. This is especially true for many of the offshore providers, who have undergone significant growth in recent years. As a result, the mid-level people on the operational front line often lack the experience to push back on the client and promote process discipline, and, instead, accommodate to the client’s approach.
Changing the hero culture
Changing the hero culture can be difficult, because you need the support of the individual heroes to make that change happen. Yet, the nature of that change – repeatable processes, consistency, commoditization – can, by definition, make the heroes feel marginalized or threatened, because their individual talent is no longer center stage. So the challenge is to create incentives that give the heroes a stake in the implementation of process discipline, so that they’re recognized and rewarded.
Another issue is that, because the hero culture often involves strong collaboration between the client and vendor teams, satisfaction with the overall relationship is typically high. In other words, in the spirit of teamwork, both sides are reluctant to step up and point out problems that need to be addressed.
According to our colleagues at TPI, a transition to a new outsourcing partner typically produces some progress toward process discipline – progress that tends to plateau prior to maturation. At that point, you need to go in and ask some tough questions, re-assess the original business objectives, and re-engage executive commitment to implement change and to get repeatability and predictability in place. Then you can develop a plan to reinvigorate the transition to a more process-centric operating model. And this requires that the client allow the service provider to do their job and institute process discipline. When you go through this process and capture all the challenges and opportunities, you get the elements of a “get well plan,” and you can begin to define actions for both the client and the service provider to take to drive improvement.
On March 8th, Compass and TPI are hosting a webinar to discuss the topic outlined here. Click here for details and to register at no cost. Bob Mathers is a Compass Principal Consultant specializing in sourcing relationship and governance issues. Read his other piece for Nearshore Americas on End-of-Contract strategies here.