Ten Steps to Building Trust in Outsourcing Relationships
Trust is essential to a successful outsourcing relationship, and is especially critical in managing transition in complex, transformational sourcing initiatives.
Oct 27, 2009
Trust is essential to a successful outsourcing relationship, and is especially critical in managing transition in complex, transformational sourcing initiatives. Ideally, trust-building is a focus of the relationship for both sides. And when it comes to building trust, its never too early to start.
As in any relationship, trust is critical to an outsourcing partnership. While it’s typically said that building trust takes time, in fact the process of building trust can and should begin before the contract is signed. Indeed, the negotiation process provides an excellent opportunity to establish the foundations of trust. Later, when the relationship encounters its inevitable rough patches, the trust built early on in negotiating the deal can steer both parties through.
Following are ten guidelines to building bridges of trust that will yield benefits throughout the life of the relationship. These are drawn from our experience in working on complex transformational sourcing projects on behalf of both client and service provider organizations.
1. Listen.
Pay attention and consider what the other side is saying. Don't feel compelled to immediately respond to or address every issue. Consider what you hear and then formulate a response. Trust is built through mutual respect, and listening is a way to demonstrate respect. Consider the old adage: "Two ears and one mouth – you should listen twice as much as you talk!"
Listening requires people to put aside their prejudices and opinions and allow the other side to have their own voice. But when a customer doesn’t have the same degree of expertise as a service provider or advisor, why listen to them? Because to demonstrate respect, you have to listen.
Example: A client organization’s VP of Human Resources kicked off discussions with this statement: "What keeps me up at night is, what will happen to my people?" The service provider responded with a review of the salary commitments, transition processes, and severance packages set out in the proposal. But the customer already had that information; the question was, "What will happen to my people?" Namely, what career advancement opportunities would the provider create within the delivery organization? The successful bidding provider addressed that question.
2. Discuss Interests, Not Positions.
Interests are the reasons you want or need something. Positions are what you want or need. Focusing a discussion around interests transforms the negotiation from a confrontation into a problem-solving exercise. Collaborative problem solving is a good way to build trust, while confrontation is a good way to destroy it.
Example: A client sought to protect their investment in a software application used to generate employee salary guidelines; the application was to be created by a service provider. The service provider aimed to minimize maintenance costs by leveraging the application across multiple clients. Each party could argue that it should be the owner of this technology. However, by focusing on interests, the parties reached a mutually beneficial arrangement around ownership without any "argument" at all. Collaborating on the problem allowed each party to feel invested in the solution and built trust between the organizations.
3. Follow Through.
Do what you say you are going to do, and do it within the timeframe promised. Put differently, manage expectations. Keeping promises builds trust. Failing to keep promises erodes trust that already exists. If you cannot keep a promise, communicate that as early as possible. Recognizing the importance of promises, even small promises, builds trust. Failing to keep even small promises can create large problems.
Example: A client asked to review their provider’s disaster recovery plan. The provider implied that the plan was on the shelf and promised delivery on Friday. When the plan was finally delivered a week late, the client subjected it to extraordinary scrutiny – largely because the delay eroded the client’s trust in the integrity, quality, and depth of the plan.
In another instance, the customer and their advisor defined an aggressive negotiating schedule for the bidding providers, while allowing much looser response times for themselves. The providers met their deadlines, but the customer and the advisor consistently missed theirs, and then required the providers to work weekends and holidays. The provider ultimately lost faith in the customer’s commitment to the tight timeframes and, consequently, increased their prices to cover contingencies. In this case, poor expectation management did not merely chip away at trust – it resulted in a higher price.
4. Step in the Other Side’s Shoes
What does the other side need? Why do they need it? Offer solutions to issues your customers might not know they have. For example, if your customer needs SAS 70 reports to comply with Sarbanes Oxley, figure out how you can deliver those reports in a cost efficient way and propose alternatives for special requests. Considering issues from the other side demonstrates acknowledgement of that person’s perspective, which helps build trust.
Mistakes in the negotiation of a large transaction are inevitable, and if significant, will probably be discovered prior to closing. Identify and address, as early as possible, mistakes made by the other side. Again, this demonstrates commitment and builds trust.
Example: The provider’s lead negotiator began a discussion as follows: "We understand that you and your advisors will need time at the start and throughout our discussions to huddle among yourselves – our team has gone through this process many times before, but it is probably the first time for you, at least as a team, and you’re still getting to know each other." Perhaps obvious, but this simple acknowledgement instantly created considerable trust, which subsequent patience on the part of the provider further nurtured.
5. Be Proactive
Consider issues to resolve and start working them early. Even if you cannot provide everything your customer wants, demonstrate effort and provide reasonable alternatives to address their interests. This will create trust, and show that your organization values the customer's interests.
Example: The customer placed a priority on protecting themselves from provider mishaps, and insisted that any provider’s insurer have a certain Moody’s rating. However, the provider used captive insurers, which were not rated by Moody’s. Purchasing additional insurance would have been very costly. In addition, the captives were well-funded, acceptable to multiple other clients, and enjoyed excellent reputations. Eventually, the customer relaxed their position – in large part because the effort made to address the customer’s priority built trust between the organizations.
6. Credibly Manage the Process
Manage issues in a fair and transparent manner and commit to realistic time tables. Strong deal management demonstrates experience and meeting deadlines builds a sense of commitment to the transaction. Demonstrating experience builds the confidence of the people managing the transaction. This confidence creates trust.
A transaction can be managed in many ways. Don’t make the mistake of setting unrealistic deadlines to short-circuit the negotiation process – and then resetting the deadline. And resetting the deadline again. Even with both sides working diligently, unrealistic deadlines affect confidence that the deal is adhering to any real schedule. And while this approach inevitably delays deal closings, the larger problem is the erosion of trust.
7. Be Honest
No matter how big or small – never lie.
8. Be a Straight Shooter
Don't avoid an issue by hiding it or diminishing its importance. Do not hide tough issues; instead, make them prominent. Show the other side how the issue is being addressed and provide regular updates. More harm is done trying to "hide" an issue than flat out rejecting it. You don't have to say "yes" to build trust, but you cannot build trust by saying "maybe" when you know the answer is "no."
In this context, an issue that often arises, on both the customer and service provider side, is that of the position argument – that something has or has never been done and is therefore possible or not possible. Positional arguments not only create confrontation (which itself affects trust), they invite the presentation of proof that they are incorrect. And if proved false, the exchange will significantly impact trust. Lesson: don’t make potentially false assertions in the first place.
A related point involves claims that "everyone does this" – that one position or another reflects "market standard." If the provider, or the customer’s consultant, intends to make such a claim, they should substantiate the claim with credible evidence. Reasonably reliable evidence of "market standard" may exist for certain issues in certain types of transactions. But are such claims credible today in the emerging business process outsourcing marketplace? Like false assertions, unverifiable claims undermine trust, even if their impact is more subtle.
9. Be Human
Closing a deal often requires tremendous sacrifice from everyone involved. Recognize that and build camaraderie around it. Eat together. Discuss non-deal stuff. Listen to stories about the difficulty of being away from family and share your own stories. Be a little jealous of your personal time and allow other people to view you as a human being. Offer to share cab rides if you fly in to the same city at the same time. Empathy builds trust.
Example: A suggestion is made to resume negotiations on Monday morning at 8:00 am. As deal lawyers, we’re fairly jealous of our weekends, because we travel all the time. One of us asked if we could start at 10:00 am and work later into the night. We heard a collective sigh of relief – the 10:00 a.m. start time would allow us to fly in Monday morning as opposed to Sunday night. Given our estimated four-week schedule, that meant four extra Sunday nights apiece for everyone on both teams. We met our deadline and enjoyed a bit more with our families. Risking the wrath of the scheduler bought a lot of goodwill and helped generate trust between our team and the other side.
"The best way to build empathy," mused one participant in a recent deal, "is to conduct negotiations at an isolated location, in windowless rooms with inconsistent temperature control, so as to build the camaraderie that is often shared among prisoners on death row in most penitentiaries." Kidding aside, the negotiating teams should make every effort to meet casually before engaging in their work. The opportunity to build a relationship with the other side in a non-adversarial setting will yield benefits when tensions inevitably arise during the negotiation process.
10. Document Everything
All that said, we remain committed to the importance of good documentation. As lawyers, we’re not paid to actually trust people. At the end of the day, documentation that clearly reflects the intentions of the parties is vitally important. Hopefully, the trust built during the negotiation means that the contract never comes out of the drawer. But if it does have to come out … well, let’s just say you want to make sure it’s trustworthy!
This article was originally posted by Globalservicesmedia.com and is the property of GLOBAL SERVICES
As in any relationship, trust is critical to an outsourcing partnership. While it’s typically said that building trust takes time, in fact the process of building trust can and should begin before the contract is signed. Indeed, the negotiation process provides an excellent opportunity to establish the foundations of trust. Later, when the relationship encounters its inevitable rough patches, the trust built early on in negotiating the deal can steer both parties through.
Following are ten guidelines to building bridges of trust that will yield benefits throughout the life of the relationship. These are drawn from our experience in working on complex transformational sourcing projects on behalf of both client and service provider organizations.
1. Listen.
Pay attention and consider what the other side is saying. Don't feel compelled to immediately respond to or address every issue. Consider what you hear and then formulate a response. Trust is built through mutual respect, and listening is a way to demonstrate respect. Consider the old adage: "Two ears and one mouth – you should listen twice as much as you talk!"
Listening requires people to put aside their prejudices and opinions and allow the other side to have their own voice. But when a customer doesn’t have the same degree of expertise as a service provider or advisor, why listen to them? Because to demonstrate respect, you have to listen.
Example: A client organization’s VP of Human Resources kicked off discussions with this statement: "What keeps me up at night is, what will happen to my people?" The service provider responded with a review of the salary commitments, transition processes, and severance packages set out in the proposal. But the customer already had that information; the question was, "What will happen to my people?" Namely, what career advancement opportunities would the provider create within the delivery organization? The successful bidding provider addressed that question.
2. Discuss Interests, Not Positions.
Interests are the reasons you want or need something. Positions are what you want or need. Focusing a discussion around interests transforms the negotiation from a confrontation into a problem-solving exercise. Collaborative problem solving is a good way to build trust, while confrontation is a good way to destroy it.
Example: A client sought to protect their investment in a software application used to generate employee salary guidelines; the application was to be created by a service provider. The service provider aimed to minimize maintenance costs by leveraging the application across multiple clients. Each party could argue that it should be the owner of this technology. However, by focusing on interests, the parties reached a mutually beneficial arrangement around ownership without any "argument" at all. Collaborating on the problem allowed each party to feel invested in the solution and built trust between the organizations.
3. Follow Through.
Do what you say you are going to do, and do it within the timeframe promised. Put differently, manage expectations. Keeping promises builds trust. Failing to keep promises erodes trust that already exists. If you cannot keep a promise, communicate that as early as possible. Recognizing the importance of promises, even small promises, builds trust. Failing to keep even small promises can create large problems.
Example: A client asked to review their provider’s disaster recovery plan. The provider implied that the plan was on the shelf and promised delivery on Friday. When the plan was finally delivered a week late, the client subjected it to extraordinary scrutiny – largely because the delay eroded the client’s trust in the integrity, quality, and depth of the plan.
In another instance, the customer and their advisor defined an aggressive negotiating schedule for the bidding providers, while allowing much looser response times for themselves. The providers met their deadlines, but the customer and the advisor consistently missed theirs, and then required the providers to work weekends and holidays. The provider ultimately lost faith in the customer’s commitment to the tight timeframes and, consequently, increased their prices to cover contingencies. In this case, poor expectation management did not merely chip away at trust – it resulted in a higher price.
4. Step in the Other Side’s Shoes
What does the other side need? Why do they need it? Offer solutions to issues your customers might not know they have. For example, if your customer needs SAS 70 reports to comply with Sarbanes Oxley, figure out how you can deliver those reports in a cost efficient way and propose alternatives for special requests. Considering issues from the other side demonstrates acknowledgement of that person’s perspective, which helps build trust.
Mistakes in the negotiation of a large transaction are inevitable, and if significant, will probably be discovered prior to closing. Identify and address, as early as possible, mistakes made by the other side. Again, this demonstrates commitment and builds trust.
Example: The provider’s lead negotiator began a discussion as follows: "We understand that you and your advisors will need time at the start and throughout our discussions to huddle among yourselves – our team has gone through this process many times before, but it is probably the first time for you, at least as a team, and you’re still getting to know each other." Perhaps obvious, but this simple acknowledgement instantly created considerable trust, which subsequent patience on the part of the provider further nurtured.
5. Be Proactive
Consider issues to resolve and start working them early. Even if you cannot provide everything your customer wants, demonstrate effort and provide reasonable alternatives to address their interests. This will create trust, and show that your organization values the customer's interests.
Example: The customer placed a priority on protecting themselves from provider mishaps, and insisted that any provider’s insurer have a certain Moody’s rating. However, the provider used captive insurers, which were not rated by Moody’s. Purchasing additional insurance would have been very costly. In addition, the captives were well-funded, acceptable to multiple other clients, and enjoyed excellent reputations. Eventually, the customer relaxed their position – in large part because the effort made to address the customer’s priority built trust between the organizations.
6. Credibly Manage the Process
Manage issues in a fair and transparent manner and commit to realistic time tables. Strong deal management demonstrates experience and meeting deadlines builds a sense of commitment to the transaction. Demonstrating experience builds the confidence of the people managing the transaction. This confidence creates trust.
A transaction can be managed in many ways. Don’t make the mistake of setting unrealistic deadlines to short-circuit the negotiation process – and then resetting the deadline. And resetting the deadline again. Even with both sides working diligently, unrealistic deadlines affect confidence that the deal is adhering to any real schedule. And while this approach inevitably delays deal closings, the larger problem is the erosion of trust.
7. Be Honest
No matter how big or small – never lie.
8. Be a Straight Shooter
Don't avoid an issue by hiding it or diminishing its importance. Do not hide tough issues; instead, make them prominent. Show the other side how the issue is being addressed and provide regular updates. More harm is done trying to "hide" an issue than flat out rejecting it. You don't have to say "yes" to build trust, but you cannot build trust by saying "maybe" when you know the answer is "no."
In this context, an issue that often arises, on both the customer and service provider side, is that of the position argument – that something has or has never been done and is therefore possible or not possible. Positional arguments not only create confrontation (which itself affects trust), they invite the presentation of proof that they are incorrect. And if proved false, the exchange will significantly impact trust. Lesson: don’t make potentially false assertions in the first place.
A related point involves claims that "everyone does this" – that one position or another reflects "market standard." If the provider, or the customer’s consultant, intends to make such a claim, they should substantiate the claim with credible evidence. Reasonably reliable evidence of "market standard" may exist for certain issues in certain types of transactions. But are such claims credible today in the emerging business process outsourcing marketplace? Like false assertions, unverifiable claims undermine trust, even if their impact is more subtle.
9. Be Human
Closing a deal often requires tremendous sacrifice from everyone involved. Recognize that and build camaraderie around it. Eat together. Discuss non-deal stuff. Listen to stories about the difficulty of being away from family and share your own stories. Be a little jealous of your personal time and allow other people to view you as a human being. Offer to share cab rides if you fly in to the same city at the same time. Empathy builds trust.
Example: A suggestion is made to resume negotiations on Monday morning at 8:00 am. As deal lawyers, we’re fairly jealous of our weekends, because we travel all the time. One of us asked if we could start at 10:00 am and work later into the night. We heard a collective sigh of relief – the 10:00 a.m. start time would allow us to fly in Monday morning as opposed to Sunday night. Given our estimated four-week schedule, that meant four extra Sunday nights apiece for everyone on both teams. We met our deadline and enjoyed a bit more with our families. Risking the wrath of the scheduler bought a lot of goodwill and helped generate trust between our team and the other side.
"The best way to build empathy," mused one participant in a recent deal, "is to conduct negotiations at an isolated location, in windowless rooms with inconsistent temperature control, so as to build the camaraderie that is often shared among prisoners on death row in most penitentiaries." Kidding aside, the negotiating teams should make every effort to meet casually before engaging in their work. The opportunity to build a relationship with the other side in a non-adversarial setting will yield benefits when tensions inevitably arise during the negotiation process.
10. Document Everything
All that said, we remain committed to the importance of good documentation. As lawyers, we’re not paid to actually trust people. At the end of the day, documentation that clearly reflects the intentions of the parties is vitally important. Hopefully, the trust built during the negotiation means that the contract never comes out of the drawer. But if it does have to come out … well, let’s just say you want to make sure it’s trustworthy!
This article was originally posted by Globalservicesmedia.com and is the property of GLOBAL SERVICES