Any Vested Outsourcing relationship flourishes best in a culture in which stakeholders work together to ensure their mutual success. Here are the 5 rules that can help you secure that!
Even though many organizations boast that they have great partnerships in place, the research of the University of Tennessee shows a slightly different reality. What most organizations really do in their partnership collaborations, is to enhance and push their own self-interest. This is often known as a what’s-in-it-for-me approach.
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A vested agreement should focus on creating a shared culture
Progressing toward a Vested agreement however, should focus on creating a shared culture, with shared goals and objectives. An agreement where the partners are working together to ensure their ultimate success.
How to structure such an agreement? The University of Tennessee unlocked the secrets of the most successful outsourcing deals in the following Five Rules of Vested:
1. Focus on outcomes, not transactions
This rule is essential because it anchors your business model on the outcomes versus transactions or activities. The buyer and supplier start by creating a shared vision and defining the high level desired outcomes that will define the ppillars of the partner’s success.
2. Focus on the what, not the how
Buyers that dictate the HOW to their suppliers limit the supplier’s ability to innovate. It’s like putting your supplier in a box while telling them you want them to think outside of the box.
3. Clearly defined and measurable outcomes
It’s one thing to define your outcomes, but it’s also imperative you measure business outcomes, and not just the tasks. Most organizations suffer from the activity trap where they are measuring everything that moves – not focusing on what matters.
4. Pricing model with incentives that optimize the business
Vested shifts from focusing on a price to pricing model with incentives. The partners see a fully transparent pricing model with incentives based on overall cost, not just price. The economics should ensure you win together and you lose together.
5. Insight vs. oversight governance
Traditional outsourcing relationships rely on SRM (supplier relationship management) processes to help buyers manage the supplier. In Vested, the WIIFWe mind-set means managing the business with your partner, rather than just managing your partner. Think of climbing Mt. Everest where the buyers is the climber and the supplier is the Sherpa. You navigate the mountain with a spirit of mutual respect and accountability – not by managing the supplier to have hired as your expert.