The Five Rules: Laying the Foundation – What’s in it for We?

Any Vested relationship flourishes best in a culture in which participants work together to ensure their mutual success.

While many organizations boast that they have solid partnerships in place, the University of Tennessee’s experience and research has found that most organizations really want to enhance and push their own self-interest. This is often known as a what’s-in-it-for-me (WIIFMe) approach. Such an attitude is understandable because winning is ingrained from early childhood on; indeed, most institutions of higher education also focus on winning. In fact, many organizations formally train procurement and sales professionals in the art of negotiation to help them “win.”

The word partner implies that there are not two sides. Progressing toward a Vested agreement should focus on creating a culture where parties are working together to ensure their ultimate success. There is a significant difference between being a supplier and being a partner. The mentality should shift from an us versus them to a we philosophy, as discussed earlier in avoiding the zero-sum game. We call this a what’s-in-it-for-we (WIIFWe) philosophy. Vested is indeed a true partnership.

Companies should approach a Vested Agreement as a symbiotic relationship because only by working together can everyone succeed. A Vested partnership focuses on identifying desired outcomes and then aligns the interests of all players so that all benefit if the desired outcomes are reached. The relationship becomes more collaborative and expands beyond simply meeting the requirements of the original outsourcing agreement.

Vested is not for the faint of heart; it challenges the mindset of senior executives, middle managers, and especially procurement specialists. It often requires the willpower to walk away from an immediate price savings gained from procurement muscle in order to save more money in the future. Finally it requires committed executive leadership from each organization. The need for senior management support is true for every major business improvement, whether it is total quality management, reengineering, or Lean. Unfortunately, many senior executives have reached that position because of their adherence to a conventional approach to outsourcing, and they may be unwilling to change their business style. Vested Outsourcing demands a willingness to transcend the conventional win-lose approach most companies take in procuring goods and services.

A true win-win requires effort, collaboration and commitment by all parties. Human relationships are fundamental to successful Vested Agreements. Almost by definition, effective partnerships must evolve over time as the parties learn to operate under a win-win philosophy. For many companies, this approach is a learned behavior, and they have to unlearn conventional patterns and ways of thinking. Without mutual trust, any attempt to implement Vested will become mired in terms and conditions.

In our experience, only those organizations that truly challenge the conventional WIIFMe mentality are able to achieve true Vested partnerships that deliver outstanding results. The University of Tennessee unlocked the secrets of of the most successful outsourcing deals in the following Five Rules of Vested:
1. Focus on outcomes, not transactions
2. Focus on the WHAT, not the HOW
3. Agree on clearly defined and measurable outcomes
4. Optimize pricing model incentives 
5. Governance structure provides insight, not merely oversight

Read more on the Five Rules by clicking on the above links.

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