Looking Back to Go Forward

I’ve been thinking lately about the psychology of outsourcing, even more so  after reading Art Markman‘s recent article in his Harvard Review blog.

In fact, it made me reflect on many other “Big Thinkers” in the field of psychology and how their pioneering work can improve how companies craft and manage outsourcing deals.  With that in mind, it’s time for a series of blogs I will refer to as “The Psychology of Outsourcing.” In addition to Art, I’ll look into the work of such luminaries as Eric Berne, Carl Rogers, Albert Mehrabian, Tom Gilovich, and Daniel Gilbert. (No doubt there are others—please contact me with your suggestions!)  I’ll try to apply their ideas to the  mental approach and discipline encompassed by Vested Outsourcing.

Let’s start with Art because his great HBR blog got me started down this path.

Art Markman is the Annabel Irion Worsham Centennial Professor of Psychology and Marketing at the University of Texas at Austin. He is also the editor of the journal Cognitive Science, and consults regularly through his company Maximizing Mind.

Art writes that some time ago he was talking with a colleague about a project he was thinking about doing. “We were both solidly in the middle of our careers, but his evaluation of the possible project surprised me. He said, ‘There are a limited number of things that I’ll be able to say I’ve done in my career, and I’m just not convinced that this should be one of them.’”

What struck Markman about the conversation was that “it took a backward-looking perspective. That is, my colleague projected himself to the end of his career and looked backward over his contribution. In contrast, most people and businesses tend to be forward-looking. This strategy can be seen clearly in politics, where politicians often make decisions based on what will help them get re-elected.”

Art writes about the duality of perspective. For example, younger people will often regret actions taken that did not go well, while older people often regret actions they did not take. A backward-looking perspective highlights the missed opportunities and the things left unsaid or undone.  Art continues: “Throughout your career, there will be many potentially pivotal moments — times when you make decisions that might shape the next several years of your life. In these moments, there is a tendency to be risk-averse. People shy away from opportunities that might go wrong for fear that they will regret failing.”

Markman’s ideas strongly apply to the business world and how we structure outsourcing deals. Taking the time to add perspective to your outsourcing planning is an important element in building an effective Vested partnership because the decision to shift to a Vested approach is often described as a “pivotal moment,” to use Art’s words.

I like the idea of basing the decision to adopt a Vested approach on what you and your partners hope to say about the outcome when you look back on the entire endeavor.

Vested thinking uses a backward-looking approach much like Markman’s friend because it starts with clearly defining Desired Outcomes, where companies project the future and then work backwards to craft a deal structure that incentivizes the service provider to achieve those Desired Outcomes.

This is exactly what Microsoft and Accenture did when they set out to create an outsourcing relationship that would not simply outsource accounting functions, but would also “transform back office procure to pay.”

Shifting to a Vested approach has huge ramifications for the future of each party, so some thought and a fresh perspective about the choices being made is needed. For this reason I also like that fact that Art suggests that you should not be too afraid of failure. “Instead, base your career decisions (at least in part) on what you hope to say when you look back on your life.”

Finally, he offers sound advice when it comes to reflecting on performance: “At least once a year, though, it is important to take stock of how you are progressing on your larger goals. An organization that consistently looks back on the present from the desired future has an excellent chance of achieving those goals.”

We all know how easy it is to fall into the day-to-day minutia of business. The best way to reflect on the performance of an outsourcing relationship is through a sound governance structure. My co-authors and I provide some guidance in my second book, The Vested Outsourcing Manual. We recommend doing monthly strategic reviews in the first year of an outsourcing relationship and at least quarterly after that. We also suggest adding further perspective by leveraging a tiered management structure. These tips and others are outlined in a white paper the University of Tennessee’s Center for Executive Education, the and the International Association for Contract and Commercial Management recently released on governance structures.

As I say—business happens! Take a breath and start looking back to go forward. It is a valuable exercise both on a personal and outsourcing level.

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