Following the first four rules of Vested helps the parties get to a good Vested agreement; keeping your agreement aligned and smoothly operating hinges on Rule #5, which creates a sound governance structure based on insight, not oversight. The main thing to keep in mind is to manage the business and the relationship, not the service provider. This mindset will help the parties avoid the Outsourcing Paradox, Activity Trap and Junkyard Dog ailments.
There are four essential components to a sound governance structure; this post highlights Element 7 – Relationship Management. Element 7 focuses on establishing joint policies and mechanisms for how the relationship and business will be flexibly and collaboratively managed. It also establishes protocols for how the parties will address changes in the key components of the agreement itself.
Good companies realize the importance of managing their Vested relationships with the same level of intensity as their customer and employee relationships. They also know that skimping on governance will lead to their agreement getting out of equilibrium.
There are six techniques to use when aligning your organizations to manage your relationship, including:
- Create a tiered management structure—establish an organizational structure to ensure that vertical alignment between the executives and the employees is charted to get the work done.
- Establish separate service delivery, transformation, and commercial management roles.
- Establish peer-to-peer communications protocols—once the parties have determined a tiered structure and have established the various functional roles within it, the parties should then focus on horizontal integration; one way to do this is to map the individuals into the structure using a peer-to-peer alignment approach, commonly known as a reverse bow tie.
- Establish a communications cadence, tempo, or rhythm—a regular communications cadence process sets the rhythm of the business because it helps the parties establish a formal mechanism for managing it.
- Develop a process to maintain continuity of resources—address common concerns by including a personnel management component, for example through the mutual identification of key personnel and provisions that prevent unilateral removal or reassignment of key personnel over a specific timeframe.
- Establish a performance management program—this program governs the day-to-business and the relationship by measuring end-to-end performance against KPIs and Desired Outcomes, the overall health of the relationship, performance scoring, using a neutral third party, proactive problem solving and a dispute resolution process.
Element 7 is discussed in full in chapter 7 of The Vested Outsourcing Manual. Also, Vested’s free self-assessment is a useful online tool to help benchmark how well you are applying Vested’s Rule #5. The 10 Elements assessment report will help identify the structural flaws that may be holding you back from achieving transformational success.