A friend of mine recently told me of the change that technology has made in her marriage. Her husband is deaf. For more than 50 years, he’s heard nothing but the very loudest noises and has to depend on reading lips to follow conversations. He called her one day at work and exclaimed, “Silverware makes noise! And so do the keys on the computer keyboard!”
With new technology in a hearing device, he now can hear sounds that he didn’t even know existed. He suddenly realized why his wife always griped at him to not make so much noise when putting the clean silverware in a drawer when unloading the dishwasher. He quickly became aware of all sorts of things – rain on the roof, the cat’s meow, a bird singing outside out the window, the snow shovel scraping against the sidewalk, the clock ticking.
His experience reminds me of a phenomenon in outsourcing. Just being told that he was making too much noise, or just being told that sounds alert people to certain dangers didn’t help my friend. He wasn’t aware of how important sound is until he actually experienced it. People in outsourcing relationships are often not aware of factors that can cause their deal to fail or succeed – until they actually experience the impact.
One of those factors is cultural fit. The corporate culture of both the client and the outsourcing service provider need to be similar in such aspects as how they make decisions about investments and opportunities, their risk appetite, and how they communicate. Is one of the companies hierarchical and slow in making decisions and the other entrepreneurial and agile and accustomed to making ad hoc decisions? Do they share information openly, proactively or reactively? Is one collaborative and innovative while the other is more risk-minded and reticent?
Gartner predicted that -
Failure to properly manage outsourcing will lead to a 30% failure rate in outsourcing relationships by 2012.
Over the past decade, Gartner has made several predictions about the failure rates of outsourcing. That number has been as high as 50 percent in the past and, although it’s now down to 30%, don’t you agree that the failure rate is still too high?
Failure to properly manage – that’s a joint responsibility. Both companies’ actions have an impact on the other and on their potential for successfully achieving their objectives. Their chances for managing to success are much higher if there’s a cultural fit in the way they approach decisions and the way they communicate. It also facilitates building trust, which is essential for partnering.
Several outsourcing buyers I’ve spoken with who had been in failed relationships say the lack of cultural fit was the biggest problem in the old failed relationship.
Once they experienced the difficulties that arose, they knew how important it was.
It’s not always easy to describe cultural fit. It’s a little like that famous saying -
“I know it when I see it.”
You can be sure that the companies that want to succeed in outsourcing go looking for it when they choose a service provider.
Since 1998, freelance writer Kathleen Goolsby has studied outsourcing relationships’ successes, failures, trends, and best practices. She has interviewed more than 860 executives at buyer and service provider companies and is the author of “Critical Requirements for Building and Sustaining a Successful Outsourcing Relationship,” a chapter in Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships (December 2006, Gower Publishing). As a freelancer, she also currently serves as the Senior Writer for Outsourcing Center (whose parent company is sourcing advisory firm, Alsbridge) and has authored dozens of articles as well as white papers. In a past role, she was editor of Outsourcing Venture (a former print publication). You can contact Kathleen at ksgoolsby@gmail.com.
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Well said Kathleen. While watching the Winter Olympics I was slightly envious of some of competing athletes, in that they have the ability to clearly see the success of their efforts. Such as in sports like speed skating, if they make a change in their training that decreases performance its black-n-white. The clock time goes up.
But in IT Outsourcing it can be very murky. If the provider is not in tune with customer the risk is great as you are marching in the dark. You could be off engineering a solution that reduces disk-access time for pulling a Word document off a Share drive by 300% when what they really wanted was an Access application ported to a web app.
Culture fit bridges the gap, leads to better relations and builds trust.
Predictions are usually based on past history or predictive trends. I do not see evidence to support past predictions and certainly nothing to support future conjecture. Failure is as much a factor of suppliers as it is buying behavior. Therefore predictions are compelling for encouraging action but need to be viewed as prediction (and not certainty).
You’re definitely right about predictions in general, Jerry, but I was talking about lessons learned rather than just predictions. When people start out on something new, they usually benefit from the advice of someone who has already been down that path and has advice (or lessons learned) on what helped their endeavor succeed or fail. When many people’s lessons learned point to the same driver toward failure, one could certainly view that as a trend but would also be wise to view it as a warning of a pitfall or danger to try to avoid.
I certainly agree with you that suppliers must take the blame for their part of a failed outsourcing relationship. But your reference to “buying behavior” also applies to suppliers; when they sign a contract, they indicate their “buy-in” of that customer as being worthy of their investment and of the deal as having a likely outcome of contributing to the supplier’s wallet and competitive success.
I sometimes tire of the media’s and industry experts’ frequent comparisons of outsourcing to marriage, but since outsourcing involves a “relationship,” marriage is an accurate comparison in the “buying behavior” or supplier-selection process in outsourcing. If I marry someone who is not the right “fit” for me in values, beliefs, preferences, goals, decision methods, approaches to resolving conflict, etc., we will have a troubled and less-than-satisfactory marriage. For various reasons, I may decide to stay married and just endure the bad relationship rather than get a divorce, but that doesn’t mean the marriage is a success or that I’ll be happy. However, that outcome isn’t always acceptable in an outsourcing relationship where both parties’ business success very much depends on what they do together. Lack of cultural fit in the business relationship context will result in a less-than-satisfactory relationship that the parties could decide to endure until the end of the contrcatual term, but it will also result in bottom-line impacts because of investments not yielding the desired outcomes.
Depending on the breadth and depth of those investments (of both parties), the lack of cultural fit can cause a failure that has a major impact on a business’ growth strategies and success in the marketplace. So, organizations embarking on an outsourcing initiative are wise to heed the lessons learned that have been shared by companies that endured their outsourcing relationship but didn’t receive the anticipated value outcomes point to lack of cultural fit. Based on how often those outcomes occurred to other companies, lack of cultural fit is a “predictor” of possible failure and definitely a pitfall that both parties need to avoid.
A prediction or forecast is a statement about the way things will happen in the future, often but not always based on experience or knowledge. While there is much overlap between prediction and forecast, a prediction may be a statement that some outcome is expected, while a forecast may cover a range of possible outcomes. Although guaranteed information about the information is in many cases impossible, prediction is necessary to allow plans to be made about possible developments; Howard H. Stevenson writes that prediction in business “… is at least two things: Important and hard.”