Kudos to Adrian Gonzales for his perceptive – and accurate – blog regarding gain-sharing!
Those who equate Vested Outsourcing as meaning the same thing as gain-sharing clearly haven’t read Vitasek’s book. (I have, and I’ve blogged about it before, here and here.)
And those who think gain-sharing “doesn’t work” are not correct. Here’s why.
While it’s true that some sourcing relationships with a gain-share component encounter problems, it’s usually because they didn’t structure the gain-share agreement correctly. I’ve talked with more 20 buyers of outsourcing services who, when they ran into this situation, worked with their service providers to jointly revise the gain-share agreement so it would truly be a win-win and enable achieving the objectives tied to the gain-sharing. All of them told me that, once they revised their gain-share agreement, it worked and it became a key component of success in their relationship.
I’ve also interviewed more than 15 buyers of outsourcing services (who were winners of Outsourcing Center’s annual Outsourcing Excellence Awards program) who successfully used gain-sharing incentives in their relationships and touted it as a key enabler of their success. And all of them did so many years before Vested Outsourcing was even written. One of my favorites shows how the University of Florida and Follett Higher Education Group accomplished specific outcomes through gain-sharing.
There are many other examples of successful gain-sharing (including several in the logistics segment).
Saying gain-sharing doesn’t work is about like my saying swimming doesn’t work. I don’t know how to swim, but it sure works for other people. All that was necessary for them was to learn how to do it – which is no different from successful outsourcing, or successful gain-sharing in outsourcing.
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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