“Whole Brain” Outsourcing
There is an inherent “right brain / left brain” tension in procuring outsourced services. The right side of the brain seeks innovative service delivery solutions and emphasizes relationship building with the supplier. The left brain seeks a high level of supplier accountability for performance, competitive pricing and favorable contractual terms.
The two sides of the brain are fundamentally different in nature.
- The right brain is collaborative and focused on solution and relationship building i.e., aligning customer and supplier interests.
- The left brain is competitive and involves risk shifting i.e., getting the most out of the supplier for the least in return.
An outsourcing involves both collaborative and competitive aspects. At an organizational level, customers want to achieve both right brain (collaborative) and left brain (competitive) objectives. Within the organization, however, there are constituencies with a right brain orientation (typically, business owners and those responsible for delivery) and left brain orientation (typically, finance, procurement and legal). Problems arise when one side of the brain dominates the outsourcing process to the detriment of the other side.
Right Brain Dominance: When the right side of the brain dominates, the procurement process often has the following characteristics:
- A single supplier is selected after a technical evaluation and “agreement” on price, but before all material business and legal issues are resolved (or even discussed).
- Legal is then brought in to “hammer out a contract.”
- The time frame to complete the contract is unrealistic.
- The procurement process is unstructured and poorly documented.
This results in an unnecessary loss of leverage, more adversarial negotiations (as the selected supplier digs in its heels on difficult issues involving accountability and risk allocation), and a need to completely revisit pricing (since usually only “day one” pricing has been discussed and scope issues have not been fully vetted).
Left Brain Dominance: When the left side of the brain dominates, the procurement process often has the following characteristics:
- Strict adherence to procurement rules, procedures and so-called “best practices” with a one size fits all approach.
- Rigid divisions of responsibility on the customer team.
- Overly prescriptive RFP requirements.
- Excessive reliance on “quantitative” scorecard evaluations and emphasis on “apples-to-apples” comparison.
This results in process and risk avoidance taking precedence over solution and relationship building. It also provides a disincentive for suppliers to propose creative solutions and limits opportunities for essential relationship building between the customer and supplier business / IT teams.
Balance: A well run procurement process integrates the best elements of right brain and left brain thinking. It starts with assembling the right team at the beginning of the project. The project team should include all stakeholders from the outset – business owners, IT, procurement, finance, legal and outside consulting / legal advisers.
It is critical that the right people be selected to comprise the core sourcing team (including internal and external resources), desirably individuals with the following characteristics:
- Good business judgment
- Collaborative / high emotional intelligence
- Willingness to place corporate interests over parochial interests
The core team should be held accountable for the success of the entire deal – not just on how well each member represented the interests of his or her constituency. Rigid divisions of responsibility should be avoided. Each team member should be free (and encouraged) to review and provide input and assistance on all aspects of the transaction.
The key is to create a “whole brain” environment where each team member appreciates the need to work together as a team to achieve both the right brain (collaborative) and left brain (competitive) objectives for the outsourcing.