Negotiate More Than Price and Terms
For the past few years, we have been following how well organizations partner with external experts, and the implications for the productivity and satisfaction of the service relationship. In our new book Agile Talent we demonstrate the growing importance of this issue. Without doubt, the dependence of organization on external expertise continues to grow. In our own research, over 50% of the global companies we surveyed plan to increase their use of external experts, which we refer to as agile talent. This is consistent with trends reported by other firms.
But while organizations depend more on external talent, it’s not always – or even often – an easy marriage. Figure One points to some of the challenges and frustrations seen on both sides:
Strong, productive, relationships between organizations and their service providers depends on four factors:
Strategic alignment. Is the organization disciplined and rigorous in identifying areas where agile talent is required or potentially beneficial? Are external experts used well? Are they doing work that matters and is important to the organization; moreover, do they feel the work is meaningful? Is the organization effective at defining the role, relationship and scope of initiatives addressed by agile talent so that both goals and roles are clear?
Does the work have the right level of sponsorship? Are timing, budget and resourcing consistent with what is required for a successful outcome? And, when scope changes occur, is the work plan and budget revised appropriately so that externals don’t feel taken advantage of or exploited.
Performance alignment. How well does the organization convert a plan or initiative into well-defined, S.M.A.R.T. objectives and timelines? Are performance expectations clearly defined, established and communicated so that the accountabilities are clear to both agile talent and the internal colleagues they depend on? How often is performance assessed and feedback provided?
Is the feedback balanced or focused primarily on problems and mistakes? Does the organization take responsibility for its part, or tend to “dump” on the external. What metrics are used, and are they reasonable? When performance problems arise, how promptly and effectively does the organization take the required action?
Relationship alignment. Does the organization consider cultural fit as well as technical expertise in the choice of external experts? Are agile talent thrown into the task or given a solid orientation to the organization and the people with whom they will work? How promptly and effectively are conflicts resolved? Are externals engaged and involved, kept informed appropriately, and treated with the consideration and respect that any professional would expect? Or, as the expression goes, are they treated like mushrooms, and kept in the dark?
Administrative alignment. Is the organization set up to work well with agile talent, or are they treated with suspicion, as a necessary evil? Does the organization respond bureaucratically in dealing with externals’ concerns, for example is the contractual process benign or difficult and excessively time consuming? Are pertinent rules and policies communicated appropriately and early? Are externals paid promptly? Is the orientation of the organization one that views external talent as interlopers or as welcome colleagues?
The service partner perspective: a case study
We recently had the opportunity to see how well companies are aligned with the four drivers of agile talent productivity and satisfaction; what we call the agile talent EQ (or effectiveness quotient).
Our agile talent EQ survey assesses organizations using a 28-item survey. Each alignment driver is tested by seven validated items utilizing 7-point scales. Therefore, each alignment driver has a potential high score of 49. We asked 20 sales and service executives of a major global logistics provider to 3 assess one of their most important customers, typically divisions of multi-billion dollar companies.
The companies they described include sophisticated global companies Wal-Mart, HP, and The Gap. Figure Two shows the overall ratings by category.
The figure suggests two interesting trends. First, the norms for each alignment driver were only slightly above a “neutral” rating; overall, for this population, client organizations representing some of the best known global companies, were not rated as highly effective in any of the alignment drivers.
We also observed that performance alignment ratings were significantly lower for this group than other alignment categories. There was a marked reduction in the ratings for the performance factor.
A third finding reinforces this trend. We thought it might be interesting to look at the range in ratings by alignment driver. Unsurprisingly, given the norms, the range in assessments was largest in the performance alignment area. Second, and close behind, was the strategic alignment factor.
The remaining drivers, relationship and administrative alignment, had more narrow ranges. Figure two provides a visual representation of the range in low – high ratings.
Figure three also gives the median rating for each of the factors: the median score for performance alignment was well below the median for others.
What is the message of these data? The sales and service leaders with whom we worked drew three important conclusions:
Negotiating price and terms isn’t enough. The individuals in our study were very clear: success was a profitable relationship that would continue and grow over time. This outcome relies on performance clarity and transparency: agreement on the results expected, the metrics and how performance is measured, and well-defined performance milestones. It depends also on timely feedback, and ongoing communication. Our respondents saw an important need for expanding the focus of pre-sales discussion.
Explore strengths and weaknesses together. We created the Agile Talent EQ survey to provide a validated, reliable and systematic approach to assessing how well organizations are set up to build strong internal-external partnerships. The survey provides a checklist for organizations, a means for identifying the gap between current and required effectiveness, and a tool for identifying and prioritizing improvement. The sales and service leaders participating in this study identified real value in using the survey with their clients both initially and on an ongoing basis to catch potential problems before they became more serious.
Define important improvement targets and collaborate in making change. Identifying obstacles to an effective relationship is the first step but it cannot be the last. The client organization owns the responsibility to improve in areas that impact the performance and satisfaction of the internal-external relationship, but may not have insight on how to change. Service partners who deal with a wide range of organizations may have good ideas and proposals for how the client organization must improve, but must be and appear to be sincere; proposing self-interested changes that do not benefit the client organization will not fly. However, in the view of the sales and service leaders who were surveyed, the combination of client organization and service partner working together on areas for improvement can be powerful.
The clear message of this pilot study is the importance of paying attention to all four alignment drivers. Of course the sales and service leaders we surveyed understand the importance of all four, but in practical terms they work hard to gain a fair price and terms for their service, and to make sure contractual objectives and 5 performance metrics are realistic. Our data suggests the value of a more explicit collaboration around all four areas and a particular focus on making certain that the performance factors include not only objectives, metrics and schedules, but also regular review and feedback. In addition, these findings encourage organizational leaders and their procurement heads to more regularly and visibly recognize successes by agile talent, and to more actively share information about those who deliver superior performance.