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Contracts & Communication

February 1, 2011

There is an interesting article on the Shared Services & Outsourcing Network website on the topic of ‘Tips For Successful Shared Services Governance’.

Shared services are, of course, based on internal relationships. However, many of the underlying principles and disciplines are the same as those for an external supplier. So in reading about the things that determine the success of a shared service, it is interesting to reflect the extent to which these also apply for an external relationship.

The article highlights the importance of communication between the provider and the customer. It suggests that few services will succeed unless the provider has engaged not only with senior management, but also with the consumers of the service.  It goes on to emphasize the key role of good documentation that sets out the principles of service and then the service or operating levels. To quote: “It is vitally important to see the SLA /OLA as a communications tool, an output of an agreed way of working between the stakeholder parties at an operations level; something that by its clarity helps to prevent conflict and that provides a way to measure service effectiveness. The document that encapsulates all of the above in word and spirit should be seen as a living framework for an evolving and organic relationship of transactions between the stakeholders and providers.”

The highlighting is mine – because it strikes me that these are fundamental principles which apply regardless of internal or external prvision. The article continues by pointing out that the documents are not ‘something to file away or to be used to hit people over the head with when things go wrong!’ They are something that will be amended and adjusted by agreement, as the service evolves and grows and continuous, improvements are made to process effectiveness, leveraging technology and new ways of working so these can be updated and reflected in the document.
 

None of this should come as a surprise, but I wonder how often most contracts pass the litmus test of these characteristics? For example, many service providers do not even have access to the internal customers or consumers. Instead, they are kept at arm’s length and required to develop proposals and negotiate on the basis set out by an intermediary (perhaps from Procurement, or maybe even a third party adviser).  And we all know that many of the SLAs are not written as mutual documents with shared commitment and agreed performance criteria. Instead, they are imposed and immediately become a likely source of dispute or disagreement.

The article concludes by observing that successful service outcomes are achieved when we understand that the core agreements surrounding the service are something that must be done together – so do the contract with each other, not to each other.

None of this is earth-shattering. But I wonder how many of us can honestly say that these principles are consistently used in the negotiation and framing of services contracts in which we are involved?

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