This article continues from "The Secret to Dealing with Outsourcing Providers? It's about You (part 1)"

Success Secrets Revealed:

-Culture is key. We suggest you start with reviewing the knowledge level and culture of your prospective collaborative partner and its compatibility with your own. Knowing what to do is part of the equation - Doing it with a matching level of cultural sensitivity determines successful and efficient long-term and sustainable integration of the OP's team into your own organization. 

It is surprising to see how many leaders deal with OPs in other cultures, yet without having any knowledge about the particular culture - therefore being greatly hindered in their cross-cultural communication ability and the partnership's effectiveness. 

Do you and your people for example, know the difference between "high context" and "low context" type cultures? Do you know which type the OP has? Outsourcing 'across cultures' requires for you and your organization to be prepared for this added inter-personal communication and management dimension. If not, culture clashes will minimally raise anxiety, cause delays and in the worse case scenario cause projects to fail by becoming a 'misaligned interest' over time.

- Require a transparent and recurring organization, quality, system and infrastructure review as part of your due diligence and business relationship. It is not uncommon to find less than optimal internal IT hardware, software and systems within OP organizations. The OP's drive for external client delivery and results, frequently challenges spending fiscal and human resources on internal 'upgrades' and systems. Often, in such organizations, efficiency-delivery of the results, can take a lot of personal effort and comes at a high personnel cost. This, according to many ex-OP employees, is also partly related to the double digit turnover in many OP organizations. Structural and internal organizational development, "non-billable" work, will often be trumped by project related work. Be cognizant and monitor this OP organizational development and leadership tension -review if it matches your (ongoing) requirements.

- Based upon Request For Proposal (RFP) data, you may select multiple OP organizations for an on-site visit to discuss capabilities in relation to your specific needs. This usually comes in the form of a presentation by OP's leadership and business development staff, followed by a question and answer session. The presentation usually provides a company overview with a presentation on the number of similar projects performed for other clients - in other words the prospective capability to successfully undertake your project.

However, for you to be able to evaluate clearly "what you're buying", you may want to ask OP leadership for a listing with an overview of the industry-, company- and possibly therapeutic area- experience, of the people who will be assigned to your project(s). In addition, you may want to ask: "Of the people who supported the presented historic successfully completed client projects, how many people are still working for your organization in a similar capacity? Remember, you're in need of buying people/team capabilities and need to be sure experience is available for your project(s). Please note it is not uncommon for OPs to significantly start hiring staff for specific projects, once the agreement is fully ratified. If this is the case for you, it is important for you to be aware of this and to take this into consideration, as part of your due diligence process.

- We recommend to always work with the intention to creating "win-win" scenario's for you and the OP you collaborate and, or partner with. This way, your decision to work with a specific team, company, is no longer a "hit and miss", it is part of the business strategy and has a true long-term intent. You consider the OP and yourself when thinking about how to make this a "win". This is not about "them", or "you", but about creating sustainable "success" out of the relationship. It truly has to be a "win-win" collaborative partnership. Every thing else ultimately will come to fail and becomes part of the flailing organizational change effort statistic, including OP's collaborative partnership failure to deliver the intended outcome [2], [3], [4].

- We recommend to carefully review the scope of the project, the size of the enterprise and the geographical (time zone) location of the enterprise you are going to work with.  Size does matter and you need to define whether a global OP with a hefty infrastructure to support, is really what you need and want to support for this particular project?

Also, geography counts, as it makes a great difference to your team if they can talk with the OP team members during their regular office hours. 

Building relationships and efficiency requires continuity of effort and demands at a minimum some form of relationship between task and people.

- We suggest to thoroughly screen and review the assigned team and provide leadership and team recommendations prior to the start of the project. Also, continuously during the project when team turnover occurs, so that timely and efficient adjustments can be made, on the OP side, or on the Sponsor side, or both.

- Do you know the OP's current personnel attrition rate? Ask the OP's leadership for a breakdown of staff by function with their tenure level within the organization - Require transparency and proof through data. Although loyalty does not equal performance, it is important to you and you need to be able to integrate the turnover data within your planning. A likely double digit personnel attrition will easily set you back in time and money, particularly on a longer duration project.

Unfortunately, as mentioned in part 1 of this article, so called 'respected' OP names, do not lead to undisputed, repeated and uncomplicated successful results. It all depends upon the team assigned and the level of 'absorption' your leadership and organization can handle to manage, i.e. can the OP team become an integral part of a newly formed team and can leadership manage this added complexity and new organizational 'modus operandi'.

- With all due respect for the business part of OP's - OP's activities and change orders come at a price to your organization and are often not the result of lack of OP strategy, planning and, or internal inefficiency. Outsourcing, including change orders is an OP's business and you need to carefully plan and manage jointly with the OP to avoid repeated and costly change orders.

- When people do not know what to do and go to an OP, the professional OP will require information, develop a plan, or revisit an earlier plan and present a (revised) bill for the resources used and time spent. Therefore we feel successful OP interface management is a professional, sensitive, operational and a logistical task if you will, yet a task which, particularly in the Biotech, Medical Devices, or Pharmaceutical Industry carries a lot of the technical and specifics of product-, or drug-development know how within. Well technical- and people-skilled individuals are definitely required!

- Working with an OP equals initiating change within the organization, hence as a leader the need to manage this adaptation process actively and intelligently - This implies collaboration, not merely  'delegation' - Take full leadership accountability and for example, target to better define the interface, its management and hence improve the functioning of the interaction with the third party throughout your organization.

- We have experienced well written interface processes effectively "not working" and mediocre processes "being handled" with excellence by the people involved. However, creativity to manage and handle complexity and the dynamics of projects cannot be 'harnessed' by Standard Operating Procedures (SOPs) alone. As mentioned before, knowledgeable people are required, people who are neutral to the process and to you -Those who have no internal 'push' from colleagues and/or the OP. In addition, people who can build relationships and who can create client success by treating the project variables intelligently and sensibly - Animosity doesn't belong in this relationship - Maturity and professionalism does. As business advisors we experienced quite dramatic uptake in project response, budget management and the overall planning by having the interface management clearly defined and being discussed upfront by knowledgeable people. This is not just about administratively 'getting the contract right'- you need specialist and mature resources at the table, people who 'have been there, done that'.

- Your leadership role, although limited, is critical in the process. We recommend to establish necessary communication and reporting lines, so your role is to lead and prepare for the interpretation of the project results, not repeatedly handling escalated collaboration, or interface project management issues. Require daily discussions if necessary, particularly if you 'test' some thing for your organization and you want to ensure to expend money and personnel on the right 'thing', or the right approach.

- We recommend senior level management interaction, as frequent as necessary, but no less than once per quarter for a full project(s) performance update, reviewing the full project(s) and any outstanding issues to be reviewed and discussed.

- We recommend neutrally guided pre-, during- and post-project interface review, resulting in improved relationships and greater interface effectiveness between you and your third party. 'Post-mortem' implies exactly that and is severely limiting project management effectiveness. You want ongoing vitality in the relationship, not mortality.

- We recommend for you to agree on the project Key Performance Indicators (KPIs) prior to starting the project - Ensuring identical measures of success are used by your team and the OP's team. Prevent they will not become subjective 'Key People Indicators', through the development of clear and objective project related measurements. You're not 'giving' all, or parts of your projects blindly away. Mutual agreement with mutual measurements in place, prior to the start of the project, prevents development of project 'blind spots'. This, usually leading to unreliable decision making data at the end.

- We strongly suggest for you to stay away from the "Bookkeeper-Auditor Dilemma" - Create a clear and separate authority and communication line between who's executing the work and who's supervising and/or auditing the work. When this is not 'possible' for example, when complete development programs are outsourced, demand regular external Quality Assurance auditing, with full access to personnel, systems and data.

Working with OPs can be rewarding for you and can contribute to the organization's business success. However, we want to stress once again, any time you collaborate with an OP, you create a new venture and you ought to create a collaborative partnership of "equals" with your OP to ensure success. 

The internal adaptation to integrate and manage the outsourcing leads to greater success, than the routine focus on selecting the "best" outsourcing provider. It is as much, if not more, about you and your (adapted) organization, as it is about the selection of the OP organization.

Creating a clear outsourcing common vision, strategizing integration, defining efficient operationalization and communication with and organizing your internal resources, is as important as organizing the interface with the OP's resources.

It is clear, OPs are not a panacea, they will not cure a corporation's missing talent, performance and/or organizational issues, they don't deal with organization misalignment, missed succession planning and any other myriad organizational and business development issues you may be dealing with.

Both Sponsor and OP leadership have to be dedicated to collaborative success - focused on "Client Success" and mutual business success, by producing functional resource integration, assigning quality and dedicated leadership with appropriate project performance measurements.

As an organizational leader you must lead and manage your own organization, but you cannot and should not attempt to manage the OP.

We hope through this 2-part article we have been able to contribute to improved and successfully dealing with the organizational development, communication requirements and collaborative leadership required in the preparation, planning and execution of successful partnership with OPs.

CONCLUSION

Partnering is collaborating and collaborating needs to happen as "equals". The internal organization and framework, its culture, is equally as important as the OP's culture you select.

Your leadership is key in preparing and leading your organization towards outsourcing success - you need trust, transparency and being able to continuously tell each other truthfully what's going on.

The true panacea to your organizations outsourcing success - The secret of dealing with OP's is all about you, your organization and the leadership of the outsourcing relationship.

Last, but not least - Please remember, any time you consider outsourcing, first consider the internal organization required to do so - Selecting the OP is of secondary importance.

Wishing you much success!

References

[1] Reinhoudt, F., Johan (2009). Collaboration to Innovate; Collaboration Matters - Creating Value at the Interface.

[2] Beer, M., Nohria, N., (2000). Cracking the Code of Change. Harvard Business Review, HBR's 10 Must Reads on Change, 88-95.

[3] Beer, M., Eisenstat, R. A., & Spector, B. (1990a). Why change programs don't produce change. Harvard Business Review, 68(6), 158-166.

[4] Kotter, J. P. (1995). Leading change: why transformation efforts fail. Harvard Business Review, 73(2), 59-67.

[5] PriceWaterhouseCoopers (2007). The partnership bridge: Building successful IT outsourcing relationships - 2007 Global Outsourcing Survey

Copyrights 2012, All Rights Reserved, All Media Johan Reinhoudt

Johan Reinhoudt is President and CEO of Collaborative Primacy Life Sciences Consulting (CPLS Consulting). He is an experienced global life sciences executive - a practical business and organizational development advisor, working principally with life sciences industry leaders internationally.

CPLS Consulting is a specialized international business advisory firm, focused on the biotechnology, medical device and pharmaceutical industry. CPLS Consulting is focused on operations, leadership and organizational business advisory and has special interest in working with small and medium sized biotechnology, medical device and pharmaceutical enterprise (SME) clients engaged in the formation, execution, optimization or efficient termination of collaborations and partnerships, between biotechnology, medical device, pharmaceutical companies, academic research centers, contract research organizations (CROs) and contract manufacturing organizations (CMOs).

Please visit our website or contact us at Tel.+1-443-420-1000, or via email: info@cplsconsulting.com.

INTRODUCTION

As a business and organizational leader, you are required to continuously and strategically position your company for growth. Increasingly, this requires for you and your organization to collaborate with outside parties - to outsource services, or production to an external party. Investment into outsourcing a project, or activity is required so you can buy specialized resources, skills, or a technique you either don't have, or don't have (yet) enough of within the organization. It also reduces capital expenditure, by being able to manage the Outsourcing Provider (OP) as external cost, reducing the internal resource dependency and increasing the flexibility to meet ever dynamic market conditions.

By now it has become clear, there is no universal route to business success, but one which needs to be uniquely tailored to both the Sponsoring and the OP organization. In this 2-part article, we want to highlight the importance of "leadership" and  "partnering" with OPs and what successful leaders have observed - In other words, how success can be positively influenced by you, the leader.

In fact, the contrary is often true: Outsourcing exacerbates existing internal leadership, management, policy, process and procedural issues. Foremost, it requires additional and a different type of leadership - not less.

Working with OPs implies the creation of a (new) collaboration and partnership - This will bring about changes in the 'modus operandi' of any organization and requires the creation of a truly "new" organization within the overall organizational framework.

Once you have taken the decision to use an OP, it is pivotal to take the changes in the 'modus operandi' of the organization first and foremost into account, and to carefully define expectations, plan, communicate and lead in close collaboration with the OP's leadership - Commencing managing the OP relationship right from the start.

In our advisory work we have seen many leaders requiring the creation of excessive policies, procedures and structures to manage the OP interface. This 'securitization' of success by leadership frequently has resulted in a lopsided focus, one which often has been 'exclusively' centered around processes and the search for 'imperfections' and inabilities in the OP's organization. Operationally, perhaps surprising, it is not so much about the OP and its organization, but mostly about the internal 'setup' of the Sponsoring organization and about seeking a mutually compatible and beneficial partner.

Often times, the initial lopsided focus by the Sponsor, results in time delays, cost overruns and other undesirable business consequences down the road. When working with an OP, when not overly careful, these will be your charges and your costs. It is up to you to continuously communicate with the OP and to ensure business interests remain aligned and mutually beneficial.

There is currently a high failure rate (~70%) in altering the way an organization is operating [2], [3], [4] and a similar failure rate, specifically in outsourcing deals (~69%), in whole or part [5]. Thus, there is a strong need for a different approach in forming partnerships and collaborative ventures in the industry by means of approaching and managing OPs in a strategic and well executed manner.

Are you experiencing "Outsourcing Provider" Alerts?

1. Are you experiencing program development timeline deviation, while working with your OPs?

2. Have you ever thought, even though you have seen advantages of working with OPs, there are plenty of times, you would like to do all the work internally with your own team?

3. Are you experiencing cost overruns, while executing your product and development programs through OPs?

4. Are you experiencing delays - Your projects not to start, or end on-time?

5. Are you experiencing multiple internally directed project changes resulting in various change orders as a result?

6. Are you considering to outsource your OPs (interface) management?

7. Are you receiving negative cost-benefit ratio updates on the use of a specific OP, or no clear cost-benefit ratio data at all?

If you are like most business leaders you have answered "yes" to one, or more of the above questions. 

The following main questions may then occupy your mind in this respect: 

A. What impact does leadership specifically have on success in the interaction and output of working with an Outsourcing Provider? 

B. Can leadership prevent outcome uncertainty, administrative mishaps, miscommunication, higher than expected cost, lower than expected output and other undesired collaboration- and partnership-results with OPs from occurring?

Effective Leaders:

- Know legal, financial and technical due diligence of a prospective partner often eclipse operational, organizational and culture reviews. When these latter issues 'fall through the cracks', it can lead to big problems in the collaborative partnership further down the road [1].

- Know successful management of an OP relationship, requires mutual knowledge and understanding of each other's organization, each other's culture and its collaborative nature, all fundamental to a successful outcome. Success is mutually driven by the assigned People, the Team, the Operations, the Organization and finally the Culture. When leaders outsource, they factually in-source, they buy a team of resources to supplement their own. 

- Model their personal collaborative leadership behavior to the collaborative partnership the seek to create. Hence this will be visible in the team's operational approach and project management.

- Seek collective gain by creating a research, clinical-, product-, or commercial- development collaboration and partnership,  a partnership of equals - a "Win-Win", irrespective from the organizational size of the 'other party' - Hence, the OP may represent a much bigger, or much smaller size organization than their own.

- Know a successful project with an OP is clearly defined by leadership right from the start - their personal leadership - A well known OP name doesn't define success - collaborative leadership does. 

- Respect each other's business - they look beyond the OP agreement "price" and see "value" by leaving a respectable margin in the price to pay, allowing for potential long term collaboration and mutual business development.

- Target success and know "management by fear" is not successful - they negotiate positive OP milestone delivery incentives in the agreement - always stimulating delivery, not fear.

- Are accountable for the organization - they do not allow for uncontrolled and unprofessional 'internal' work, to be 'fixed' (at a price) by the OP.  This is particularly relevant when "strategic partnerships" are initiated, often leading to huge organizational cost (frustration and project delays) as a result of the initial "hands-off" mentality by the Sponsor's staff. The latter is a result of leadership's inability to 'sell' the decision to outsource complete departments and/or functions and to collaborate internally on a partnership with the OP.

When leaders outsource, they factually in-source, they buy a team of resources to supplement their own."

- Define "neutral", high quality, knowledgeable professionals to interface with OPs - avoiding the multi-layered department oversight scenario (administrative-, contract-, project-management), leading to an inability of clear accountability, producing inefficiency and potential project waste as a result. 

- They assign talent which is defined as 'fit for purpose', not just based upon résumé review, but through a sensible review of an individual's inner desire to perform and contribute to the specific requirements of the OP interface job.

- Distinguish interface management from "process management". They actively work on the daily reality of how well their organization integrates its own activities with the external OP organization and determine what repercussions the outsourcing has on a departmental level within their organization. 

- Develop a clear project vision and a realistic and implementable strategy, planning and execution - leading to timely information provision, reducing mid-course project strategy changes to a minimum. They are well aware that otherwise, planning and quality will suffer and human and fiscal resources will have to be expended, all as a result of OP generated, but Sponsor 'caused' "change orders". 

- Avoid the 'dynamic' product development environment excuse used by departments or the organization as a whole, causing projects to drift and continuously change course, without a clear strategic reasoning. They know this is more related to their personal and their leadership team's inability to clearly define what needs to be done, than to product-, regulatory-, or commercial-data driven changes.

Will you know what's going on and are you getting your money's worth i.e., will the defined goals and objectives be met by the OPs promised date - At the agreed price?"

- Know that so called reputable (company) names, do not lead to undisputed, repeated and uncomplicated successful project results. It all depends upon the team assigned and the defined interface and management thereof. It is up to the assigned Sponsor leader to ensure team verification and qualification for the job to be done - this includes the assigned Sponsor and OPs Project Manager.

- Know smaller sized OPs often times have 'niche' product-, therapeutic- and, or specific geographical-area expertise. These OPs deliver agility, flexibility and responsiveness, often complemented by short communication lines with knowledgeable Senior Leadership - features most  'larger' OPs cannot, or cannot consistently provide and guarantee.

- Define success and give clear measurements. Implement mutual key performance measurements in place to prove that the outsourcing is 'working' and contributing to the Sponsor and the OP's business success. 

- Are interested in the creation of an increasing flexible organization, one with lower "fixed cost" and increasing successful response to market demand, allowing for rapid increase, or decrease of resources, yet not without realizing there is an internal "cost" to this.

- Know that in a strict regulatory context, using an OP does not reduce an organization's accountability for the actual project work being done by the OP. Effective leaders are known to be ultra selective about who is going to work on their projects, in what capacity and for how long. These leaders know they will finally be held Regulatory and Financially accountable for all OP activities on their project(s).

Are there Success Secrets? Find out next week.

Part 2 of this article will be published on January 18, 2012.

References

[1] Reinhoudt, F., Johan (2009). Collaboration to Innovate; Collaboration Matters - Creating Value at the Interface.

[2] Beer, M., Nohria, N., (2000). Cracking the Code of Change. Harvard Business Review, HBR's 10 Must Reads on Change, 88-95.

[3] Beer, M., Eisenstat, R. A., & Spector, B. (1990a). Why change programs don't produce change. Harvard Business Review, 68(6), 158-166.

[4] Kotter, J. P. (1995). Leading change: why transformation efforts fail? Harvard Business Review, 73(2), 59-67.

[5] PriceWaterhouseCoopers (2007). The partnership bridge: Building successful IT outsourcing relationships - 2007 Global Outsourcing Survey

Copyrights 2012, All Rights Reserved, All Media Johan Reinhoudt

Johan Reinhoudt is President and CEO of Collaborative Primacy Life Sciences Consulting (CPLS Consulting). He is an experienced global life sciences executive - a practical business leader and organizational development advisor, working principally with life sciences industry leaders internationally.

CPLS Consulting is a specialized international business advisory firm, focused on the biotechnology, medical device and pharmaceutical industry. CPLS Consulting is focused on operations, leadership and organizational business advisory and has special interest in working with small and medium sized biotechnology, medical device and pharmaceutical enterprise (SME) clients engaged in the formation, execution, optimization or efficient termination of collaborations and partnerships, between biotechnology, medical device, pharmaceutical companies, academic research centers, contract research organizations (CROs) and contract manufacturing organizations (CMOs).

Please visit our website, or contact us at Tel.+1-443-420-1000, or via email: info@cplsconsulting.com.