Vested Outsourcing – Key to Winning Business Relationships
The Global Sourcing Council’s board strongly believes in continuing support and education of our 3S Awards winners. As part of this effort, through the generosity of the University of Tennessee’s Vested Outsourcing program, winners of the awards were offered a three day executive education course on this topic, for which the University of Tennessee is not only a thought leader, but world famous.
This year, a winner of a 3S Award for Empowered Woman, Ajay Chaturvedi, founder of HarVa, attended the three day highly course along with the president of the GSC, Diana d’Ambra.
Vested outsourcing is a structured approach for companies to work together in a high strategic manner with business partners. Creating a “what’s-in-it-for-me” approach to business sourcing relationships, this course explored the application to this approach using case studies with P&G, McDonald’s and Microsoft. But the win-win formula is not just for them, or even smaller corporations. It is just as applicable for governmental agencies, having actually started with work that Kate Vitasek did with the US Air Force and for non-profits.
Five principles that apply to all companies, agencies and non-profits are:
- Focus on outcomes, not transactions.
- Focus on the what, not the how.
- Clearly defined and measurable desired outcomes.
- Pricing model with incentives.
- Insight versus oversight governance.
Perhaps of special interest to the readers of the Source, the course covered the application of the Vested Principles to a non-profit, Denver based, Water for People. This NGO helps people in developing countries improve their quality of life by supporting the development of locally sustainable drinking water resources, sanitation facilities, and hygiene education programs.
Water for People believes that access to clean water is a basic human right. And, as with nearly all NGOs, they are passionate and committed to this goal. Using the Vested approach, following the Five Rules described above, Water for People has focused on long-term sustainable solutions.
Focusing on outcomes, Vested Rule No. 1, fosters partnerships with local governments and communities that maximize the partner’s ability to solve their own water challenges. Prior to Water for People’s solution, the countryside in many developing countries were littered with broken wells and pumps, where no local entity or people have the knowledge or skills to repair a broken well. By focusing on how each local government and community will solve its water problem, setting it up so that from the start how the partners will install, monitor, maintain and repair their water pumps, rather than just install them without the engagement foreseen and planned.
Vested Rule 2 maximizes the partners’ ability to solve their own water problems. This operational model has defined and measurable outcomes. Water for People, relying on their knowledge of the wider range of water problems, helps create the framework but the solution is tailored, specific and local relying upon the local partners including not only governmental agencies but social agencies such as a PTA. But the local partners determine how to solve the water problems along with Water for People, not Water for People alone.
Vested Rule 3 has Water for People and the local partners measure success with a limited number of strategic, long-term results at three, six and ten years from the start. Water for People uses technology to make sure that water is still running, the pumps are still working and the agreements among the parties are still in force.
Vested Rule 4 focuses on pricing, so that each party benefits from success. To some extent, Water for People works to limit their role over time and responsibilities shifts to the other parties. And to make sure that the governmental and other parties have a financial stake and obtain financial benefit at all points.
A strategy of focusing on insight rather than oversight is the Vested Rule 5. Here Water for People has multiple agreements with governments, NGOs, and individuals. Each agreement shows shared risks, investments and commitments with the goal of independence and sustainability. The offices are run and staffed mostly by local employees who are most intimately familiar with the politics, culture, language and community.
And, having attended this course, here is a brief interview with Ajay Chaturvedi:
What about the course was of greatest interest?
The idea of “Vested” interest in any business relationship is intriguing and fascinating because it makes longevity and mutual benefits interdependent. Given the business that HarVa is in, we engage with clients who we would like to be vested in our growth and vice-versa we in theirs. Thinking at a conceptual level is one thing, being able to do it is another and being able to replicate it time and time again across industry verticals and clients, is a totally different ballgame. For me the course was a way to get into the mindsets of the clients, while being a huge networking opportunity.
What surprised you most about the course?
I was expecting some fluid case studies and some softer aspects of discussion which are mostly inexplicable and usually subjective. However after getting there, the most surprising part was the objectivity that was used to define and make understand the idea of vested outsourcing and relationships involved. In most cases when people speak of emotional detachment while making the toughest decisions, they focus more on the importance of making tough decisions and rarely on how to cut the emotional attachment. This was one class where a step-by-step approach was provided on actually focusing on the root of the solution and how to start it.
What did you take away as your most valuable finding?
Vested outsourcing might not be the immediate solution but a long-term must. The sooner buyers and suppliers start embracing it, the better it is for the whole eco-system and sustainability.