Outsourcing Commentaries: Building Trust

By Michael Mensik, Peter George and James Stetson, Baker & McKenzie

The deal is done. All the issues put to bed. The ink is dry on the signature pages. Everyone is on their way home - the client,its consultants,the service provider,and all the lawyers.You’re in the cab on your way to the airport,taking that now familiar route for perhaps the last time. Tired,but satisfied. “Job well done,”you tell yourself. But,then you begin to wonder:“So what’s it going to be like on Monday,when transition begins? How are the parties going to get along then? Did I really do a good job? Did I do all I could to help create the one thing that matters most - trust between the parties?”

As deal attorneys working on global sourcing transactions,we sometimes actually do reflect on the process of negotiating large deals.Although we have published many articles on the “substance” of such transactions (e.g., tax efficient structures, legal compliance, risk allocation, governance structures, etc.), we have not yet published anything about the one aspect of the negotiation process that is probably more important to a successful relationship than any “substantive”issue - building trust. Many of our clients have said that “trust”is one of the most important factors in any negotiation. “I would say that the trust factor is the most important - all of the other aspects of negotiations and, more importantly, implementation, no matter how difficult, can be handled eventually if there is a foundation of trust,” observes Steve Mower of The Thomson Corporation.

We have seen how the negotiation process can generate trust between individuals and organizations. And we have also seen how trust can be destroyed. Particularly with respect to complex outsourcing transactions, where there will inevitably be some rough patches through transition before “steady state,” the trust that is built into negotiating the deal will be the fuel that powers the relationship over time through those rough patches.

So, we decided it was time for us to publish an article on building trust in the negotiation process. There is nothing new here - just ten simple thoughts we collected from some of our past deal experiences. Many of our thoughts likely apply to almost any “relationship” deal.1However, we thought our examples might help others identify similar experiences and that maybe this type of article would help bridge the gap that too often exists between sourcing customers and sourcing providers.

“How many outsourcing agreements are renegotiated in the first 3 years? I have heard figures as high as 70% of the larger contracts. Whether or not that number is accurate,there are too many”notes Vincent Taylor of Accenture. “This hurts all of us in the outsourcing marketplace.” Is it not high time for all of us - customers,their consultants,providers,and all the lawyers - to consider how to build better bridges in the negotiation process? As Barry Weiss of Hewitt Associates has remarked,“We would all greatly benefit from a dialogue about how the deal process can be used to ‘amplify the relationship’.” At Baker & McKenzie, we think creating trust is a key component of building these bridges. We hope this commentary contributes to that end.

(1) Listen. Pay attention to what the other side is saying and consider what they are saying. Don't feel like you have to respond immediately or have an answer right away. Listen,think about what you hear,and then formulate a response. Trust is built through mutual respect,and listening is a way to demonstrate respect. Joel Stern of Accenture punctuates this point with an old adage:“Two ears and one mouth - you should listen twice as much as you talk!” Listening seems easy,but it isn’t. It requires people to put aside their prejudices and opinions about what the other side wants and instead allow the other side to have their own voice. But when a customer doesn’t have the same degree of expertise as its advisors and service providers, why should service providers and advisors listen to them? Because you must. It can be difficult to put those prejudices and opinions aside. But it doesn’t matter. To demonstrate respect,you have to listen.

In a recent yellow pad session, we recall the customer’s VP of Human Resources kicked off discussions with this statement: “What keeps me up at night is,what will happen to my people?” Thinking it already knew and had responded to the concern, the service provider expounded on the salary commitments, transition processes, and severance packages set out in the proposal. But the customer already had that information. What it really wanted to know was,“what will happen to my people?” What the provider failed to address was the career advancement opportunities that the provider would create for those people in its delivery organization. The successful bidding provider did.

(2) Discuss Interests, Not Positions. Interests are the reasons why you want or need something. Positions are what you want or need. Focusing a discussion around interests transforms the negotiation into a problem solving exercise. Focusing a discussion on positions makes the negotiation confrontational. Collaborative problem solving is a good way to build trust. Confrontational negotiations are a good way to destroy it.“The importance and impact of this cannot be overstated,”says Joel Stern of Accenture.

In another recent transaction, our client was interested in protecting its investment in a software application used to generate employee salary guidelines - which was to be created by a service provider. The service provider was interested in minimizing the cost of maintaining this application by leveraging this tool across multiple clients. Each party could have spent several weeks arguing that it should be the owner of this technology. However, by focusing on interests, the parties were able to reach a mutually beneficial arrangement around ownership without any “argument” at all. Collaborating on the problem allowed each party to feel invested in the solution and added to the trust between the organizations.

 

cont'd on page 2

The Premiere Forum for Technology Events and IT Information