The success rate of HRO contracts is bad to dismal. That isn’t to say that companies are not saving money, or that vendors are providing bad service levels. But often, companies are dissatisfied with their overall relationships. The key indicator for satisfaction is not service delivery or cost savings (although those are drivers). The key indicator is how well you’ve structured your partnership around the contract.
Partnership goes both ways. There must be some form of understanding about the core strategy and direction of the contract from the outset – beginning from sales. This is really about understanding the “spirit” of the relationship. From the vendor perspective, it means that understanding the goals should translate into not being and nickel and dime store – not everything is actually out of scope. While certain services are not spelled out in the scope of work (SOW), the spirit of the contract and the philosophy of what was agreed do between the negotiators in the sales process may not have made it to the SOW. In reality, there will always be some disagreement about what’s in the SOW and what was actually purchase/sold in spirit.
From the customer side, it’s the understanding that a win/win is possible. Nobody really wants their vendor to go out of business, but in their particular case, they want a cost model that is too good to be true. It’s also understanding that sometimes things go wrong. They went wrong when the processes were in-house, and the new outsourcer will have some glitches too.
I’ve heard companies say “if you don’t come down hard on them, they won’t do the work.” The problem is that if you do “come down hard” they won’t go above and beyond the call of duty when the time comes for that. I use the term “vendor” a lot because it’s the easiest descriptor. In truth, partner is the correct term – and the important one if you want success in HRO.