CHAPTER 12: Outsourcing: Managing

Interorganizational Relations

Partnering- a process o transforming contractual

arrangements into a cohesive, collaborative team that
deals with issues and problems encountered to meet a
Well-Defined Requirements and Procedures-
customer’s needs.
They often choose to contract only work with
clearly defined deliverables with measurable
• Assumes that traditional adversarial relationship outcomes.
between the owner and contractor is ineffective Extensive Training and Team-Building
and self defeating. Activities- They train their personnel to work
• Assumes that both parties share common goals effectively with people from other organizations
and mutually benefit from the successful and countries. This training is pervasive. It is not
completion of projects. limited to management but involves all the
people, at all levels, who interact with and are
Factors favoring partnering: dependent upon outsourcers.
-The team-building sessions often culminate
with the creation of a partnering charter signed
• Existence of common goals
by all of the participants. This charter states their
• High costs of the adversarial approach
common goals for the project as well as the
• Shared benefits of the collaborative approach procedures that will be used to achieve these
goals
outsourcing has traditionally been applied to the Well-Established Conflict Management
transferring of business functions or processes (e.g., Processes in Place- Conflict is inevitable on a
customer support, IT, accounting) to other, often foreign project and, as pointed out in the previous
companies. chapter, disagreements handled effectively can
elevate performance.
The advantages of outsourcing project work -Escalation is the primary control mechanism for
dealing with and resolving problems
1. Cost reduction Frequent Review and Status Updates- This
2. Faster project completion provides a forum for identifying problems not
3. High level of expertise. only with the project but also with working
4. Flexibility relationships so that they can be resolved quickly
and appropriately.
The disadvantages of outsourcing project work Co-Location When Needed- This allows the high
degree of face-to-face interaction needed to
1. Coordination breakdowns. coordinate activities, solve difficult problems,
2. Loss of control.
and form a common bond. This is especially
3. Conflict.
relevant for complex projects in which close
4. Security issues.
collaboration from different parties is required
to be successful.
Fair and Incentive-Laden Contracts- Managers
recognize that cohesion and cooperation is
undermined if one party feels he or she is being
unfairly treated by others. They also realize that
negotiating the best deal in terms of price can
come back to haunt them with shoddy work and
change order gouging.
 Long-Term Outsourcing Relationships- Many 4. When possible, use objective criteria-Whenever
companies recognize that major benefits can be possible, you should insist on using external, objective
enjoyed when outsourcing arrangements extend criteria to settle disagreement
across multiple projects and are long term.
• Reduced administrative costs—The costs Preproject Activities
associated with bidding and selecting a
contractor are eliminated. Contract • Selecting a partner
administration costs are reduced as partners -Voluntary, experienced, willing with committed
become knowledgeable of their counterpart’s top management.
legal concerns. • Team Building: The project Managers
• More efficient utilization of resources— -Build a collaborative relationship among the
Contractors have a known forecast of work while project managers.
owners are able to concentrate their workforce • Team Building: The stakeholder
on core businesses and avoid the demanding -Expand the partnership commitment to include
swings of project support. other key managers and specialists.
• Improved communication—As partners gain
experience with each other, they develop a
common language and perspective, which
reduces misunderstanding and enhances
collaboration.
• Improved innovation—The partners are able to
discuss innovation and associated risks in a more
open manner and share risks and rewards fairly.
• Improved performance—Over time partners
become more familiar with each other’s
standards and expectations and are able to apply
lessons learned from previous projects to
current projects

Strategies for Communication

1. Recognize cultural differences

2. Choose the right words
3. Confirm your requirements
4. Set deadlines

principled negotiation- It emphasizes developing

win/win solutions while protecting yourself against those
who would take advantage of your forthrightness.

1. Separate the people from the problem - Be hard on the

problem, soft on the people and Let anger fly out the
window.”
2. Focus on interests, not positions -Seek first to
understand, then to be understood.
3. Invent options for mutual gain -Clarifying interests and
exploring mutual options create the opportunity for
dovetailing interests