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Designed for Failure

Monday, October 1, 2012
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Getting to "Yes" and then documenting that "Yes" can be an exhausting experience. From provider identification through requests for proposal, evaluation of bids, selection of the ultimate service provider and contract negotiations and settlement, the road can be long and tortuous.

The provider deal team is tasked with understanding the need identified in the RFP and responding to that need. Often, the deal team will know nothing more about the client company, its culture, its industry and its business drivers than can be found in generic glossy annual reports and SEC filings.

Due to very real needs to limit providers from influencing buying decisions, client-procurement officers and HR executives will often limit the service provider's access to people in the client company in the RFP process.

Once the contract is set, both parties begin process documentation, knowledge transfer and transition of services. During this phase, the service provider has very real budget constraints. The provider has targeted only so much time and so many resources to get to the go-live date on which services start. Service commencement is the key to when the provider can start billing for all the operations manpower that has been lined up to provide services to the client, so the provider's cost and margin concerns are highly sensitive during this phase of operations. Likewise, the client is concerned with the quality of resources, the systems and the communications of the provider, and it is during this critical phase of the relationship that misperceptions of culture and needs are often seen.

The need for both companies to appreciate the culture and needs of the other is absolutely fundamental to the success of the relationship. The HR team in a client company has a distinctive brand, and is in a sense the keeper of the client's cultural brand. The HR team is often the first line of contact in issues of ethics, fair dealing between employees and maintaining a business-like working environment. Many HR teams feel they are high-touch and very responsive to employee questions and needs. If that is the dominant culture, or at least HR's perception of its service culture, then the provider needs to be fully aware of that perception.

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The relationship will die an early death if this terrain is not carefully navigated. Some of the issues frequently encountered during transitions with providers include newly hired and sometimes poorly trained resources, lacking skills and depth of bench in project-management resources. Other problems include inadequate numbers of call-center and service-center resources to deal with the number of calls that can occur from the first day of the relationship, and a failure to adequately and correctly document process steps. Generic workflows in documents are good starts to saving both client and provider time, but they can never be taken as more than starts.

Cultural mismatches between the client and the provider can be absolutely poisonous, and some relationships never really recover from the lack of understanding the other party's service culture. Providers and clients should invest quality time with each other and be certain of how various key executives see the service culture before transition gets underway. Shortchanging this part of the process can cost a great deal down the road.

Lowell Williams is a director in KPMG's Shared Services and Outsourcing Advisory group, based in New York. He can be reached at lcwilliams@KPMG.com.

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