Enhancing Outsourcing Relationship Management Capabilities: Driving Greater Value from AllianceBernstein s Global Operations

Transcription

1 Enhancing Outsourcing Relationship Management Capabilities: Driving Greater Value from AllianceBernstein s Global Operations A Vantage Partners Case Study

3 Like many of its peers in the financial services industry, AllianceBernstein relies significantly on external partners to deliver critical operational services. Capturing maximum value from these arrangements requires more than just getting a good price; the difference between well-managed relationships and troubled ones amounts to millions of dollars in bottom-line value, and more in terms of risks managed or mitigated. To ensure Global Operations was getting the most from its outsourcing relationships, Dick Taggart, SVP and Head of Global Operations, partnered with CPO John Detweiler (now Managing Director of Sourcing and Vendor Management at BlackRock) and Vantage Partners to undertake both a health check of a particularly complex, multi-faceted outsourcing relationship and a structured inventory of his team s provider management capabilities. This effort was triggered not because anything in particular was broken, but because Dick and his team believed that they could better leverage the best of what each of their providers could deliver and that they needed to raise their game given accelerating plans for a more integrated, outsourced operating model. The individual health check and the broader capability inventory assessment proceeded on parallel tracks, each addressing different challenges: Health Check Challenge: AllianceBernstein singled out one relationship for the health check because it was relatively complex, involving different parts of Global Operations and multiple business units at the provider. This provider had long delivered business continuity services from different sites around the globe, with mixed perceptions of how well it was doing. AllianceBernstein takes business continuity very seriously, investing significantly in its ability to recover from a major disaster and quickly enable its professionals to continue to trade and manage investments. A separate business unit of the provider had completed for AllianceBernstein a major technology implementation of a new hosted application to replace an outdated system and eventually deliver much more value if all went well. This aspect of the relationship was relatively new, with both honeymoon perceptions and transition pains. Approach: To facilitate candid conversations, objective analysis, and effective brainstorming, AllianceBernstein concluded that third-party expertise would be useful. Vantage Partners brought a proven methodology and a highly collaborative facilitation approach. (For an example of a set of health check dimensions to explore and hypotheses to test, please see Table 1 in Vantage Partners Outsourcing Health Check: A Case Study). The engagement relied on interviews and focus group discussions with approximately 40 stakeholders; an electronic survey; a review of historical documents, including governance structures, contractual provisions, and performance data; as well as multiple working sessions with a joint core team including both AllianceBernstein and its outsourcing partner. Relationship Management Capability Inventory Challenge: AllianceBernstein s provider relationships, covering a range of different scopes and delivery models, had been put in place independently over the years as needed. Some were long-standing and others more recent, but all were largely managed as one-offs. Even if each relationship was managed well, questions remained regarding what lessons could be shared, what capabilities could be better leveraged, and how AllianceBernstein could take its outsourcing management capabilities to the next level of excellence. Approach: AllianceBernstein formed an inter-disciplinary core team including Sourcing, HR, and Operations representatives to carry out an internal capability inventory. Leveraging some of the frameworks and methodology that Vantage provided for the health check, the core team developed a survey for individuals managing different provider relationships and followed up the survey with individual interviews. In all, AllianceBernstein considered six other provider relationships. During its interviews, the core team probed behind the answers to the capability questions, collected examples of documents, templates, and checklists, and played a cross-pollinating role by describing some of what others were doing. At the conclusion of the effort, they analyzed the Global Operations team s provider management capabilities and gaps and created a shared repository of sample documents and descriptions of internal best practices.

4 Key Health Check Insights Analysis of the data gathered through the health check illuminated both the strengths and challenges of the relationship. On the positive side, parties on both sides indicated that they trusted and respected one another s individuals skills, capabilities, and intentions, and also those of the organization as well. Specifically, the health check found that: Both organizations believe that they can count on each other to deliver on key commitments. Individuals are said to display impressive project management experience, possess effective interpersonal skills, and exhibit professionalism. Interviewees on both sides compared the partner organization favorably to other suppliers/clients in the areas above. Mutual trust proved to be a strong foundation upon which to address some of the challenges the parties experienced, such as: Misaligned service delivery expectations between the organizations; for example, the provider felt it was rolling out the red carpet to deliver exceptional service enhancements, while AllianceBernstein felt its expectations were not being met in that area. Squandered opportunities to innovate and grow the relationship for example, by expanding the scope of the hosted solution or building a new data center because the provider had not developed a solid understanding of AllianceBernstein s business needs and AllianceBernstein had not taken the opportunity to fully appreciate the provider s capabilities. Ineffective tracking and reporting on progress in meeting key relationship objectives, including areas that were sources of frustration, such as delivery of service enhancements. Health Check Outcomes Upon further analysis, these general symptoms stemmed from a common cause: lack of an effective governance structure. Only 35% of survey respondents believed that governance committees were properly staffed, met regularly, and actually accomplished their objectives. Both parties agreed that designing and formalizing a strong governance structure, tailored to the needs of this particular deal, was critical to addressing the challenges the parties experienced. A small joint sub-group, working closely with Vantage, developed a three-tier governance model that provided a common framework across the different aspects of this multi-faceted relationship, while also providing each service tower the mechanisms it needed to manage the relationship. This model includes a high-level Relationship Steering Committee, two tower-specific Management Committees that periodically meet jointly to look across the two towers, and two tower-specific Program Offices that focus on operational issues. The parties aligned around a meeting cadence for each element of the model and the flow of planning, monitoring, and issue-resolution activities (see Figure 1). Hosted Solution Business Continuity Strategic Relationship Steering Committee Meets once a year to set the course and guide the overall relationship. Focus will be on sharing strategic direction, thought leadership, innovation, and industry trends, particularly appropriate platforms and strategies that enhance AllianceBernstein direction. Hosted Solution Management Committee Business Continuity Management Committee Managing Operational Meets monthly to discuss overall project planning and prioritization and quarterly to assess performance and stakeholder satisfaction, identify opportunities for improvement, and align resources and innovation pursuit with strategic direction set by the Relationship Steering Committee. Hosted Solution Program Office Meets weekly (may become monthly) to discuss issues and enhancements and review service quality, resource management, and stakeholder satisfaction. Meets quarterly to assess performance and stakeholder satisfaction, identify opportunities for improvement, and align resources and innovation pursuits with strategic direction set by the Relationship Steering Committee. Business Continuity Program Office Meets weekly (may become bi-weekly) to discuss defects and enhancement and review service quality, resource management, and stakeholder satisfaction. Figure 1: AllianceBernstein Governance Model

5 With Vantage s assistance, the parties also developed: A detailed and well-structured mechanism for aligning around the nature of the business relationship and service delivery expectations. A joint scorecard to maintain alignment towards and track progress against key joint and individual business goals; this scorecard looks beyond SLAs and other operational metrics to include strategic, financial, and relational objectives and metrics for both AllianceBernstein and its provider partner. Working-together protocols, including specific agreements on joint escalations, to improve day-to-day and long-term interactions by facilitating collaborative and effective issue resolution and agreeing to a method of sharing regular, structured information and feedback. Relationship Management Capability Inventory Outcomes While the health check produced specific changes in how that single relationship was managed, the AllianceBernstein team continued its analysis of its broader portfolio of relationships. In general, the news was good: most of AllianceBernstein s relationship managers reported well-functioning relationships on a 5-point rating scale (see Figure 2). Green represents areas working well, yellow stands for areas of caution, and red denotes areas requiring immediate attention. The team also concluded, however, that the success was largely due to the strong skills and intuition of the individuals managing each relationship, rather than an established organizational capability: A lack of specific governance procedures (e.g., processes or tools) existed in some relationships, leaving the individuals involved in those relationships to wing it when problems arose. There was no clear or consistent approach to managing relationships based on AllianceBernstein s objectives or the anticipated complexity of each individual relationship, which led to the sub-optimal use of resources. Key stakeholders were generally not sufficiently aligned around service delivery expectations, leading to confusion and frustration on both sides of the relationship. Overall Engagement Results The health check brought AllianceBernstein and its provider much closer together, lowered significant barriers to exchanging information, and established a foundation for working through problems collaboratively. We realized that we were not sharing enough about our business con- Key Relationship Management Dimensions Communication Continuous Improvement & Innovation Governance Metrics Stakeholder Engagement & Alignment Knowledge & Skills Transfer BPO Technology I Provider Relationship Technology II Full Service I Full Service II Full Service III Figure 2: Self-Reported AllianceBernstein Relationship Management Effectiveness

6 cerns or strategic direction with them, because we were worried it would just lead to more sales calls, explained Dick Taggart. As we cleared the air about some service delivery expectations, put in place new mechanisms for managing the relationship, and made personal commitments about communicating more openly and directly, it became easier to ask them to help and for them to share what they were learning by working with others in our industry. We made tremendous progress in those working sessions. Indeed, as a result of some of those discussions, AllianceBernstein and its provider partner agreed on a significant expansion of scope for the hosted solution on terms that AllianceBernstein found very attractive.... it became easier to ask [our provider] to help and for them to share what they were learning by working with others in our industry. We made tremendous progress... Beyond this particular relationship, the process of performing the health check and developing an overall relationship management capability inventory helped to provide a clearer overall picture of AllianceBernstein s outsourcing relationships and relationship management capability. We developed a better sense of how to treat different provider relationships in a way that fits their purpose and to put the appropriate level of governance resources up against it, said John Detweiler. We ve known that supplier performance management improves engagement value, but supplier collaboration extracts value beyond that of the contract; this model gives us a roadmap to enhance our own capabilities so that we can capture that additional value.

7 About Vantage Partners, LLC Vantage Partners leads the field of relationship management, building on more than 25 years of research and consulting experience with the world s leading companies. A spin-off of the Harvard Negotiation Project, at Vantage we help our clients and their partners and providers enter into, manage, and (when necessary) remediate working relationships. For more information, please visit Brighton Landing West 10 Guest Street Boston, MA USA T F Vantage Partners, llc. All rights reserved.

8 Vantage Partners 10 Guest Street, Boston, MA USA T F