Elements of Successful Outsourcing

Has it ever occurred to you to equate outsourcing with Maslow’s hierarchy of needs? It had not occurred to me either until I read an excellent post by Kate Vitasek, architect of the “Vested Business Model” who is also a professor at the University of Tennessee.

Abraham Maslow, the founder of humanistic psychology, defined the hierarchy of needs something like this: human beings are motivated by unsatisfied needs and certain lower needs must be satisfied before higher needs can be addressed. The hierarchy of needs pyramid starts with physiological needs at the base, then moves up to safety needs, social needs and esteem needs. The fulfillment of those needs is what leads to self-actualization.

Is your outsourcing relationship self-actualized?

In a nutshell, here is Vitasek’s comparison to outsourcing.

Buyers and suppliers need to make sure the basic building blocks of the relationship are being met… As the parties move up the hierarchy, buyers need to feel safe that their basic service levels are being met. And at the top of the hierarchy is the ability to drive transformation and innovation from the outsourcing partnership.

First, both parties must understand/agree on what the desired outcomes are. Vitasek uses the analogy of the goal of climbing Mt. Everest. She warns that too many companies fall in the common trap of not focusing on their Mt. Everest—where they are going and where they want to be. All too often, they approach outsourcing from an out-tasking point of view; the (buyer) company is looking for a supplier to perform tasks they can’t or don’t want to do.

“The vast majority of outsourcing deals are structured as transactional labor arbitrage deals where the buyer is simply paying for tasks to be done,” Vitasek writes. “No wonder they don’t ever achieve their desired outcomes!”

Vitasek also warns of the “outsourcing paradox,” where a company outsources to an expert, only to turn around and tell the service provider how to do the work. What the “buying” company doesn’t realize is that they are losing out because they are stymying innovation when they prescribe “how” the work is to be done.

The one-two punch of not defining desired outcomes, coupled with the insistence on prescribing how the work should be done, puts the “buying” company at risk of unintentionally overlooking the bigger picture of what an outsourcing relationship can deliver and ultimately ending up dissatisfied.

How being vested leads to self-actualized outsourcing relationships

“Vested” agreements, or relationships, that foster collaboration, create a win-win says Vitasek because both the buyer and supplier are linked through their mutual desired outcomes (their agreed desire to summit Mount Everest, if you will). The best partnerships are not “buyer” vs “vendor,” because that point of view creates transactional contracts—and those are not the self-actualized partnerships either party is seeking.

Outsourcing deals that don’t form collaborative and trusting partnerships between the company and service provider are doomed to have a much lower ceiling of satisfaction because they have not looked inward to try and better understand how they could improve their mutual relationship. For businesses to blossom and succeed, it’s imperative that those businesses change their self-awareness.

As Maslow himself said, “Classic economic theory, based as it is on an inadequate theory of human motivation, could be revolutionized by accepting the reality of higher human needs, including the impulse to self-actualization and the love for the highest values.”


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