How Not to Fail On Execution

According to the Gartner Group, 70% of outsourcing engagements fail and 90% do not meet their financial goals.

The question you should be asking yourself is “Why?” You created an excellent request for proposal (RFP), assembled a well-rounded team to assist with the process, chose a vendor that has a good reputation and negotiated what you believe is a strong contract. However at the end of the first year, you only saved a fraction of what you projected. Well, you are not alone ' welcome to the 90%.

What happened? Assuming your benchmarks and projections were correct, chances are the following happened:

• The RFP wasn't specked correctly so you had to make costly adjustments to equipment and/or labor;
• Unforeseen charges ate into the projected savings;
• There were billing errors that were overlooked; and
• The projected economies of scale and efficiencies were not realized.

Fortunately, there is a foolproof way to avoid falling into the 90% of the outsourcing engagements that fail to meet their financial goals or the failure of rolling-out any significant contract.

1. It starts at the beginning: The right strategy with the right tool.

Any firm that wants to drive the most advantageous deal to achieve the most savings and flexible terms has to create a competitive situation through an open RFP process. The right tool to accomplish this is a properly constructed RFP. As part of the RFP, the monthly and quarterly reporting requirements must be spelled out in detail along with dollar penalties if the required information is not supplied in a timely manner. Sounds harsh, perhaps, but it can be the difference between the successes (10%) and the failures (90%). Here is a common question: I am in the middle of a five-year contract, do I have to wait until my next contract is in place to implement a comprehensive monitoring and maintenance plan?

No. Reputable vendors will never question your ability to monitor your invoices and should welcome the scrutiny. In fact, they should welcome the opportunity to report to you the value they are bringing to the table. The only thing that may be lacking by starting a monitoring and maintenance protocol in mid-contract are the dollar penalties that could be associated with some missed performance criteria.

2. Statistics show you are not going to do it.

When was the last time you backed up the hard drive on your home computer? Studies show that only 18% currently back up data on a regular basis, and nearly one in five have never backed up their personal files. Even though you know you are supposed to do it, it is easy to do, and it is in your best interest ' you still don't do it. The same is true with monitoring and managing a contract after it is negotiated and put into place.

3. Getting off on the right foot: Contract implementation.

Depending on what services are being contracted for, the implementation can be pretty straight-forward; if it is an outsourcing contract with labor involved or the consolidation of offsite records storage vendors, it can be complicated. If you have the in-house resources and the project management experience to oversee an implementation requiring weekly update meetings and the associated management reporting, then it should prove to be a stream-lined transition. Many firms do not have the available resources internally to oversee such a transition and ensure the selected vendor lives up to its commitments, so they enlist outside services to oversee the implementation. It is important to make sure someone is looking after the firm's interest during an implementation process because you only get one chance to make a good impression ' and more importantly, to justify your decision.

4. What should a monitoring and maintenance phase include?

There are four parts to a successful monitoring and maintenance program:

1. Invoice Review.

The first is a monthly (or quarterly) invoice review to insure the invoice matches up to the terms and pricing negotiated in the contract. Sounds easy enough, but you would be surprised at the amount of mistakes (both in the favor of the vendor and the firm) that our consultants find. These errors range in value from a few cents to five figures.

Some of the more common mistakes we see are in the areas of office supplies (incorrect units and pricing or negotiated incentives not being given), outsourcing or equipment contracts, and offsite records storage (incorrect units and pricing, billing for unnecessary premium charges).

As one client stated when asked about the role of an outside party in the invoice review process: “Simply put, it's a second pair of eyes looking at these things ' an expert second pair of eyes that are able to suggest strategic recommendations based upon pricing fluctuations, or catch discrepancies very easily.”

2. Monthly/Quarterly Reporting

If you are receiving any type of reporting from your vendors, chances are it is just volumes of raw data ' meter reads, the amount of overtime hours, etc. It is nice, but is it really providing you the information necessary to make intelligent, well-informed decisions about your operation?

Some examples of the reporting and information you should be receiving:

• What is my spend-per-attorney and how does it compare to other firms?
• My volume has decreased by 31% in the past six months ' why and what impact does this have on my contract, performance standards and headcount?
• I have a negotiated scorecard with penalties in my contract ' how does my current operation rate against this scorecard and am I due a credit?

I am often asked if vendors should be willing to provide these reports to a client. As my father used to say about my report cards, “You should be begging to show it to me.” In other words, if the vendor is doing a good job and meeting the agreed upon performance standards, the vendor should want to show you the results.

3. Vendor issue resolution process.

Every contract/operation will have issues; it is how the vendor responds to these issues that is the key. The popular theory is that if you take care of your car on a regular basis ' change the oil, rotate the tires, etc. ' your chances of having a breakdown are dramatically reduced. The same can be said of vendor performance issues: If you are receiving quality monthly/quarterly reporting as described above, monitoring the invoices on a regular basis, the chances of vendor issues decrease dramatically.

What happens if they do occur?

• Separate the facts from the fiction. By having monthly reporting that provides detailed performance standards then you will know if the complaint you just received is an outlier or the signs of a bigger issue.
• DAM them: D ocument, A ssign responsibility for resolution, and M onitor them.

4. Periodic Strategic meetings

Periodically through a contract, there should be an opportunity to meet with the vendor and think outside the box on the services they are providing to you and what are their recommendations are for doing things differently. These forums should address topics ranging from do you even need their services anymore to renewing with them for another five years.

Conclusion

Negotiating a new contract is half the battle, managing the contract effectively on an ongoing basis is usually the difference between a poor/mediocre engagement and a successful one. Any vendor worth retaining will welcome this ongoing management.

Rob Mattern, a member of this newsletter's Board of Editors, is president and founder of Mattern & Associates, LLC, and a frequent speaker and sponsor of ALA events across the country. For more information, visit www.matternassoc.com, the Mattern & Associates blog at www.matternoffact.com, or follow Mattern & Associates on Twitter @MatternOfFact.

According to the Gartner Group, 70% of outsourcing engagements fail and 90% do not meet their financial goals.

The question you should be asking yourself is “Why?” You created an excellent request for proposal (RFP), assembled a well-rounded team to assist with the process, chose a vendor that has a good reputation and negotiated what you believe is a strong contract. However at the end of the first year, you only saved a fraction of what you projected. Well, you are not alone ' welcome to the 90%.

What happened? Assuming your benchmarks and projections were correct, chances are the following happened:

• The RFP wasn't specked correctly so you had to make costly adjustments to equipment and/or labor;
• Unforeseen charges ate into the projected savings;
• There were billing errors that were overlooked; and
• The projected economies of scale and efficiencies were not realized.

Fortunately, there is a foolproof way to avoid falling into the 90% of the outsourcing engagements that fail to meet their financial goals or the failure of rolling-out any significant contract.

1. It starts at the beginning: The right strategy with the right tool.

Any firm that wants to drive the most advantageous deal to achieve the most savings and flexible terms has to create a competitive situation through an open RFP process. The right tool to accomplish this is a properly constructed RFP. As part of the RFP, the monthly and quarterly reporting requirements must be spelled out in detail along with dollar penalties if the required information is not supplied in a timely manner. Sounds harsh, perhaps, but it can be the difference between the successes (10%) and the failures (90%). Here is a common question: I am in the middle of a five-year contract, do I have to wait until my next contract is in place to implement a comprehensive monitoring and maintenance plan?

No. Reputable vendors will never question your ability to monitor your invoices and should welcome the scrutiny. In fact, they should welcome the opportunity to report to you the value they are bringing to the table. The only thing that may be lacking by starting a monitoring and maintenance protocol in mid-contract are the dollar penalties that could be associated with some missed performance criteria.

2. Statistics show you are not going to do it.

When was the last time you backed up the hard drive on your home computer? Studies show that only 18% currently back up data on a regular basis, and nearly one in five have never backed up their personal files. Even though you know you are supposed to do it, it is easy to do, and it is in your best interest ' you still don't do it. The same is true with monitoring and managing a contract after it is negotiated and put into place.

3. Getting off on the right foot: Contract implementation.

Depending on what services are being contracted for, the implementation can be pretty straight-forward; if it is an outsourcing contract with labor involved or the consolidation of offsite records storage vendors, it can be complicated. If you have the in-house resources and the project management experience to oversee an implementation requiring weekly update meetings and the associated management reporting, then it should prove to be a stream-lined transition. Many firms do not have the available resources internally to oversee such a transition and ensure the selected vendor lives up to its commitments, so they enlist outside services to oversee the implementation. It is important to make sure someone is looking after the firm's interest during an implementation process because you only get one chance to make a good impression ' and more importantly, to justify your decision.

4. What should a monitoring and maintenance phase include?

There are four parts to a successful monitoring and maintenance program:

1. Invoice Review.

The first is a monthly (or quarterly) invoice review to insure the invoice matches up to the terms and pricing negotiated in the contract. Sounds easy enough, but you would be surprised at the amount of mistakes (both in the favor of the vendor and the firm) that our consultants find. These errors range in value from a few cents to five figures.

Some of the more common mistakes we see are in the areas of office supplies (incorrect units and pricing or negotiated incentives not being given), outsourcing or equipment contracts, and offsite records storage (incorrect units and pricing, billing for unnecessary premium charges).

As one client stated when asked about the role of an outside party in the invoice review process: “Simply put, it's a second pair of eyes looking at these things ' an expert second pair of eyes that are able to suggest strategic recommendations based upon pricing fluctuations, or catch discrepancies very easily.”

2. Monthly/Quarterly Reporting

If you are receiving any type of reporting from your vendors, chances are it is just volumes of raw data ' meter reads, the amount of overtime hours, etc. It is nice, but is it really providing you the information necessary to make intelligent, well-informed decisions about your operation?

Some examples of the reporting and information you should be receiving:

• What is my spend-per-attorney and how does it compare to other firms?
• My volume has decreased by 31% in the past six months ' why and what impact does this have on my contract, performance standards and headcount?
• I have a negotiated scorecard with penalties in my contract ' how does my current operation rate against this scorecard and am I due a credit?

I am often asked if vendors should be willing to provide these reports to a client. As my father used to say about my report cards, “You should be begging to show it to me.” In other words, if the vendor is doing a good job and meeting the agreed upon performance standards, the vendor should want to show you the results.

3. Vendor issue resolution process.

Every contract/operation will have issues; it is how the vendor responds to these issues that is the key. The popular theory is that if you take care of your car on a regular basis ' change the oil, rotate the tires, etc. ' your chances of having a breakdown are dramatically reduced. The same can be said of vendor performance issues: If you are receiving quality monthly/quarterly reporting as described above, monitoring the invoices on a regular basis, the chances of vendor issues decrease dramatically.

What happens if they do occur?

• Separate the facts from the fiction. By having monthly reporting that provides detailed performance standards then you will know if the complaint you just received is an outlier or the signs of a bigger issue.
• DAM them: D ocument, A ssign responsibility for resolution, and M onitor them.

4. Periodic Strategic meetings

Periodically through a contract, there should be an opportunity to meet with the vendor and think outside the box on the services they are providing to you and what are their recommendations are for doing things differently. These forums should address topics ranging from do you even need their services anymore to renewing with them for another five years.

Conclusion

Negotiating a new contract is half the battle, managing the contract effectively on an ongoing basis is usually the difference between a poor/mediocre engagement and a successful one. Any vendor worth retaining will welcome this ongoing management.

Rob Mattern, a member of this newsletter's Board of Editors, is president and founder of Mattern & Associates, LLC, and a frequent speaker and sponsor of ALA events across the country. For more information, visit www.matternassoc.com, the Mattern & Associates blog at www.matternoffact.com, or follow Mattern & Associates on Twitter @MatternOfFact.