Relationship Management Unit 4

1. M.Sc Facilities Management D31SQ Service Procurement and Provision Lecturer: Daniel Wong MBA, MSc, BBus

2. Relationship ManagementUnit 4 UNIT 3 ‘the relationship is as important as the contract’

3. Supply-Chain Partnering • Openness • Communication • Mutual Trust • Sharing of information • Shared business aims

4. Getting the balance right? Arms length contract relations Obligational contract relations

5. Four Outsourcing Relationship Types (FORT) extent of substitution strategic impact

6. Is it strategic? • …does the outsourced portfolio provide the client firm with competitive advantage? • …will the outsourced portfolio affect the long-term competitiveness of the client firm? • …does the outsourced portfolio call for a close partnership between the provider and the client? • …does the outsourced portfolio allow for the development of strategic inter-organisational relationships? • …does the outsourced portfolio provide opportunities for identification of value points that can be leveraged in the outsourced portfolio? • …does the outsourced portfolio provide opportunities for business process improvement? • …does the outsourced portfolio open up new revenue opportunities?

7. What is the level of ownership (substitution)? • …are service providers involved in day-to-day operations? • …do service providers have managerial control and decision making authority? • …are service providers involved in the planning , development and implementation of service provision for the client firm? • …do service providers have ownership of physical assets such as plant, machinery, control systems or hardware and software? • …do service providers replace in-house personnel of the client firm? • …are service providers responsibilities restricted to off-site activities?

10. Workshop Exercise • Using the questions for substitution and strategic impact used in the FORT model, analyse a portfolio of services that you have access to. • Which of the four relationship types does the portfolio fall under? • Do you think that this is static or do you think it has moved or will move between these quadrants? • Do you think there are conscious attempts to move to a different quadrant? • Do you think that the position within the quadrants may have changed as a result of a maturing of the relationship with the service provider? • Do you think that there may have been attempts to recover some control in-house towards a less ‘relationship’ based arrangement?

11. PFI – A Special Form of Partnering • This form of procurement, which was first introduced by the UK Government in 1992, is a design, build, finance and operate (DBFO) procurement method

12. The PFI Relationship • ‘The Government believes that the relationship between the public and private sector in a PFI project must always ultimately be contractual but should be overlaid with partnership working to ensure that operations are effective

13. PFI Aspirations • genuine integration benefits in terms of accurately assessing whole life operating costs of projects; • that private sector management of subcontractors within PFI will be more effective than direct public sector management of a separately let soft services contract; • that there will be a greater reduction in interface issues between service providers than if soft services contracts were let separately; • flexibility benefits for end users with a single point of contact that could not be replicated with separate soft services contract; • improved consideration of soft services requirements in design and construction of PFI assets leading to quantifiable reduction of maintenance and operating costs of project; and • financial incentives to perform within a PFI structure that are significantly better than in a separately let contract.

14. Trust • ‘In an exchange relationship under conditions of risk and interdependence, trust is the belief that a voluntarily accepted duty will prevail, ensuring that no party exploits the other’s vulnerabilities’

15. Perspective Taking • Perspective taking arises from the fact that ‘individuals will have to develop an understanding of ideas and frameworks from their own’

16. …perspective taking • ‘taking the role of the other’, which typically refers to the role of the customer. It reflects how Fuji Xerox adopted learning practices in its own organisation, as documented by Takeuchi (1985).

17. Homework • Investigate information on the PFI Edinburgh Royal Infirmary using the Internet. • Make notes of issues, particularly those relating to the operational stage • How successful has PFI been?

18. Assignment • Based on an organisation with which you are familiar, develop a sourcing strategy for a particular service or bundle of services. The sourcing strategy considered should be different from their existing one (i.e. if it is an in-house operation, propose outsourcing; if it is an outsourced operation, propose an in-house or alternative type of outsourcing relationship).

19. Dissertation • Working in pairs • Put forward a hypothesis • Discuss with your partner the various modifications, angles, perspectives and approaches that might be used for this hypothesis • Summarise your ideas • Example of a hypothesis: • ‘The moon is made of cheese’