Friday, June 07, 2013

A Case Study: Procter & Gamble’s Five Rules for Transformative Outsourcing by guest blogger Joe Stolarski

Transformation is on every CEO’s mind these days. And, to effect change, many companies are beginning to outsource an increasingly larger set of non-core activities. Few have managed the outsourced relationship as effectively—and unconventionally—as Procter & Gamble (P&G). The global manufacturer uses a “five rules” approach that illustrates the principles of “Vested®”, a hybrid business model for hyper-collaborative relationships, as identified in research conducted by the University of Tennessee’s Center for Executive Education.

As P&G’s real estate services provider since 2003, JLL has been privileged to experience this powerful approach first-hand. Here is how it works:

  • Rule 1: Focus on outcomes, not transactions. Our compensation is linked to our success in achieving specific outcomes established in collaboration with P&G – not on property commissions. This structure ensures that both parties share a vested interest in bringing new ideas to the work and for achieving our shared goals. 
  • Rule 2: Focus on the what, not the how. Rather than defining service minutia in the contract, P&G delegated these details to us. For example, at the outset, approximately 550 P&G employees were transferred to our company. Most had never worked for any company other than P&G, but we were trusted to affect the change in mindset and motivate the new employees.
  • Rule 3: Establish clear and measurable desired outcomes. We worked with P&G to define big-picture metrics rather than measuring the program against individual task performance. For example, in 2005 we focused on the successful integration of P&G’s Gillette and Wella acquisitions. An annual review and yearly goal-setting keeps our program aligned with business strategy.
  • Rule 4: Create a pricing model with incentives. Multi-tiered incentives align P&G and service provider goals. The contract features cost pass-throughs in which P&G retains responsibility for bills; a management fee-at-risk structure in which a portion of our fees are withheld until results are achieved; pre-structured compensation for above-scope work; and shared savings incentives.
  • Rule 5: Provide insight balanced with oversight. We incorporated a proactive governance structure into our contract to ensure an ongoing “win-win” relationship, establishing both companies as co-owners of the corporate real estate function, with shared goals and aligned processes.

Most critically, P&G expected us to take charge of its facilities, not just take care of them, to achieve cost efficiency while exceeding customer satisfaction targets. It’s a profound difference in mindset that continues to inspire our work.
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Joe Stolarski, International Director at Jones Lang LaSalle

5 comments:

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    -RKO

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  4. Joe Stolarski, Thanks for this post. You talk about Case Study. I have read your post. I want to know about best it outsourcing companies. I am waiting for your next post.my blog

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