Communication and Trust is Key

JUL

Communication and Trust is Key

15 JUL 2011 | Posted in agile governance, contracts | Author John Wright |

3 Comments

So what really makes for good IT delivery? Efficient process re-engineering, good developers, clever technology, pragmatic project managers, robust QA? All of these things can contribute towards success, but the one thing that will result in failure is poor communication and a breakdown in trust between those trying to deliver business value and those implementing IT to support that.

So many projects try to solve this problem by tightly specifying the desired solution up front. This tight specification is then coupled with a supply of goods contract forcing suppliers to deliver exactly what has been specified, nothing more, nothing less. This results in behaviour that is not conducive to delivering the desired outcome for the business.

Shifting the arrangement between the client and supplier from a solution based specification and fixed price contract to an outcome based contract with shared benefits for success aligns the client and supplier in the goal of delivering the best outcome for both parties.

That would create a trust-based collaborative environment with open honest communication where the agile mentality can truly flourish!

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Traditional contracts are doomed!

Comments

Mark (not verified)
15 Jul 2011 17:06

Very interesting. This change is definitely necessary, but not easy. One could argue that contracts are only necessary to cover the time when trust has broken down. Aligning the supplier contract to the desired client outcomes definitely helps, but this also raises the question of whether the contract should provide to the supplier a share of the client benefit from the outcomes. The main challenge I've often seen (in consulting and design services rather than IT) is when the client outcomes are dependant on many other factors outside of the suppliers control or influence, such that the supplier may perform outstandingly then lose out through no fault of their own.

John Wright
18 Jul 2011 11:51

Mark, you make a very good point, not all aspects of a project are under the supplier's control, similarly not all client's manage their projects particularly well, so the exact incentives put in place need to be considered carefully.

However, consider a client/supplier relationship to be like an employer/employee relationship. The employee is typically paid a basic salary, and incentivised with a performance related bonus. The bonus is paid out of the bonus pool (based on company profit), the size of which is outside the control of the employee. However the employee works appropriately to maximise their proportion of the pool.

This way basic costs are covered for the supplier, and if their client is successful, they get the benefits of a long term working relationship and a share in the profits of the business they are in partnership with.

If a client's contracts are all setup this way then you build a collaborative team that is consistently incentivised for the benefit of all. That's can't be a bad thing can it?

Anthony Flack
24 Aug 2011 21:33

This is a very interesting topic and one where I suspect the shift in approach required in the construction of the supplier client relationship is a significant one.

Developing the theme I have noticed some inclination in firms who require IT services, to request that the supplier operates on what they refer to as an "at risk" basis. The correct terminology is perhaps better described as a "risk and reward approach", reflecting both the down and upside for the supplier based on the success of delivery. The idea is of course to in some way protect the client from the risk of having to pay the supplier where the service has not been successfully delivered.

Whilst I can see at the high level why a firm might feel the need to consider such an arrangement, in practise to what extent is consideration given to the chance this form of arrangement has of supporting collaboration, in particular when the going gets tough? I wonder how well this type of arrangement fits with the approach presented by John based on sharing benefits via an outcome based approach. My feeling is that the "risk" element is more aligned to a supply of goods approach?

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John Wright

I'm an experienced Agile project manager and am particularly interested in governance and contractual issues. I have a hands on approach and have been running and coaching Agile teams since the late 90’s.

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