Vested Relationships

What is a Vested Relationship?

It is typified by an outsourcing relationship where both parties have a stake in maintaining the arrangement and where both parties work together to create a performance partnership which takes both the company outsourcing and the service provider to new levels of cost, service and profitability not realized by traditional outsourcing models.

While no two Vested partnerships are alike, all good ones achieve a performance partnership based on optimizing for innovation and improved service, reduced cost to the company outsourcing, and improved profits to the outsource provider. This is what we call the performance pyramid. This trend towards performance partnerships has evolved to where outsourcing companies and service providers work together to develop a performance-based solution where both parties’ interests are aligned — and both parties receive tangible benefits (either through tangible or intangible incentives).

The heart of a Vested Relationship and Contract is an agreement on desired outcomes that explicitly states the results on which both companies will base their outsourcing agreement. A Vested agreement clearly defines financial penalties, or rewards, for not meeting, or exceeding, agreed upon desired outcomes. In the agreement, regardless of what is being outsourced, the outsourcing partner has the ability to earn additional financial value (e.g., more profit) by contractually committing to achieve the desired outcomes. Simply stated: if the outsource provider achieves the desired outcomes, they receive a bonus.

The progression towards a Vested agreement must focus on creating a culture where both parties are working together to ensure the ultimate success of each other. The mentality should shift from an “us vs. them” to a “we” philosophy, or what we call a What’s in it For We (WIIFWe) philosophy.

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