By Professor Ilan Oshri, Centre for Global Sourcing and Services, Loughborough University
The lawn needs mowing and you are weighing your options. You can ask a member of the family to mow the lawn. In return you are willing to pay £10. The other option is to hire a gardener and pay a similar amount. The performance for these two can be similar, so you wonder what could motivate these two to improve their performance and what would it take from your side? The logic is fairly straightforward: If you use your son/daughter, they are likely to do a good job once they get going, but you can expect that they may somehow drag you into doing some bits and bobs (‘Dad, where is the mower? Dad, can you open the gate for me?’).
If you use a gardener, you also expect no less than a decent job, but you will consider the relationship with the gardener to affect performance (‘Oh dear, I forgot to offer tea. He is going to hate me and do a lousy job!’). So now you consider what it will take to improve their performance.
With your son/daughter, the issue is to ensure that it is crystal clear to them what they need to do if they want to get £10 for mowing the lawn. You simply complement your good relationship with your son/daughter with a set of clear expected outcomes (even for a simple job such as mowing the lawn!).
With the gardener, you reckon he/she is a professional and is likely to perform well, but a bit of friendliness between you two can give you the extra improvement in performance you are after.
Do you think you got your assumptions right?
A team from the Centre for Global Sourcing and Service (Eleni Lioliou, Angelika Zimmermann, myself and our collaborator Alexandra Gerbasi from Grenoble Business School) conducted an industry-wide study that looked into this aspect – but obviously not in the context of mowing a lawn. We examined this dilemma for firms that consume the same services from an internal provider and from a third-party service provider.
The results of our study are far more complex than what we share here and will be presented during the Global Sourcing Conference in February 2015.
In a nutshell, we found the following: when using an internal provider (your son is mowing the lawn), you will achieve better performance if you outline a list of expected outcomes. Regardless how close you are with your son/daughter, they will take advantage of the ambiguity of who does what and will eventually get you to do some work while you still pay them the £10.
If you hire a gardener, it is not always the case that schmoozing with the gardener that will give you better performance. In fact, you will get better performance if you understand gardening and instruct the gardener to follow certain procedures. The gardener will figure out the quality expected from him/her based on the steps you outlined.
So, the takeaway from this very high-level story is the following:
We will leave you with these takeaways to consider them in the context of the various services your organisation consumes. Some services you use may be provided by internal providers, some by external providers, but all require some effort when attempting to improve performance. We invest in developing relationships, defining expected outcomes and specifying procedures.
The big question is: Are we investing in the right place?
To learn about our projects and research please visit: www.lboro.ac.uk/cgss
This Blog post was written by Professor Ilan Oshri, Director of the Centre for Global Sourcing and Services.
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