STRATEGIC AND OPERATIONAL IMPACT OF P&G’S DECISION TO

OUTSOURCE ITS FACILITY MANAGEMENT FUNCTIONS TO JLL

Student number: 1504063

Programme: Business Intelligence and Social Media

Module code: MG5589

Module title: Global Outsourcing

Date of submission: 22 March 2015

1. Introduction

In the past outsourcing was primarily relegated to the procurement of non-core components
and services. However, currently the outsourcing trend has expanded to include virtually
every activity of a firm, including core and non-core components, business processes,
information technology processes, manufacturing, distribution activities, and customer
support activities (Chamberland, 2003). Venkatesan (1992) believes the growth in the
importance of outsourcing can be attributed to the ability of outsourcing programs to create
competitive advantages for firms. Due to its growing importance outsourcing has become not
only a key component of supply chain management strategies (Chase, Jacobs and Aquilano,
2004), but also a strategic component of business strategies (Kakabadse and Kakabadse,
2003).

One of the sectors extensively involved with outsourcing processes is manufacturing (Oshri,
Kotlarsky and Willcocks, 2009). Procter & Gamble (P&G) is one of the world’s leading
manufacturers of consumer packaged goods. In 2003 P&G decided to outsource facility
management functions on an unprecedented scale. They signed a groundbreaking contract
with Jones Lang LaSalle (JLL), delegating the supplier the responsibility to oversee 14
million square feet of real estate at 165 sites in 60 countries (Siemens PLM Software, 2008).
JLL has provided integrated facilities management, project development, construction
management, and strategic occupancy planning services to P&G since 2003 and real estate
transaction management and lease administration services since 2008. JLL was recognized by
P&G as “Supplier of the Year” in 2008 and 2009, and is also a three-time winner of P&G’s
Global Business Services “Excellence Award.” In May 2012 companies announced a five-
year renewal of their global strategic alliance relationship (Bloomberg, 2013).

In order to successfully carry out such a substantial outsourcing contract, P&G must be doing
something right. To discover the crucial factors which led to such remarkable outsourcing
results this assignment will investigate how outsourcing has influenced and shaped P&G’s
supply chain strategy and supply chain processes. Apart from assessing the overall strategic
and operational impact of outsourcing on P&G’s business we will also devise a plan for P&G
to outsource its invoice verification process and include suggestions and recommendations for
further operational improvements.

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2. Overall strategic and operational impact of outsourcing decision on P&G’s business

2.1 P&G

P&G is focused on providing branded consumer packaged goods of superior quality and value
to improve the lives of the world's consumers. The company was incorporated in Ohio in
1905, having been built from a business founded in 1837 by William Procter and James
Gamble. Today, they sell their products in more than 180 countries and territories. P&G’s
business model relies on the continued growth and success of existing brands and products, as
well as the creation of new products (P&G, 2013).

According to A.G. Lafley, P&G’s Chairman of the Board, President and Chief Executive
Officer, for P&G, the primary drivers of growth and value creation are innovation and
productivity (Bloomberg, 2013). Figure 2.1.1 shows P&G’s net sales growth in 2013.

Figure 2.1.1 P&G’s net sales growth in 2013 (P&G 2013)

P&G admits that this degree of corporate growth could not be achieved without significant
innovation across all aspects of the business even extending to their relationships with
suppliers and partners (ATUT, 2014). Chesbrough and Tecce (1996) distinguish two types of
innovation: autonomous and systemic. Autonomous innovation can be pursued independently
from other innovations, while the benefits of systemic innovation can only be realised in
conjunction with related innovation. In order to be successfully managed, systemic innovation
requires a high level of information sharing and the capabilities to coordinate adjustments
throughout an entire product system. By extending innovation across all aspects of business
P&G has undertaken a systemic approach to innovation, as will be shown in detail in the
subsequent parts of this assignment.

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 2.2 Impacts of outsourcing on P&G’s business – benefits and risks

Today it is widely believed that outsourcing brings numerous strategic and operational
benefits. According to Chamberland (2003) outsourcing has enabled manufacturing firms to
reduce costs, improve speed and responsiveness, reduce cycle times, improve innovativeness,
increase flexibility and agility, and improve overall competitiveness. By outsourcing facility
management functions to a third-party vendor P&G wanted to: reduce the efforts it was
putting into its non-core activities and hence increase its ability to concentrate on company’s
core activities (Bloomberg, 2013); accomplish cost advantages through economies of scale
while maintaining the quality of service (Vitasek, Manrodt and Kling, 2012); gain access to
service provider’s capabilities and innovation abilities and benefit from expertise and industry
knowledge externally (ATUT, 2014).

After several years of partnership with JLL it can be confirmed that P&G has successfully
realised its outsourcing goals. The provider has presented the client with 46 innovative
initiatives, a third of them being accepted by the client as true innovation (ATUT, 2014).
Furthermore, JLL has helped to reduce client’s facility management’s costs by 33 % (Vitasek,
Manrodt and Kling, 2012).

However, during the process P&G also had to successfully deal with several outsourcing
related risks. First, to prevent decreased motivation of work force due to possible layoffs,
P&G's employees had been signalled the coming changes long before P&G actually signed
the contract with the chosen vendor. Employees’ concerns had been thoroughly answered by
the top management. P&G believes that it was this open communication and transparency that
made the final switch easier (Lobash, 2005). Second, a great number of measures had been
integrated into the outsourcing contract to lower the risk of P&G losing control over timing
and quality of products. Some of the tools used to prevent the loss of control were: linking of
the service providers’ pay to the achievement of the desired outcomes; incentives to deliver
innovation; detailed innovation performance metrics, combined with additional KPIs such as
reliability, efficiency, customer satisfaction and savings; proactive joint governance structure;
“cost pass through” provision proclaiming JLL not responsible for the costs that are beyond
its control (Vitasek, Manrodt and Kling, 2012).

2.3 Strategic outsourcing choice

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To be able to realise such a long-term and mutually beneficial outsourcing agreement, P&G
had to go through a detailed process of strategic outsourcing choice. First they had to
determine the processes that constitute good candidates for outsourcing. Willcocks,
Petherbridge and Olson (2002) suggest that processes should be assessed in terms of their
contribution to the business operation and in terms of their contribution to the competitive
positioning. Facility management is a non-core process which is critical to P&G’s business
operations, however, its contribution to the firm’s competitive positioning is low. Thus it can
be marked as a “qualifier”. Qualifiers should be sourced, if the third party meets the right cost
and quality criteria (Willcocks, Petherbridge and Olson, 2002). Second, P&G no longer
wanted vendors to simply take care of their buildings; they wanted a service provider that
would take charge of their buildings (ATUT, 2014). In other words, P&G wanted a total
outsourcing agreement, meaning that the firm was willing to transfer more than 80 % of
function’s operating budget to external providers (Oshri, Kotlarsky and Willcocks, 2009).
Third, even though at the beginning P&G had been considering a panel of providers, in the
end it decided to look for a sole provider that could operate on P&G’s global scale (Lobash,
2005). Choosing a sole provider brings benefits to the client, however, it implies also certain
risks and management issues that need to be considered, as shown in Table 2.3.1 (Willcocks,
Cullen and Lacity, 2006).

Table 2.3.1 Sole supplier configuration – benefits and risks (Willcocks, Cullen and Lacity,
2006)
Configuration Benefits Risks Management issues
sole supplier -sole accountability -monopolistic supplier -extensive contract
-potential for the supplier to create behaviours flexibility rights due to
economies of scale, the benefits of -compromise quality dependence on the
which may be passed on to the where the supplier is supplier
customer not best of breed in -independent expertise to
-streamlined contracting costs and services, industries or avoid solution
processes geographic locations channelling and ensure
-end-to-end key performance metrics value for money

In the majority of cases where an organisation follows the sole supplier configuration, global
providers are utilised because of their worldwide reach and the broad scope of services they
offer. Such large suppliers have access to more resources and economies of scale and can deal
with fluctuations in the demand (Oshri, Kotlarsky and Willcocks, 2009). Forth, the chosen
provider would have to take on the company’s strategic planning initiatives. Any potential
provider would have to supply a level of service at all of the company’s facilities that met or
exceeded the existing service levels, be right for the business, be a good employer for P&G’s

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facilities employees, provide global account management and be a good cultural match for
P&G (Lobash, 2005).

2.4 Outsourcing capabilities

Having determined the characteristics of the provider it was looking for, P&G launched a
competitive bid process. During the process P&G's management had most likely inspected
potential vendors’ core capabilities. Feeny, Lacity and Willcocks (2005) define 12 core
vendor capabilities that clients should take into account when looking for a provider. These
core capabilities can be leveraged into three key competences, as illustrated in Figure 2.4.1.

Figure 2.4.1 Twelve supplier capabilities (Feeny, Lacity and Willcocks, 2005)

Analysis (see Appendices 1) revealed that JLL possesses 8 out of 12 core capabilities:
leadership (capability of delivering the desired result throughout the deal), business
management (capability to deliver product and services according to the agreement), planning
and contracting (capability to produce beneficial results for both sides), behaviour
management (ability to motivate and inspire people to deliver high quality services), domain
expertise (capability to retain and apply professional knowledge), sourcing (ability to access
necessary sources), governance (existence of governing processes and structures that facilitate
the alignment of the client’s objectives and strategies with the vendor’s delivery system),

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process improvement (capability to change processes in a way that generates a dramatic
improvement). These 8 capabilities transform equivalently into all three key competencies,
i.e. delivery, transformation and relationship competency, confirming that JLL is an extremely
capable all-round provider.

2.5 Outsourcing options and selections

After almost a year-long bidding process ultimately P&G picked JLL as its outsourcing
partner. The contract the two companies signed flipped the conventional outsourcing
approach on its head: P&G would focus on contracting for transformation instead of
contracting for day-to-day work under a managed services agreement (ATUT, 2014). In other
words, P&G had decided to take advantage of external innovation channels, and embarked on
the route of building innovation on the market through strategic procurement, i.e. by seeking
differentiated products or innovative processes from suppliers (Linder, Jarvenpaa and
Davenport, 2003).

Outsourcing can be seen as a spectrum of choices. Willcocks, Cullen and Lacity (2006) use
the criteria of resource ownership, resource management, customer/supplier relationship,
typical location of supplier staff and type of contract to make distinction among five types of
outsourcing models. P&G believes that to be successful at driving innovation in outsourcing,
it must work in highly-strategic partnerships with its suppliers (ATUT, 2014). Consequently it
has chosen the enterprise partnership outsourcing model. For the detailed explanation of
typical characteristics and activities most suited for enterprise partnership model see Table
2.5.1.

Table 2.5.1 Characteristics and activities most suited for enterprise partnership model
(Willcocks, Cullen and Lacity, 2006)
Resource ownership
Resource management
Customer/supplier relationship
Typical location of supplier stuff
Typical customer/supplier contract
Activities most suited for this model
partnership
customer and supplier
one-to-one
mixed (some supplier staff on customer site)
broadly defined for revenue sharing, customized after
partnership format
customer non-core, supplier core capabilities;
significant market for venture’s products and services;
used for large scale transform of large back offices

2.6 Outsourcing relationship

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Signing the contract by no means means that the hard work is over. In the past quite a few
outsourcing relationships have been terminated, a major reason for this being poor
governance. Governance refers to processes and structures that ensure the alignment of
strategies and objectives of the parties involved. One important element that can strengthen
governing structure is the relationship between the contracting parties (Oshri, Kotlarsky and
Willcocks, 2009). Queen (2000) discusses key aspects of successful managing of outsourced
innovation. Analysis (see Appendices 2) confirmed that the relationship between P&G and
JLL contains 8 out of 10 key aspects of successful managing of outsourced innovation:
concentration on what needs to be accomplished, not how to get there (imposing detailed
control of processes constrains the innovators); setting up an incentive system (innovation is
more likely to happen when people from both the buyer and the vendor support and benefit
from innovation); commitment to exciting goals (shared commitment to common goals
inspires internal and external people to work together with energy); establishment of figures
of merit (exciting performance targets induce innovators to rethink existing approaches and
come up with something new); setting up a three point system of information exchange and
project execution; provision of open, compatible information (open-information capability
places all participants on the same footing in discussion); development of open, interactive
software model (increases speed and precision of innovation process); usage of software to
coordinate the players (common language, a measurement system, and a set of rules facilitate
human communications, and capture and preserve knowledge); making sure the provider
benefits from the partnership, sharing gains from surpassing targets (sustains jointly shared
innovation incentives).

2.7 Legal challenges

The materials published contain no information on the legal issues concerning the P&G’s
outsourcing relationship with JLL. However, since P&G is actually building innovation on the
market, it is most likely that within the contract important issues related to confidentiality and
intellectual property were tackled (Oshri, Kotlarsky and Willcocks, 2009).

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3. Plan for P&G to outsource their invoice verification process

In the following section a plan for P&G to outsource its invoice verification process is
described. The plan is based on GAO’s (2001) model of the outsourcing lifecycle, as shown in
Figure 3.1. The model identifies seven main outsourcing phases as well as the major practices
associated with each stage. Practices that are perceived as essential for successful outsourcing
of P&G’s invoice verification process are enlisted. For the detailed view of the model see
Appendices 3.

Figure 3.1 Outsourcing lifecycle (GAO 2001)

1. Determine sourcing strategy. During this phase P&G has to determine whether it is more
efficient to keep a function in-house or to source it to an external vendor. According to Aron
and Singh (2005) executives should rank organisational processes along two dimensions: their
potential of value creation and their potential of value capture. While the higher rank of a
process indicates that process plays a vital role in relation to the company’s strategy and
should therefore not be outsourced, the processes which are ranked lower are better
candidates for outsourcing. P&G’s invoice verification process is an example of a low ranking
process. It is less crucial than other company’s processes not only in the creation of customer
value but also when it comes to enabling the company to capture some of the value that is
created for the customers. Therefore the process should be outsourced.

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2. Define operational model. During this phase P&G must formalise the executive
outsourcing leadership, the composition of the teams, and the operating relationship with the
vendor. The operational model will enable P&G to later compare the performance of the
relationship against the original objectives.

3. Develop the contract. During this phase P&G will have to consider various legal issues
related to confidentiality, security, intellectual property and compliance (Oshri, Kotlarsky and
Willcocks, 2009).

4. Select provider. During this phase P&G will have to: conduct research on state of the
market, vendors, and technology before defining the vendor selection criteria; identify and
evaluate different sourcing solutions (e.g., single vendor, alliance); define a process for
selecting vendors (e.g., issuing a request for proposal); define vendor selection and acceptance
criteria (e.g., cultural fit, industry knowledge). When issuing a request for proposal, services
with expected performance levels will have to be defined and client and provider roles and
responsibilities determined. P&G will also have to conduct due diligence activities to verify
vendor capabilities before signing the contract. In the end the contract will be negotiated and
final vendor selection made.

5. Transition to provider. During this phase P&G will transfer responsibility for invoice
verification process to the selected provider. It is advisable to prepare a transition plan to
enable a smoother transition. This transition plan should include handling resistance to change
with meetings between upper management and employees, and creation of client/vendor
transition teams to address short-term transition tasks.

6. Manage provider’s performance. In order to manage vendor’s performance, P&G should:

consider incentives to motivate provider to exceed performance requirements; schedule
periodic working-level meetings with both the end-user groups and the provider to review
provider’s performance.

7. Ensure services are provided. P&G has to ensure that services are provided as agreed.
Consequently it should monitor the provider’s work to anticipate issues for resolution and use
provider performance data to continuously improve processes.

By following the described steps P&G should be able not only to successfully outsource their
invoice verification process, but also to manage the ongoing outsourcing relationship.

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However, since P&G has so successful established and managed an outsourcing relationship
based on building innovation with JLL, we recommend that selected elements of the vested
outsourcing relationship (i.e. agreement based on shared values and goals in order to create a
win-win situation) are also built into the outsourcing agreement with the provider of invoice
verification services. By contributing innovation and decreasing costs at the same time the
provider of invoice verification service might just as well as JLL contribute to P&G’s growth
and value creation.

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4. Summary

Because innovation is one of the two primary drivers of growth for P&G, the company has
integrated innovation into their relationships with suppliers. Analysis showed that by
outsourcing facility management functions to JLL, P&G has successfully realised its strategic
outsourcing goals, i.e. to benefit from expertise and industry knowledge externally, to realise
cost advantages through economy of scale while maintaining the quality of services, and to
outsource non-core activities in order to be able to concentrate on company’s core activities.
Assessment further confirmed that P&G underwent a detailed process of strategic outsourcing
choice which resulted in picking up a sole service provider, operating on a global scale. This
configuration offers JLL the potential to create economies of scale, the benefits of which are
passed on to P&G. Analysis also revealed that JLL possesses 8 out of 12 core supplier
capabilities, which transform into all three key supplier competencies. Consequently JLL can
be proclaimed for an extremely capable all-round provider. P&G decided to form an
enterprise partnership with JLL. This outsourcing model is appropriate, because P&G’s non-
core capabilities are JLL’s core capabilities, P&G’s 165 facilities in 60 countries represent a
significant market for JLL’s services, and P&G’s goal is a large scale transformation of large
back offices. The outsourcing contract was carefully designed. Via linking JLL’s pay to the
achievement of the desired outcomes, establishment of incentives to deliver innovation,
introduction of detailed innovation performance metrics, installation of proactive joint
governance structure and the “cost pass through” provision the contract achieved two main
goals. While P&G was able to reduce the risk of losing control over timing and quality of
processes, JLL was given the reassurance that it will benefit from the partnership. It was a
win-win contract that has enabled a long-term mutually beneficial business partnership. This
partnership is being permanently nurtured by a special governance structure, which is
constantly looking for additional ways to improve joint venture’s endeavours.

Although we could not find any information about the legal issues related to the outsourcing
relationship in question, the case study still has been mostly informative. First, it has proven
that a successful outsourcing relationship is based on careful inspection of the potential
strategic and operational impacts of an outsourcing decision on company’s business. Second,
in order to be successful, outsourcing decision must bring benefits to both, the client and the
vendor. And last, a successful outsourcing relationship demands constant performance
management and constant improvements.

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5. Reference list

Aron, R. and Singh, J.V. (2005) ‘Getting offshoring right’, Harvard Business Review, 83(12),
pp. 135-143.

ATUT - Academic Team from The University of Tennessee, College of Business

Administration (2014) ‘Innovation in Outsourcing: The Case of The Procter & Gamble
Company’. Available at: https://www.iaop.org/Firmbuilder/Articles/34/175/3974 (Accessed:
20 February 2015).

Bloomberg (2013) Procter & Gamble Names Jones Lang LaSalle “External Business Partner
of the Year”. Available at: http://www.bloomberg.com/bb/newsarchive/aja_hVOFfjf8.html
(Accessed: 2 March 2015).

Chamberland, D. (2003) 'Is it core strategic? Outsourcing as a strategic management tool',

Ivey Business Journal Online, July/August, pp. 1-5.

Chase, R.B., Jacobs, F.R. and Aquilano, N.J. (2004) Operations Management for Competitive
Advantage. 10th edn. Boston: Irwin/McGraw-Hill.

Chesbrough, H. and Teece, D.J. (1996) ‘Organizing for innovation: When is virtual virtous?’,
Harward Business Review, January/February, pp. 65-73.

Feeny, D., Lacity, M. and Willcocks, L.P. (2005) ‘Taking the measure of outsourcing
providers’, Sloan Management Review, 46(3), pp. 41-48.

GAO - Governmental Accounting Office Report (2001) ‘Leading commercial practices for
outsourcing of services’. Available at: http://www.gao.gov/new.items/d02214.pdf (Accessed:
4 March 2015).

Kakabadse, A. and Kakabadse, N. (2003) 'Outsourcing best practice: transformational and

transactional considerations', Knowledge and Process Management, 10(1), pp. 60-71.

Linder, J.C., Jarvenpaa, S. and Davenport, T.H. (2003) ‘Toward an innovation sourcing
strategy’, Sloan Management Review, 44(4), pp. 43-49.

Lobash, M. (2005) Procter & Gamble Takes Outsourcing Global. Available at:
http://www.facilitiesnet.com/equipmentrentaltools/article/Going-Global--3433# (Accessed:
10 February 2015).

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Oshri, I., Kotlarsky, J. and Willcocks, L.P. (2009) The Handbook of Global Outsourcing and
Offshoring. Houndmills: Palgrave Macmillan.

P&G (2013) ‘Annual Report’. Available at:

http://www.pginvestor.com/Cache/1001180053.PDF?Y=&O=PDF&D=&fid=1001180053&T
=&iid=4004124 (Accessed: 15 February 2015).

Queen, J.B. (2000) ‘Outsourcing innovation: The new engine of growth’, Sloan Management
Review, 41(4), pp. 13-28.

Siemens PLM Software (2008) 'Proctor & Gamble creates a collaborative community'.
Available at:
http://www.informationweek.com/whitepaper/Enterprise_Software/wp902864?articleID=902
864 (Accessed: 3 March 2015).

Venkatesan, R. (1992) 'Strategic sourcing: to make or not to make', Harvard Business Review,
70(6), pp. 98.

Vitasek, K., Manrodt, K. and Kling, J. (2012) Vested for Success Case study: How P&G and
JLL Transformed Corporate Real Estate. Available at: http://www.vestedway.com/wp-
content/uploads/2012/09/PG-Case-Study.pdf (Accessed: 15 February 2015).

Willcocks, L.P., Cullen, S. and Lacity, M. (2006) The COE guide to selecting effective
suppliers. Logica Internal Report.

Willcocks, L.P., Petherbridge, P. and Olson, N. (2002) Making IT count. Strategy, Delivery,
Infrastructure. Oxford: Butterworth Heinemann.

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6. Appendices

1. Assessment of core JLL’s capabilities

Capability Proof Source

Leadership Both companies had a long history of Vitasek, Manrodt and
Business management being able to deliver results that add Kling, 2012
real business value to their bottom
line.
Planning and contracting Both companies understood winning Vitasek, Manrodt and
needed to be a shared experience. Kling, 2012
Governance Sharing risks and rewards enabled Vitasek, Manrodt and
both companies to achieve alignment. Kling, 2012
Behaviour management Bill Thummel, now JLL’s Chief Vitasek, Manrodt and
Operating Officer, shouldered the Kling, 2012
challenge to transfer approximately
550 P&G employees and help them
understand the difference of doing
their jobs for JLL.
Sourcing JLL is a leader in the real estate Bloomberg, 2013
Domain expertise outsourcing field.
Process improvement The provider has presented the client ATUT, 2014
with 46 innovative initiatives, a third Vitasek, Manrodt and
of them being accepted by the client as Kling, 2012
true innovation. Furthermore, JLL has
helped to reduce client’s facility
management, project management and
strategic occupancy service’s costs by
33 %.

2. Assessment of the business relationship between P&G and JLL

Aspect Proof Source

Concentrate on what By focusing the contract content on Vitasek, Manrodt and
needs to be the outcomes and not transactions, Kling, 2012
accomplished, not how determining what and not the how, the
to get there. contract negotiation was considerably
simplified and exhaustive lists of
potential tasks/details were made
unnecessary because the entire
responsibility was turned over to the
vendor.

P&G believed that linking the service

providers’ pay to achieving the
Desired Outcomes would best meet
P&G’s need to drive transformational
changes in how the work was done,

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 while still allowing P&G to have some
control over the transformational
efforts.
Set up an incentive P&G decided to not to rely on the ATUT, 2014
system. traditional approach and stimulate the
Commit to exciting supplier to hit operational performance
goals. metrics. Instead, they decided to pay
Establish figures of JLL to deliver innovation. P&G
merit. argued that challenging and incenting
change provides the supplier the
opportunity to align with the
customers’ changing business needs,
to maintain a strong relationship and
to drive value for the customer and
growth through potential new business
opportunities for the supplier.
Set up three point system P&G and JLL decided it was Vitasek, Manrodt and
of information exchange important to design governance into Kling, 2012
and project execution. the agreement itself – in essence, ATUT, 2014
Provide open, contractually obligating the firms to
compatible information. manage the business, changes and
relationship in a proactive manner.

They set up a strong governance body,

comprised of representatives from
both companies. Program is led by an
Innovation Council made up of the
P&G Relationship Manager, the JLL
P&G Account Executive, the JLL
Corporate Innovation Program Leader
and JLL’s Chief Information Officer.
The Council is supported by a joint
Innovation Team, led by a dedicated
JLL P&G Account Innovation
Manager and a P&G counterpart.
Functional service owners and
regional innovation leaders comprise
the team that is chartered with
deployment of the initiatives. The
Innovation Program brings together
the Innovation Council and the
Innovation Team in bi-annual
meetings, one virtual and one face to
face.
Develop open, The P&G/JLL Innovation Program is ATUT, 2014
interactive software heavily focused on leveraging data, Vitasek, Manrodt and
model. analytics and technology to manage Kling, 2012
Provide open, the real estate portfolio, assets and
compatible information. utilities. Results are managed
Use software to effectively, by both parties, through

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coordinate the players. transparent data, measures and
analysis. P&G believes that a
transparent, data driven approach
means they are all on the same page,
marching to the beat of the same
drum.

JLL also established a “One View

Service Centre” that delivers real-time
reporting results as well as a platform
for work requests and immediate
access to current activity and progress.
Make sure your partner The P&G/JLL global team developed Vitasek, Manrodt and
benefits from the a pricing model that is fair, yet drives Kling, 2012
partnership. accountability and transformation.
Share gains from Key components include: 1) cost pass
surpassing targets. through provision - JLL is responsible
for managing the budget and the costs,
but P&G retains responsibility for the
bills; using this approach, JLL is not
responsible for costs that are out of
their control; 2) for unplanned out of
scope work, P&G created a structured
approach for JLL to charge P&G an
additional management fee for any
work above the base scope of work; 3)
shared savings incentives when JLL
helps P&G reduce its costs and beat its
budget.

3. Detailed plan for outsourcing P&G’s invoice verification process

Phase Processes involved

1- determining sourcing
strategy
- use third-party assistance with experience in variety of
sourcing arrangements when formulating a sourcing
strategy
- incorporate lessons learned from peers who have engaged
in similar sourcing decisions
- estimate the impact of sourcing decision on the internal
organisation as well as the impact on enterprise alliances
and relationships
- consider optimizing business processes before deciding
on a sourcing strategy
- benchmark and baseline productivity of internal services
prior to making the final decision
- consider starting a representative service or selective set
of services to outsource; balance against economies of
scale
- determine the business reasons for outsourcing
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2 - defining operational - establish executive leadership for the outsourced process
model to facilitate the outsourcing initiative
- make sure that outsourcing and business objectives are
aligned
- manage provider performance
- define strategic objectives and consider creation of
position responsible for strategic outsourcing decisions
- create and define contract management structure with
operational points of contact and managers
- have provider establish an on-site support team to serve as
a liaison between client and provider
- train provider on client business environment and goals
- select or develop standard tools for managing the
relationship (e.g. performance scorecards)
- understand the organisational structure of the provider
and who is empowered to make decisions
3 – developing the - base performance requirements on business outcomes
contract - include measures that reflect end-user satisfaction
- review and update performance requirements periodically
- require the provider to meet the minimum performance in
each category of service
- incorporate sufficient flexibility so that minimum
acceptable performance can be adjusted as conditions
change, as the provider becomes more adept at satisfying
customer demands
- use service level agreements to clearly articulate all
aspects of performance
- specify circumstances under which the provider is
excused from performance levels mandated by master
service agreements
4 – selecting the provider - conduct research on state of the market, vendors, and
technology before defining the vendor selection criteria
- identify and evaluate various sourcing solutions (e.g.,
single vendor, alliance)
- define a process for selecting vendors (e.g., issuing a
request for proposal)
- define vendor selection and acceptance criteria (e.g.,
cultural fit, skill set, industry knowledge, proposed
transition plan, past performance)
- when issuing a request for proposal, identify services with
expected performance levels and define client and
provider roles and responsibilities
- conduct due diligence activities to verify vendor
capabilities before signing the contract
- negotiate the contract and make final vendor selection
5 – transition to provider - communicate a clear transition process to all key players
from both client and provider organisation
- handle resistance to change with meetings between upper
management and employees
- create client/vendor transition teams to address short-term

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 transition tasks
- encourage transition of staff to provider
- develop employee-retention programmes and offer
bonuses to keep key people
- document key information to preserve organisational
knowledge
- use change management strategies to help employees deal
with the transition
6 – manage provider - consider incentives to motivate provide to exceed
performance performance requirements
- use penalties to motivate provider to meet performance
requirements
- periodically undertake studies to assess how the
provider’s performance compares with value being
delivered to similar clients and the extent to which the
provider’s performance is improving over time
- schedule periodic working-level meetings with both the
end-user groups and the provider to review provider’s
performance
- conduct executive-level oversight meetings with the
provider’s senior management to review provider’s
performance
- distribute performance data to stakeholders
- ensure that provider measures and reports on performance
- work with provider to redefine service levels
- sample performance data frequently enough to perform
trend analysis and to permit extrapolation based upon
historical data
- allow employees to rate provider on a regular basis
7 – ensuring services are - monitor the provider’s work to anticipate issues for
provided resolution
- conduct periodic meetings to resolve issues jointly
- document and maintain organisational knowledge
- make sure provider uses the standard tools and processes
defined as part of the operational model
- use provider performance data to continuously improve
processes
- pursue improvement based on customer satisfaction
surveys
- have provider ensure that adequate and appropriate
resources are available to perform services
- set realistic time frames that are agreed to by the provider
- ensure that appropriately empowered individual from the
client organisation oversees the work (Oshri, Kotlarsky
and Willcocks, 2009)

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