Monday, May 16, 2011

Performance Contracting: Now, Who Is the Customer, Again?

Governments provide services and deliver results for customers in two basic ways: through employees, or through contractors.

Aligning and integrating employee performance to advance your organization is a powerful way to “git ‘er done,” and it’s a big focus of our efforts as well. At Weidner, we’re in the middle of presenting a series of webinars on Employee Performance Management; you can check out what we’ve already shared by clicking here, and you can sign up for one of our upcoming sessions by clicking here.

But with all the (deserved) attention to employees, organizations sometimes don’t focus enough on using their contracted vendors to accomplish results as well. Partnering for Results is a suggested way of talking about Performance Based Contracting, and I’ll be talking about that here and in a couple of blog posts to come.

This first piece focuses on being clear about who the customer is – is the customer the vendor, or the people receiving the service? In upcoming posts I’ll share some thoughts about what you want to actually contract for, and how you can build capacity in your organization and in your contractors to get the results you need.

The first of three keys to successful Partnering for Results (code for Performance-Based Contracting):

Be relentlessly clear about the answer to the question, “Who is the customer?”

We are unequivocal about this: the people who receive the services provided through the contract are the customer. Not vendors. Vendors who provide services are not the customer – they are your “performance partners.”

Customers are not held accountable for results, and we do not measure their performance. But vendors should be held accountable, and their performance must be measured. In contracting relationships, staff can develop what I would call a co-dependent relationship with vendors that can soften expectations for performance. Listen, services providers would love for you to treat them like they are the customer!

What’s the big deal about this? Contracts are intended to be an extension of your organization’s efforts to implement your strategic and business plans and achieve key results for your customers. So there is a great deal at stake in managing performance through contracts.

What does it look like when vendors are considered to be the customer?

•Contracts include few, if any, performance requirements.
•Little or no data is collected on the experiences of the people who receive the services.
•Contract or performance reviews are rare to nonexistent.
•Support services for vendors are first priority.
•Contracts tend to be multi-year and extended with little effort by the vendor.
•Performance reports are mostly about how much money is spent.

Not a pretty picture.

By comparison, what does it look like if the people who receive the services are considered the customer?

•Contracts have both output and results measures.
•Data is collected on both types of measures and reported at regular intervals.
•Contract reviews are primarily about performance and are conducted regularly.
•Performance is reviewed frequently.
•Reports connect money to the customer experience.
•Contracts are clearly and directly aligned to support your strategic and business plans.

The Alcohol, Drug and Mental Health (ADAMH) Board in Franklin County, Ohio, has demonstrated best-in-class focus on results for the customer through their efforts to Partner For Results. They contract out, through service providers/vendors, more than 90% of the funding they receive each year. Over a decade ago they made the decision that the individuals and families receiving the services are the customer, not the vendors who provide those services. The impact of that decision has been extraordinary.

Check out our recent webinar in which Susan Lewis Kaylor, Vice President for Performance and Management at ADAMH, shared the story of their focus on results for customers. You can see the presentation file and listen to the webinar audio.

Get clear about who the customer really is, and then you can be clear about what you need your contracts to accomplish – results, or something less. I’ll talk about that next time.

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