Innovating in teaching contracting skills: learning by doing

By Kate Vitasek

In the companion piece about the Vested business model, I described it as a progressive and collaborative way for buyers and sellers to achieve long-term win-win relationships based on shared-value principles.

For many individuals and organisations, Vested may sound like an interesting theory, but implementation in the real world is another story.

This motivated us to write the book, Vested: How P&G, McDonald's and Microsoft are Redefining Winning in Business Relationships, to describe the successful implementation of the Vested methodology by major public and private entities. Since the book was published in 2012, many companies have gone the Vested route for their most strategic relationships, including Discovery Health Medical Scheme, Dell, Intel, Novartis and Vancouver Coastal Health (VCH).

However, implementing a Vested business model is not easy and often organisations need more than a book or two to understand Vested.

They need to go back to school.

University of Tennessee (UT) researchers, who developed the Vested business model, have also designed a complete education programme to guide parties from concept to practice. The goal is to institutionalise best practice from their research through a 'Certified Deal Architect' (CDA) programme.

Key components of this programme include enhancing traditional classroom training with on-the-job training, and working with organisations to ramp up field-based support to reinforce and further embed the concepts in an applied environment.

Learning how to learn and do

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Because outsourcing contracts are often multi-year agreements, "the supplier is often backed into a corner to keep profit margins up and the result is 'change order hell' for the client", says David Frydlinger, Partner at Lindahl Law Firm in Sweden and Adjunct Faculty Member teaching UT's Collaborative Contracting course.

"What I like about the Vested methodology is that it teaches lawyers and business people - on both sides of the table - how to create a fair and balanced, flexible contract framework", added Frydlinger.

VCH tested the Vested methodology on an about-to-expire environmental services contract with supplier Crothall Healthcare.

Key to the Vested methodology is having both the buyer and supplier select individuals who are part of a 'deal architect' team that will, ultimately, co-create their contract.

VCH's David Handley (Vice President: Business Partnerships), explained that 20 people, including a cross-functional group of individuals ranging from sourcing, legal and operations, began the process by taking the online course Five Rules That Will Transform Business Relationships.

The joint VCH-Crothall team then used the Creating a Vested Agreement online course as the foundation for putting concepts into practice.

From the supplier's perspective, Leta Hill (Executive Vice President, Crothall Healthcare), noted that "the 'deal architect' team concept helped us ensure we had the right people in the room as we were going through the contracting process. Using the Creating a Vested Agreement online course helped us to all be on the same page together. It was the first time I have ever seen such a high degree of alignment between a buyer and supplier. We both ended up with a far better contract than we ever expected".

Practice makes perfect
In addition to getting everyone on the same page, the Creating a Vested Agreement course is designed to increase the success factor of how people learn. An integrated learning-and-doing approach is better than the learn-all-at-once-and-then-do-later model - or worse, the learn-then-test-and-maybe-don't-ever-do model of traditional learning.

The CDA programme helps individuals to not just learn, but to apply what they learn in real time on a real deal. By integrating the learning-and-doing process, it significantly increases an individual's ability to successfully apply their learning in practice.

As part of the CDA programme, organisations are paired with a UT CDA graduate at one of ten centres of excellence around the world and receive eight hours of coaching support as part of the course.

Teaming an organisation, such as VCH, with a regional centre of excellence enabled them to get hands-on, real-time advice from local experts.

Donna Massari, the CDA coach working with VCH, is a Principal at The Forefront Group, one of the US-based Vested centres of excellence. She noted that the "Vested methodology is effective because the approach shifts the focus away from a consultant doing the work for a client to one of us transferring knowledge and skills to the client. Clients get formal training from the UT courses and we supplement this training with on-the-job training through a series of workshops and coaching sessions. In essence, we provide strategic support and guidance all the way through to the end".

Briefly put, students have gone through an apprenticeship programme or become the equivalent of a Six Sigma Green Belt in the art, science and practice of structuring an outsourcing relationship. They are not experts yet, but can apply the skills and have applied the best practices that they have learnt on a real contract.

From implementation to mastery
Typically, organisations have a variety of stakeholders on the 'deal architect' team. The number can vary but, typically, ranges from a low of four people (two from the buyer and two from the supplier) to a high of sometimes more than 20 people. The individuals leading the outsourcing effort can opt to continue on and pursue a CDA.

A key component of the CDA programme is attending two on-site training courses and completing a validation course with one-on-one coaching from a UT faculty member, where the CDA candidate and UT faculty member review the contract for any structural flaws against the Vested Five Rules.

A key goal of the CDA programme is to ensure that organisations have leaders who can explain the 'why' and 'how' of the Vested methodology on a scale broader than just one deal.

In the case of VCH and Crothall, each organisation chose to send three people to complete the UT CDA programme. Crothall also had three members of the initial 'deal architect' team become CDAs.

Conclusion
In 2010, UT researchers set out to share best practice lessons from their award-winning research on how to develop win-win outsourcing contracts. What resulted was not only best practices in outsourcing, but a complete rethinking about how to teach organisations about applying best practices to real outsourcing and procurement deals.

The result? A shift away from the traditional learn-and-do-later model to one of an integrated learning-by-doing approach. Gone was role-playing in how to negotiate and in its place was 'real-playing', where teams would come together and learn by doing, using a common framework and a coach to provide real-time, hands-on feedback.

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