Making Joint Ventures and Outsourcing Deals Work
In a recent conference in Charlotte hosted by Moore & Van Allen, I saw on a panel with Phillip Grigsby, SVP of Commercial Transmission at Duke Energy, and JoAnn Carlton, General Counsel and Corporate Secretary at Bank of America Merchant Services, LLC. The latter is a company spun off by Bank of America for its Merchant Services organization.
The discussion focused on a number of different issues related to the management of JV’s. Mr. Grigsby alluded to the challenges and misunderstandings that occurred after the so-called “honeymoon” period. He discussed the issues around sitting down with the other party, and laying out all of the issues, and going through them one by one.
Jo-Ann echoed this sentiment, and noted how important it was to be able to spend time reviewing the specific details around problems when they arose. Too often people jumped to conclusions without fully understanding who is responsible, what was communicated, what was expected, etc.
This is especially true when going into any type of outsourcing arrangements. Too often people do not spend enough time going through the operational SLAs, in terms of ability to respond, lead-time, and specific elements about service levels. There are often hidden costs in such deals that don’t arise until after the contract is signed, including the loss of control and visibility.
To avoid these problems, the panel recommended that a lengthy process and full-time team be engaged in gradually migrating over to the new service provider. This may include a period of opportunity development, transition and building out of SLa’s, and carefully constructing service delivery requirements and performance measures. Once established, the relationship has to be closely monitored based on compliance and regular review of performance.
As we discussed in class two weeks ago – simply outsourcing doesn’t mean the management of the process goes away. If anything, the relationship management efforts may escalate more than ever!