SherbyNet - /page/wikibook/entry.mu

Micron Document

<!DOCTYPE html>

<title>Vested outsourcing</title>

</head>

<span id="openzim-page-title" class="mw-page-title-main"><span class="mw-page-title-main">Vested outsourcing</span></span>

</h1>

</header>

<div id="mw-content-text" class="mw-body-content mw-content-ltr" lang="en" dir="ltr"><div class="mw-content-ltr mw-parser-output" lang="en" dir="ltr"><p><b>Vested outsourcing</b> is a hybrid <a href="Business_model" title="Business model">business model</a> in which contracting parties create a formal <a href="Relational_contract" title="Relational contract">relational contract</a> using shared values and goals and outcome-based economics to create an agreement that is mutually beneficial for each party.<sup id="cite_ref-Vitasek_1-0" class="reference"><a href="#cite_note-Vitasek-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup>

</p><p>Proponents of the vested outsourcing model argue that traditional outsourcing and businesses relationships are focused on <a href="Win-lose_deal" class="mw-redirect" title="Win-lose deal">win-lose</a> arrangements where one party benefits at the other's expense. In contrast, a Vested agreement creates a win-win relationship in which both parties are equally invested in one another's success.<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup>

</p>

<div class="mw-heading mw-heading2"><h2 id="History">History</h2></div>

<p>The model was developed out of research by the <a href="University_of_Tennessee" title="University of Tennessee">University of Tennessee</a> led by <a href="Kate_Vitasek" title="Kate Vitasek">Kate Vitasek</a>.

</p><p>The Vested approach is firmly rooted in <a href="Relational_contract" title="Relational contract">relational contract</a> theory, which was originally developed in the United States by the legal scholars <a href="Ian_Roderick_Macneil" title="Ian Roderick Macneil">Ian Roderick Macneil</a> and Stewart Macaulay. Relational contract theory is characterized by a view of contracts as relations rather than as discrete transactions.

</p><p>Harvard University Professor and Nobel Laureate <a href="Oliver_Hart_(economist)" title="Oliver Hart (economist)">Oliver Hart</a>’s 2019 article<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> (with David Frydlinger and Kate Vitasek) in the September-October edition of the Harvard Business Review, “A New Approach to Contracts”, argues for the adoption of a different kind of contracting arrangement: a formal relational contract that specifies mutual goals and establishes governance structures to keep the parties’ expectations and interests aligned over the long term. The article notes that nearly 60 companies have employed the vested methodology.

</p><p>Vested outsourcing applies in a variety of industries and has been adopted by companies like <a href="Procter_%26_Gamble" title="Procter & Gamble">Procter & Gamble</a>, <a href="McDonald's" title="McDonald's">McDonald's</a>, <a href="Microsoft" title="Microsoft">Microsoft</a>, <a href="Dell" title="Dell">Dell</a> and <a href="FedEx" title="FedEx">FedEx</a>.<sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup>

</p>

<div class="mw-heading mw-heading2"><h2 id="Process">Process</h2></div>

<p>The vested formal relational contract process includes steps to lay the foundation and helps contracting parties stay in continual alignment by establishing a “partnership mentality” which engenders an environment of mutual trust, a shared vision and objectives, adoption of guiding principles, and alignment of expectations and interests. A shared-value mindset is the basis of a vested outsourcing agreement. The contract itself follows five rules based on the Tennessee research on the topic that began in 2003:

</p>

<ul><li>agreements should be outcome focussed</li>

<li>focus on the "what" not the "how"</li>

<li>desired outcomes should be clearly defined and measurable</li>

<li>pricing model incentives should be optimised for cost/service tradeoffs</li>

<li>governance should be based on insight rather than oversight.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup></li></ul>

<p>The parties must agree upon one or more "desired outcomes" which can be objectively measured to determine if the relationship is successful. This outcome can include cost reductions, <a href="Revenue" title="Revenue">revenue</a> increases, schedule improvements, increased <a href="Market_share" title="Market share">market share</a> and better levels of <a href="Customer_service" title="Customer service">customer service</a>.<sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup>

</p><p>More than simply focusing on the success of the <a href="Contract" title="Contract">contract</a> relationship, the Vested approach commits both the company and the service provider to the success of each other's overall business.<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> This strengthens the sense of <a href="Partnership" title="Partnership">partnership</a> and encourages a more lasting relationship.<sup id="cite_ref-8" class="reference"><a href="#cite_note-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> By sharing their expertise and aligning their goals, both parties are able to drive <a href="Innovation" title="Innovation">innovation</a>, adapt to changing needs and <a href="Mitigation_(law)" title="Mitigation (law)">mitigate</a> risk while working towards mutual success.<sup id="cite_ref-9" class="reference"><a href="#cite_note-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup>

</p><p>Vested relationships depend on <a href="Collaboration" title="Collaboration">collaboration</a>, <a href="Transparency_(behavior)" title="Transparency (behavior)">transparency</a>, flexibility and trust. Rather than traditional business relationships in which companies buy transactions or services from suppliers, vested relationships instead focus on buying results.<sup id="cite_ref-Vitasek_1-1" class="reference"><a href="#cite_note-Vitasek-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup>

</p>

<div class="mw-heading mw-heading2"><h2 id="References">References</h2></div>

/* start https://en.wikipedia.org/ */

.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}

/* end https://en.wikipedia.org/ */

</style><div class="reflist">

/* start https://en.wikipedia.org/ */

.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("./mw/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("./mw/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("./mw/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("./mw/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}

/* end https://en.wikipedia.org/ */

</style><cite id="CITEREFVitasekLedyardManrodt2010" class="citation book cs1"><a href="Kate_Vitasek" title="Kate Vitasek">Vitasek, Kate</a>; Ledyard, Mike; Manrodt, Karl (2010). <a rel="nofollow" class="external text" href="https://books.google.com/books?id=Zf99RxnWrxQC&q=vested+outsourcing&pg=PP1"><i>Vested Outsourcing, Second Edition: Five Rules That Will Transform Outsourcing</i></a>. New York, NY: Palgrave MacMillan. <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-1-137-29719-8</bdi>.</cite></span>

</li>

<li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text">Vitasek, Kate and D. Michael Ledyard. (October 2010). Playing to Win. Outsource Magazine, retrieved from <a rel="nofollow" class="external free" href="http://www.outsourcemagazine.co.uk/articles/item/3565-playing-to-win">http://www.outsourcemagazine.co.uk/articles/item/3565-playing-to-win</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20120424030632/http://www.outsourcemagazine.co.uk/articles/item/3565-playing-to-win">Archived</a> 2012-04-24 at the <a href="Wayback_Machine" title="Wayback Machine">Wayback Machine</a>.</span>

</li>

<li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text"><cite id="CITEREFHartFrydlingerVitasek" class="citation web cs1">Hart, Oliver; Frydlinger, David; Vitasek, Kate. <a rel="nofollow" class="external text" href="https://hbr.org/2019/09/a-new-approach-to-contracts">"A New Approach to Contracts"</a>. <i>Harvard Business Review Magazine</i>. Harvard Business Review<span class="reference-accessdate">. Retrieved <span class="nowrap">4 January</span> 2021</span>.</cite></span>

</li>

<li id="cite_note-4"><span class="mw-cite-backlink"><b><a href="#cite_ref-4">^</a></b></span> <span class="reference-text"><cite id="CITEREFVitasek2012" class="citation book cs1">Vitasek, Kate; et al. (2012). <i>Vested: How P&G, McDonald's, and Microsoft are Redefining Winning in Business Relationships</i> (1st ed.). New York: Palgrave Macmillan. <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-0230341708</bdi>.</cite></span>

</li>

<li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text">Vitasek, K., Ledyard, M. and Cummins, T., <a rel="nofollow" class="external text" href="https://www.vestedway.com/wp-content/uploads/2012/09/agreement.pdf">Vested Outsourcing: a Better Way to Structure Outsourcing Contracts</a>, University of Tennessee Centre for Executive Education, p 8, published September 2012, accessed 23 May 2021</span>

</li>

<li id="cite_note-6"><span class="mw-cite-backlink"><b><a href="#cite_ref-6">^</a></b></span> <span class="reference-text">Vitasek, Kate, Art Van Bodegraven and Ken Ackerman (July 2011), Options in incentive procurement: What are they and when to use them. Warehousing Forum, Vol. 26, No. 8. Retrieved from <a rel="nofollow" class="external autonumber" href="https://web.archive.org/web/20150924105546/http://www.staffoutsourcing.com/Warehousing-Forum-v26n8-July2011.pdf">[1]</a></span>

</li>

<li id="cite_note-7"><span class="mw-cite-backlink"><b><a href="#cite_ref-7">^</a></b></span> <span class="reference-text">Logan, Daniel with special contributor Jim Eckler. (August 4, 2011). Vested outsourcing. Slaw.ca. Retrieved from <a rel="nofollow" class="external free" href="http://www.slaw.ca/2011/08/04/vested-outsourcing/">http://www.slaw.ca/2011/08/04/vested-outsourcing/</a>.</span>

</li>

<li id="cite_note-8"><span class="mw-cite-backlink"><b><a href="#cite_ref-8">^</a></b></span> <span class="reference-text">Eckler, Jim. A Better Way to Outsource Business Functions. Retrieved from ecklerassociates.com/uploads/ReinventingOutsourcing.pdf.</span>

</li>

<li id="cite_note-9"><span class="mw-cite-backlink"><b><a href="#cite_ref-9">^</a></b></span> <span class="reference-text">(Quarter 3 2011). Outsourcing for mutual success. CSCMP's Supply Chain Quarterly. Retrieved from <a rel="nofollow" class="external free" href="http://www.supplychainquarterly.com/news/201103forward_outsourcing/">http://www.supplychainquarterly.com/news/201103forward_outsourcing/</a>.</span>

</li>

</ol></div></div></div><div><div class="zim-footer">

This article is issued from <a class="external text" title="Last edited on 2025-06-19" href="https://en.wikipedia.org/wiki/?title=Vested_outsourcing&oldid=1296373404">Wikipedia</a>. The text is available under <a class="external text" href="https://creativecommons.org/licenses/by-sa/4.0/deed.en">Creative Commons Attribution-Share Alike 4.0</a> unless otherwise noted. Additional terms may apply for the media files.

</div>

</div></div>

</div>

</main>

</div>

</body></html>