Finding the right business partner can be tough.
Making the relationship work can be even more difficult.
John Coutts explores the ins and outs of relationship management.

Scanning the skies over southern Britain , the radar screens at Swanwick keep vigil over one of the busiest patches of airspace in the world. Swanwick is the flagship of National Air Traffic Services (NATS), the business responsible for flight safety over the UK . At Swanwick, the operations room covers half an acre and controllers handle up to 6,000 flight movements a day.

For NATS, choosing the right partners and managing those relationships are fundamental to its operation. Maintenance of business-critical power and security systems is outsourced to specialist facilities contractor EMCOR, while the creation of the next generation of air traffic management systems is being undertaken with Spanish partners Aena.

To maintain effectiveness, external relationships are managed actively and that means going further than fulfilling basic regulatory and contractual obligations: relationship management in this context is about sharing goals, understanding each other’s business and integrating information on a day-to-day basis. Actively managed relationships of this sort can enhance competitiveness as well as safety: last year, NATS Holdings Limited posted a pre-tax profit of £69 million, its first significant surplus since part-privatization in 2001.

Establishing best practice approaches of this sort – and harnessing the benefits for the wider business community – is the role of a new British standard, PAS 11000 Business relationship management – Guidance. The new standard is geared to cover a wide range of collaborative relationships and it can be adopted by enterprises of any scale, from SMEs to multi-nationals. PAS 11000 is the world’s first relationship management standard and it is scheduled for release in 2007.

“Relationship management is applied common sense if you like,” says Howard Kendall, chairman of the BSI committee developing the new standard and founder director of the Help Desk Institute. “It’s basically looking at the generic relationships between businesses and their suppliers or the people they supply to. Put simply, if a bank outsources its customer service operation to a third-party supplier, whether in the UK or offshore, it’s about how they manage the relationship. But that relationship might equally be with their stationery supplier.”

The need for the new standard is clear. In a recent BSI Business Barometer survey, 87 per cent of senior decision makers in FTSE 250 companies agreed that increased reliance on outsourcing means that standards are more important than ever.

At the heart of PAS 11000 is a fundamental reappraisal of the way organizations work together. Rather than adopting an arm’s-length approach, businesses and suppliers are shown how to work collaboratively to improve quality, innovate, drive down costs and bring products to market. Increased integration does not eliminate the need for contractual relationships, but it places greater emphasis on communication.

Paradoxically, technology has meant that business relationships are increasingly remote: “In pre-computing days people did relationship management as a matter of course,” says Kendall . “It was about courtesy, and you took a long time building relationships with people and did business on that basis. Nowadays, you can be supplied by somebody you never see or meet. There’s less understanding of the business you’re working with. To a certain extent, we’re trying to restore the balance and PAS 11000 will be a useful tool for achieving this.”

PAS 11000 will provide guidance to make organizations more productive and better able to manage their costs through more effective partnerships. But it’s not just about saving money – it means understanding the bigger picture as well. Improving the quality of what’s delivered and managing risk are key elements. The new standard is based on an established relationship management or “partnering” methodology pioneered by Partnership Sourcing Ltd (PSL).

“What’s happening now with outsourcing and off-shoring is that internal processes are actually going outside organizations,” says David Hawkins, PSL’s operations director. “Your external contractor could now be facing your customer. So the whole issue of relationships is now no longer about purely contractual compliance, it’s about overall delivery performance in a much wider context than just price, quality and delivery”.

The rapidly changing commercial and regulatory landscape means that standards for business are increasingly in demand. Management systems standards, such as the ISO 9000:2000 series, enjoy global recognition. PAS 11000 will join a growing suite of standards tailored to the changing needs of business.

“Partnering for profit is not a new concept for businesses,” says Frank Post, marketing director of BSI British Standards. “Recent years have seen a sharp rise in outsourcing and offshoring. However, standardizing an approach, based on PSL’s eight-step process, will improve the competitiveness and efficiency of businesses. We foresee that a wide range of organizations, both private and public, will use this standard.”

For more information on PAS 11000, please contact Geoff Gonella +44 (0)20 8996 7150 or geoff.gonella@bsi-global.com.

Note: This article first appeared in the April 2006 issue of Business Standards, the magazine of the British Standards Institution.