Successful Vendor Governance is a Balancing Act of Communiction, Transparency and Respect

Having spent the majority of the last ten years in vendor management and strategic sourcing, I’ve noticed that no two lines of business are handling these tasks in an identical fashion, even within the same company.

I am now on my fourth line of business within one of Canada’s big five banks, and I can say with confidence that it’s completely unlike any other area of the bank that I’ve worked in. Our group is on a new journey to structured vendor performance and governance, with a mandate to get there now…right now!

Tools of the Trade

The tools our group uses are templates, segmentation guides, process maps, risk assessments, performance scorecards…the list goes on. We have every tool known to man, but these tools are only useful if someone teaches you how to use them.

I mean, I have a giant tool box in my garage at home, but I’ll be damned if I know how to use a drill or a ratchet.

Vendor management and governance is no different to learning any other new skill – the more you practice it the easier it becomes. It’s part of the process to learn by mistakes, but wouldn’t it be great if someone could act as your governance coach and walk you through the on-boarding of an existing vendor that has no true governance?

It’s like the old Proverb says:

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime”

The very same is true in the world of vendor management; you have to provide the means for vendors to fully develop their side of the partnership.

Evolving Vendor Governance Practices

Many people think that vendor governance is made up of a series of meetings, defining who talks to who and at what level, developing an awesome scorecard, making sure service levels are in the contract, and getting reports on them, but these aspects are only the outskirts of what governance is.

The truth is, it isn’t a series of meetings or reports; it’s ultimately making your contract come to life by building value and developing a relationship, and by getting the communication going at all levels of the organization.

Vendors that are strategically and long-term focused are more excited by the prospect of formalized governance than those who are not. This is because it gives them more visibility at an executive level – it’s not an opportunity for the client to beat down the vendor, but an opportunity for the vendor to show the senior leadership how they shine.

This is where the vendor can strategically guide us as clients, bringing innovation to the forefront, and helping us to identify potential savings. Above all, they can be the best ally for helping us understand where we may be going wrong.

As clients we cannot assume we are perfect, we cannot continually point the finger of wrong at the vendor, because, like all things in life, it takes two to tango.

Contractual Roadmap for a Long-lasting Relationship

As most of us know, a contract is only as good as the paper it’s written on. We all have good intentions when we work together on pricing, or measures to understand performance, but so many companies sign the contract and never look at it again.

The contract is your roadmap, your plan, your guide for the next three to five years. It’s the beginning of what your relationship is built upon.

Great vendors know this and will perform in line with the contract for the most part, but many only do what they are pushed to do, what they are asked about, and what they are measured on.

Often a vendor performs across multiple lines of business, especially enterprise infrastructure vendors. For example, this can result in the securities group being happy, but the merchant group not. Core banking may be thrilled but the direct channels isn’t…you get the picture.

The crazy thing is, so many vendor managers don’t think to ask for backup validation reports to be created – many of these measures are auto generated, especially availability in the IT world – so why aren’t we getting these backup documents?

Going Green

What if your vendor’s entire scorecard is green but there are internal rumblings about issues? Ask yourself these questions:

• Is that vendor really green if they are unresponsive or can’t turn a quote around quickly enough for you?
• Are they really green if they mess up a change and fix it yet never provide the root cause?
• What if they are green in all areas but they don’t return emails promptly?
• What if their client team isn’t responsive at all?

If you’ve experienced any of these scenarios, can you say with confidence that they are really a green vendor?

All the green metrics that they may be providing to you on your availability or your capacity or some other widget isn’t a measure of how green that vendor is.

I have said his before and I will say this again: to ensure this is happening correctly it has to be a partnership. You have to be able to ask the difficult questions, ask for validation and back up on scorecard reporting, ensure you are getting the value from your contracts, and ensure there is inventory validation to back up your invoices.

It’s really that simple; just ask and follow through.

Success Comes From Mutual Respect

I personally measure my greatest success by how my vendors respect me and vice versa. I remember to not only take them to task on their challenges, but I reward them by openly acknowledging and thanking them for great support. I also share that thank you with my senior executive team.

I always have their back when they are not in the wrong…no one likes anyone that doesn’t take accountability and many times we, as the client, can be wrong. There are times to be tough and there are times to be kind. It’s just like all relationships in life…we do more, and give more to the people we like and respect.

If we can all remember that the true foundation of vendor/client partnerships is the people and the relationships that you build, life would be so much simpler.

In the end, the process of developing partnerships and building your personal brand as a smart, fair, and savvy businessperson, while tossing in some humor along the way, always makes every negotiation or uncomfortable conversation a heck of a lot lighter.