If there is one thing I’ve learned after so many years dealing with vendor management issues — especially issues dealing with complex legal matters — it’s the longstanding truth expressed in a simple proverb, one which is oft-repeated yet infrequently applied:
An ounce of prevention is worth a pound of cure.
Although I try to avoid using sports analogies, I believe many of the principles I’ve applied to vendor management closely parallel the principles of injury prevention as applied in professional athletics.
The story of one long-since retired NBA athlete should illustrate my point quite well.
Short-term Benefits, Long-term Impacts
Growing up in the Northeast, I recall seeing some truly incredible athletes come through the Philadelphia area. One of those athletes was Kevin McHale, the great Celtics forward who teamed with Larry Bird to bring three titles to Boston during the 1980s.
During a playoff series in the late 80s, McHale played with a serious foot injury, which worsened the condition to such a degree that his production dropped throughout the seasons that followed.
Although, at the time, McHale was praised for playing through the injury, he paid a handsome price for doing so. Ultimately, his Hall of Fame career was cut short.
There was a short-term benefit to the player and the team, but the long-term impact illustrates why organizations must consider all potential outcomes, both in the present as well as in the future.
Hopefully, the McHale analogy will allow you to see the parallels as they relate to vendor management and legal matters.
Challenges Faced by Vendor Managers
It is my personal belief that effective vendor management requires a detail-oriented focus that appropriately accounts for and addresses the wide range of challenges faced by the professionals charged with overseeing these unique and critical responsibilities.
It might not be the most exciting responsibility associated with your professional career, but it is important to remember the comprehensive oversight of vendor rates, billing, and company policy compliance all play a substantial role in your ability to control expenses, which is a vital responsibility for many reasons.
On top of that, working with vendors for legal matters presents a whole host of unique challenges that require a great deal of forethought and planning, including the challenges inherent in the tracking and reporting of vendor expenses — not to mention the particularly pressing need to develop assessment tools for application in the procurement and selection of vendors.
To return to the McHale analogy, the team of professionals who share these responsibilities would essentially represent the Boston Celtics, who should have been cognizant of many different short-term and long-term consequences associated with the decision to let one of their best players compete with such a serious injury.
Through goal-setting strategies, interdepartmental communication, and thoughtful collaboration, many of the negative consequences stemming from the poor decision might have been avoided altogether.
At this point, I’m sure you will be able to see the additional parallels between common vendor management issues and the situation I described in what I hope is an apt sports analogy. What follows is a brief overview of the strategies I believe are most beneficial to ensuring effective vendor management, with a particular focus on some of the more common legal issues you might encounter along the way.
Identifying Goals and Developing Initiatives for Effective Vendor Management
Through effective interdepartmental collaboration, it is possible to clearly identify specific vendor management goals, which in turn leads to the development of effective vendor management initiatives.
In my own career, I’ve made it a goal to create a centralized and comprehensive vendor management program that strives to achieve reductions in costs and exposure to risk — all while yielding improvements in service as well as vendor relationships.
It’s worked for me, and I think it will work for you too.
Establishing Strong Interdepartmental Relationships
Overcoming the many challenges associated with vendor management requires a great deal of interdepartmental collaboration, often involving departments that include, but are not limited to, the legal department, the procurement department, and the corporate finance department.
It often takes a lot of effort just to establish these relationships, but trust me, it is absolutely worth any amount of effort required.
Organizational hierarchies will most certainly differ from company to company. Even so, it’s critical to establish solid, mutually beneficial relationships between the professionals who will play a fundamental role in establishing a comprehensive vendor management program.
Risk Management and Other Issues
Third-party contracting can expose your organization to a variety of risks, and effective vendor management requires a thorough understanding of the full range of risks posed to your organization.
In addition to understanding the risks associated with third-party contracting, it is necessary that your vendor management program develops a clear set of strategies designed to mitigate the risks to which your organization might be exposed.
These risks include, but are certainly not limited to, compliance, credit, operational, reputation, strategic, and transaction.
Each of these risks creates a unique threat to companies operating in any industry, and many of them can result in far-reaching consequences that affect a company’s long-term viability.
Sure, it may not be the most exciting thing you do as a professional, but with proper planning and foresight, along with effective and thoughtful collaboration between departments, it is possible to prepare for the many challenges you are sure to face when it comes to legal matters and vendor management.