How do you monitor and manage vendor performance and SLAs?

Before you engage with a vendor - you also need to have your own processes and procedures locked down, evaluating a vendor is a mutual endeavor. Identifying the right internal stakeholders and decision makers ahead of time will also establish communication practices.

A key aspect is ensuring that KPIs are relevant to both the Vendor and the Client Organization and making sure there are mechanisms to incentivize a focus on continuous process and Customer Experience improvement. In some instances "less" but "'more critical" and "more relevant" may allow a more focused delivery of services.

In addition to what has been said here, I think the outcome, trust and value is also very important to assess a vendor’s performance.

Vendors engage lots of people internally before and during any formal negotiations begin - it is important to understand what has been shared with the vendors and what the vendors have shared with your team. Also, it is critical to define and document the key sponsors' objectives and desired outcomes so that you can ensure both the internal and external teams are aligned.

Agree with other comments as well but a key to success is to also know how performance was prior to engaging a 3rd party vendor. Short term and long-term goals are key at the start.

When conducting due diligence ensure that you have all the necessary internal groups involved in the process - this may include the functional groups who will be leveraging what the vendors provide and who may have requirements related to innovation, data privacy, technology groups such as security, integration to other systems, post implementation support and ongoing support departments. Including your contractual requirements and risk management thresholds as part of the due diligence process will shorten the selection process.

The alignment on vision - both long term and short term is the most important element. Once that's set : 1. Check their past references 2. Verify their compliance: Verify that the vendor is compliant with any regulatory requirements or industry standards that apply to your organization. 3. Review their security measures: Review the vendor's security measures, including data security and physical security, to ensure that your organization's data and assets are protected. 4. Assess their technical and process adherence and capabilities 5. Review their financials: Review the vendor's financial statements to assess their financial stability and ability to deliver services over the long term.

Agree with all of the comments:- I have little different lens to look at it. 1. Identify Sacred Sanctum (business objective based application critically) 2. Align SLAs in accordance of criticalities. 3. Refer to past and create of pain point heat map 4. Validate using Due Diligence 5. Playback to key stale holders for double validation 6. Bring in your expertise to solve use case problem statements. 7. Create Milestone Plan.

I would use G2 reviews and provider grids (from Forrester) to identify my top prospects (for a vendor) before issuing the RFP. After the RFP responses and whittling down to a top 5 potential vendors, I would ask for customer testimonials.

In my opinion, the due diligence step is probably the most widely conducted phase within the vendor assessment process. I agree with @Colleen Mahoney, that other groups need to be involved in the due diligence process. I think scoping needs to be done as well to understand how much due diligence is needed per vendor because all vendors to do not present the same inherent risk to the organization.

The KPIs and SLA should be specific to the role the vendor provides. If it's a SaaS marketing tool - you need to have awareness of product updates/releases, if it's a critical tool - uptime and redundancy are critical. How does the system alert users of errors or issues. Do you know how your vendor will handle root cause analysis? When are RCAs triggered.

Anything that is to be monitored and managed needs to be discussed and agreed to contractually before the contract is signed. As much as possible these elements should be addressed in Due Diligence.

Unilateral KPIs and SLAs with vendor is not a golden key of vendor delivery management, it is just a shiny piece for satisfaction. Project management with vendors is successful when the KPIs are established on collaboration. Collaboration between the implementation team, between the consumer's and the vendor services team. All bound by KPIs which will lead to a successful implementation. The expectations of this collaboration shall establish SLA's for the vendor. If is done correctly, it produces the best result and a long term productive outcome in any execution project.

Set up tasks in a project management system including predecessors, successors, time, duration, responsibilities, issues risks, in/out of scope, then set 5 top rules 1) Include the project manager(s) in ALL project-related communications. This is intended to eliminate/forego assumptions & misunderstandings and those who might want to undermine the project, 2) NO email; all communications must be posted to the proper task/issue/risk... in the project plan. This eliminates searching emails and the "I didn't get the message" excuse, 3) Project team members are responsible for staying informed via the project plan. This eliminates blaming others and various excuses, 4) Allow SOME "plausible deniability," and 5) Set a reporting schedule.

I agree with the suggestions above but wanted to add additional thoughts. There can be multiple strategies for managing vendors and I am sure each works to different degrees depending on the work being performed. What I personally found that works best is to ensure the vendor has a strong team that directly manages with them vs treating them as a "vendor". Building a strong trust between the company and vendor, holding them accountable when needed, recognizing and celebrating with them their success is key. Ensure reporting is real time and make sure they have a strong leader, especially a technical leader if dealing with technology, so performance issues can be addressed real time.

In addition, I’d suggest to extend the same level of trainings and enablement for vendor as you do it for your your company and employees. This is compliance by enablement and is preventive in nature.

I agree with Sandeep. Assuming the vendor is being asked to perform similar work to internal organizations the training should be consistent. Some vendors, if well established, will work to modify the material to allow them to train their staff in a way that allows them to be successful. This obviously must be validated and approved internally but can be highly successful. A champion/challenger (multi-vendor) approach also helps mitigate risk if feasible.

Understanding what training vendor requires of their staff and their subcontractors is important - expecting a vendor, particularly a SaaS vendor, to conform to a specific company's requirements may not be realistic. Rather, I recommend, understanding what they do and determining if your company can live with that.

This may be one of the most important aspects of outsourcing your work. My experience started with just "managing" a vendor and the performance was just ok. This was not where we wanted the support to be, so we had to adjust internally before we could expect our partner to be better. After putting in place technical leaders who were willing to teach them and would stand by them through good and bad, the performance accelerated beyond all expectations. The partnership became a two-way street and in the end the partner was outperforming most teams and working some of the most complex repairs. Any time we slipped or went back to just managing, the performance declined. Vendors need strong partnerships to succeed and that starts internally.

Not all vendors consider their clients strategic or partners. It is important to understand where your company fits into the vendor's view of clients and how you will be treated as a result. Many vendors will be transactionally based and that is fine as long as you know it upfront and can respond accordingly. Also it is important to identify the internal resource(s) who will be responsible for engaging with the vendor throughout the lifecycle.

Mutual respect is critical between vendor and buyer. You need to designate a vendor manager to centralize the engagement to ensure a single source of management for the vendor. Weekly touch bases and monthly synchs are also helpful.

My experience is that most vendors view the "P" in profit much higher than the "P" in partnership as they march to their providers monetary goals. I would suggest that firms outsourcing large contracts establish an agreed upon short list of SLA's and KPI's to track performance. I say short as you don't want to spend an inordinate amount time looking in the rearview mirror. The SLA's and KPI's should not have significant financial penalties but, instead, work improvement commitments to ensure compliance. My reason for this is that financial penalties will be priced into any contract by the provider so, in reality, they are only giving you your money back. If they don't ever pay a penalty it's a windfall for the provider.

You must know how vendors operate. These are the facts 1) Everyone loves a new vendor and hates the same vendor before the 4th project, 2) Vendors quote their best prices and put their best people on their first project with you, then raise prices and assign the B and C teams on subsequent projects, and 3) There are hundreds of training/learning vendors. Despite what they say, very little differentiates one from another; none are worth premium prices. All will bend over backward to keep a good client, 4) Be a good client. Break down the work together. Use a highly detailed project plan, then follow it. Make payments on time. Help build your vendor's reputation.

If managed properly, the performance should be known daily and tracked in a dashboard available to all stakeholders. Of course, reviewing at the end of the contract is key, but actions should be taken well in advance if performance is not where expected. This could include bringing in a new vendor with enough time to be prepared to move business before terminating an agreement.

In addition, bring competition on the table between vendors not only for cost reduction but also for value generation and innovation at defined capabilities.

We utilize the Beeline tool for management and performance monitoring very successfully. We had monthly/ quarterly/ and annually meetings with vendors to access performance and lessons learned.