Fear and Loathing in New Zealand

And therefore never send to know for whom the bell tolls; It tolls for thee – John Donne, Meditation XVII

I just managed to weave (and slightly misquote) three authors in the first two lines.  I think that is a pretty good start.  After an interesting couple of weeks I thought I would pass on an observation.  In short, why is there a natural reluctance to measure and (more importantly) discuss vendor performance?  In part this can be put down to an Antipodean reliance on relationship to achieve our goals, but is this the root cause.

Don’t get me wrong, relationship is very important with key suppliers.  It enables both parties to ‘go the extra mile’ and create value.  However, it is my hypothesis that measuring performance is the (required) foundation that relationship needs to be built on. 

Case Study A (not real but based on my experiences)

A large organisation outsourced its facilities management.  For the organisation facilities management was a non-core activity and was seen as distracting to management.  For the provider this contract was extremely important.  Through no-ones fault the contract KPIs were not monitored and there were formalised meetings to discuss performance.  At a site and regional level the provider maintained a strong relationship and generally met their contractual obligations.  At a national level there were frustrations over escalating costs and a lack of a formal asset management plan.  Importantly, these frustrations were not discussed with the provider; instead they were left to fester (adjective used advisedly).

At the time of the contractual renewal these frustrations boiled over into an acrimonious and divisive process.  Without going into the gory details, my analysis of the situation boiled down to three root causes:

• the ‘balanced scorecard’ (i.e. balance between service quality and cost) wasn’t clearly explained to the provider;
• in the absence of direction the provider worked to provide what they thought was required; and
• lack of formalised performance reviews led to small and isolated issues gaining an exaggerated importance.

These issues could have been addressed by having a regular agenda-based performance reviews where issues and performance can be discussed and problems resolved.  Ok – so that’s a truism, why is it so hard.  Why is there a preference (in some cases) for relationship management to be an informal process? 

To answer this question I need to go back to the title of this piece and the emotive reactions I sometimes get when getting discussing performance management.  Somewhere deep inside our psyche is a reluctance to have the (perceived) hard conversations.  The net impact of this reluctance though can be the creation of a conflict-ridden supplier relationship.

Having said all that (and got down from my high horse), I have seen a considered effort by a number of organisations to turn this behaviour.  Hats off to those organisations.