Three Critical Tools for Improving Vendor Performance

Supplier performance is a tricky proposition because there are multiple sources of “truth” about whether the supplier is “good”. The role of Procurement and specifically of Vendor Management Organizations is to define what “good” means. This means identifying those sharing perspectives about the supplier (usually overly negative or positive) making them part of a process that calibrates their perspective with those of others, as well as some objective facts.

Guess who else has a perspective of “good”, you guessed it, the vendor. They are fiercely defensive of their story of value regarding their performance. ?They have resources that are well trained in their ability to speak to the technical complexity of change, document any client process transgressions, and are keenly observant of process and capability gaps of the client firm. These capabilities can often persuade the uninitiated to almost tear up, understanding any failure as obviously the fault of outside forces.

To normalize the chatter and get to the real story, cast a wide net for those who should be a part of our qualitative survey process. Survey potentials are members of your organization that by virtue of their role, are authorized to say something about the vendor you are assessing. They may have a governance role or may own (i.e. pay for) a particular service critical to the relationship. Your role will be to manage perspectives of others who have mere opinions, by referencing the facts sourced from those authorized to be in the know, but only once calibrated through your survey.

Typical titles of the folks you are looking for include the following:

·????????Project Manager (and manager)

·????????Delivery Manager

·????????Delivery Director and their manager

·????????Functional SME (or their director)

Pole this group for additional names of people that they work with to manage all of this vendor’s services. Then validate this list with the highest-ranking executive that is the most responsible for their program, project or service. There is always only one executive who drives the relationship. If there is not, get one anointed.

The Survey

The survey itself must be well structured, and not changed frequently.?The idea is to create a baseline of performance that once set, only moves because of the vendor’s behavior. If those looking at the result of the survey must navigate change from the target and the survey instrument, then your results could be called into question, or worse cause confusion and lack of confidence in the approach.

The survey sections should cover the broad domains of all relationships. The good news is that there is consensus on how to assess any relationship, but I have added one section that is a key control to align perspectives on how to improve the relationship post assessment. Because the survey is no good unless you can fix what is perceived to be wrong.

Here are the sections that should frame the survey based on my experience. Particular questions may need to be added to each firm’s particular product/service objectives, and ways of working.

*Performance Improvement Plan

The Survey Process

The survey process is straight forward. Develop questions that address relevant topic areas in each domain along the lines of the themes provided, adjusting for relevance as required. Scoring should be aligned across all stakeholders. An averaging approach all scores can be used, or a group-scoring method adopted to gain alignment if your facilitation chops are strong.

Alignment can be achieved by discussion and group willingness to speak with one voice. Each voice should be heard and responded to where strong evidence of behavior is present. A senior executive should be present to “own” the score of the team and speak to the integrity of the process.

Create an executive slide for each scoring session to show to executives as part of the supplier file of record and to drive decision making on RFP participation and also as in input into any one-off opportunities.

Survey and Improvement Cycles

The supplier should get a readout of your results and the drivers for alignment on the corrective action plan. They should see a clear but sanitized version of the high points and opportunity areas and respond with performance improvement initiatives and countermeasures for consideration against any identified improvement areas. Priority of improvement areas should come from the client and limited to 2 or 3 max.

Improvement cycles should be limited to 90 days, hence the small number of improvement areas. Resources should be available on both sides to drive change. Competent subject matter experts, design thinking or structure problem solving capabilities should be part of the vendor team. Cadence for managing all improvement actions should be weekly to bi-weekly depending on urgency. After 90 days, use another month or 2 to measure the impact of your efforts and confirm effectiveness before the next scoring cycle.

A semi-annual or annual survey scoring process works best to move relationships forward while creating time for corrective actions to be measured and confirmed to be closed.

The Performance Improvement Plan

Improving firm performance is usually a commonsense affair.?People sometimes just don’t talk to who they need to talk with. Vendors don’t have their best people lined up to give the service the customer is expecting. Clients are shy about asking for what they really need or don’t think they can. Processes are not fully understood. But sometimes requirements need to be developed and core capabilities need to be invested in over time to make the relationship work. Here is where you reference the broad expectations of the contract and focus on the commitment to make it work for the customer.

To find the right solution that will truly solve the issue the client is looking to remediate, the client should have a facilitator engaged who is familiar with the basic improvement process. I use Lean as a basic methodology such as A4 or a structured problem-solving method to ensure alignment on the problem and that the proposed countermeasure(s) is likely to address those causes. Fixing these issues is time consuming and sometimes requires material investments.?Not being aligned is not only costly, but also embarrassing to all in involved. Bring in a facilitator if these basic skills are untested until the team feels comfortable with the process.

Also, the facilitator or the partner of the facilitator should bring the perspective of the contract to the discussion. This might compel the supplier to fix issues on their own without any reference to costs required. Also, the tone should be different for the supplier to fix expected and contracted commitments vs emergent issues.

Speed is required for this process to work effectively. The feedback loop of the performance improvement system needs not only fix what was broken in the relationship and close any expectation gaps, it also needs to confirm the issue is resolved. So, a period of measurement is required to confirm that the issue, per the view of the stakeholders, has been permanently addressed. When the stakeholders provide this confirmation, the issue should be documented as closed with some details as to the method and process. Then the next scoring session should reflect a higher score for that part of the survey, relative to the work of the team.

Through this process, the survey and continuous improvement process addresses many of the subjective and hard to define experiential issues in the relationship that are impossible to plan for. Certainty of the value of the process is confirmed by the participation of the stakeholders, whose voice gives weight to each scoring cycle’s outcomes and the approach used to improve the relationship where the pain is most impactful to the relationship.

This is not the only way to ensure relationships work effectively. But this is a great place to start. Next, we shall explore the second leg of the relationship management framework.

The industry assessment is Part II.

#suppliermanagement #vendormanagement #supplierrelationshipmanagement #procurement #smallbusiness #transformation #performanceimprovement #continuousimprovement #procurementleadership