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Maximize Vendor Performance

When good enough isn't good enough.

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  • Five organizations contributed information to assist with the development of this solution set. Due to the sensitivity of the information, all contributors requested confidentiality.
  • Organizations are dependent on vendors yet spend little effort managing their performance, resulting in less than optimal results.
  • The use of some standard processes can ensure that vendors at least meet expectations.
  • The application of additional techniques can move vendors beyond good-enough performance to better or even first-rate.

Our Advice

Critical Insight

  • Without effective management, vendor performance will remain at standard or deteriorate below standard service. Actively manage vendor performance to motivate them to provide exceptional service.
  • Treat the collection of IT vendors as a portfolio requiring regular performance review. Actively manage them all, but pay the most attention to underperformers and develop plans to bring them up to a higher level of service.
  • To become a favored client to the vendor, establish internal responsibility for ensuring you have shared targets, build a relationship with liaison staff and their managers, implement an effective performance tracking process, and resolve small issues early to correct potentially chronic problems.

Impact and Result

  • Vendor performance metrics provide the common understanding between the organization and the vendor delivering the products and/or services. Measure progress against metrics and set targets for higher performance, or address a vendor's substandard performance before it becomes a larger problem.
  • The size of your organization relative to your vendor's and the role of your assigned client-facing representative dictate how you manage the relationship. Cultivate vendor management relationships to leverage negotiations and nurture the client-facing worker who will go above and beyond for you.
  • Without sufficient motivation, vendors will generally only meet the agreed expectations. Leverage the drivers of vendor profitability, reputation, and partnership to motivate them to higher performance.
  • Manage vendor relationships as a portfolio to achieve a consolidated view of performance highlights and issues, higher customer satisfaction, lower costs, higher quality, and better vendor service.

Research & Tools

1. Effectively manage vendor relationships.

Motivate vendors and suppliers to provide maximum performance.

2. Measure the performance of your vendor portfolio.

Identify at-a-glance target areas for performance improvement.

3. Survey your vendors to assess the health of the vendor relationship from their perspective.

Learn what motivates your vendors to better performance and take action.

4. Document and track ongoing vendor management issues.

Hold vendors accountable for their performance issues and motivate them to better performance.

5. Identify the vendor management roles best suited for your organization.

Dedicate vendor management responsibility to ensure vendor performance isn't left to chance.

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