Managing Vendors – Being a Quality Vendor Management Team
What is the line between vendor accountability and micromanaging a vendor?
The opposite question is equally valid: what does “non-managing” a vendor look like?
I don’t know if there is a simple answer to those questions.
Like 9-year-olds, vendors have varying degrees of maturity, focus, and distraction. Therefore, skills and principles will provide us better guidance than pat answers as we interact with our vendors.
What NOT to do!
Vendor Management is a balancing act. Here are the two unbalanced extremes you DON’T want to fall into:
The Vendor “Non-management” Team has little respect for their vendors. They express this disrespect with a “hands off” stance to their vendors. Vendors are a pain and the less one deals with them the better.
This ‘hands-off’ expression of disrespect creates a black hole where communication between the vendor management team and the vendor becomes less frequent, less interactive, until, eventually, there is no communication at all.
You can’t manage a vendor without communicating. You can’t communicate effectively without respect.
The Vendor Micro-management Team has the same disrespect for the vendors as the Vendor “Non-management” Team. However, they express their disrespect by meddling in every detail of that vendor’s interaction with the company.
This creates an annoying ‘noise’ of second-guessing and needless challenging of the vendor – not because the vendor is incapable – but because the vendor is not respected.
The angst created by that noise will either drive the vendor to retaliate against the company (which is NOT a good move), or the vendor will minimize any interaction with the company to avoid the constant demeaning noise.
So, what principles does a Quality Vendor Management Team operate under?
Let’s take a look at seven critically important vendor management skills and how they can be done well:
1. Respect Your Vendors: Without respect as a foundation, any relationship will go toxic. I have seen many companies and their vendors become increasingly dysfunctional because of a lack of mutual respect.
Respect begins with honoring a vendor’s reputation in the marketplace. You hired them because they have a good product or a good service.
Respect between you and your vendor grows as your vendor management team excels at the vendor management skills we will cover in this list.
Constructive communication is one of the most effective expressions of respect. Even in a conflict with a vendor, never sacrifice respect.
2. Understand Your Vendors: This skill not only makes you much more effective at vendor management; it will also increase your respect for your vendors.
Ask them questions,
Learn their systems,
Learn their organization structure and their company culture,
Become fluent in their industry and corporate dialect,
Find out all you can about their goals and ambitions.
3. Understand Your End Users: Unfortunately, many vendor management teams miss this perspective. Vendor management sits in a key position. However, like all key positions, it is not a solo act. Vendor management is a liaison role.
A Liaison is a person who links different people or groups together.
A liaison understands both groups and is able to create a constructive conversation, bridging the differences between the culture, language, and roles of the different groups.
4. Well-written Contracts: A well-written contract is worth its weight in gold. I have seen hundreds of companies and vendors get into relationship squabbles, legal battles, and media wars – just because their contract did not capture the critical points of the relationship.
A Quality Vendor Management team knows the contract with each vendor.
They have metrics in place to measure performance against the contract.
They have protocol in place to identify any behaviour or needs that fall outside of the contract – and can quickly escalate these so that the behaviour can be addressed or the contract can be amended.
5. Accountability: Believe it or not, vendors like accountability – if it is done well.
A Quality Vendor Management Team will implement an accountability reporting and meeting cadence that matches contract requirements and the reporting abilities of the vendor.
As much as possible, this team uses vendor standard reporting for audit and accountability purposes. This not only makes for a smoother accountability relationship; it allows the vendor to provide benchmark reporting as well (IF that benchmark reporting is in the contract).
6. Compliance: We can’t talk about the payments industry without talking about compliance. Where your vendors touch your business, you are responsible to the payment networks and to government authorities for your vendors being compliant with their requirements. If your vendors aren’t compliant where they touch your business – you are in trouble with the network or government – not them. A Quality Vendor Management team:
Is fully aware of its company’s compliance requirements – strategically and tactically,
Effectively communicates these requirements to the affected vendors (remember point #2 above: understand their culture, systems, processes, and dialects),
Actively tracks vendor progress in conforming to the compliance requirements.
7. Best Practices: A Quality Vendor Management team is an excellent curator of best practices:
A Vendor Management team is privy to a lot of confidential information and processes. This is very useful to this team and its role. However, confidential information cannot be shared with other teams and companies.
On the other hand, the Vendor Management Team gets to watch many companies and teams “do their thing” and can curate best practices that can be shared to make their company and their vendors more effective partners.
What about you and your vendor management team?
Which team are you:
The Vendor ‘Non-management’ Team,
The Vendor ‘Micro-management' Team,
Or do you want to take up the challenge to be one of the few Quality Vendor Management Teams?