By The Procurement School

Without effective communication, relationships with your procurement partners can quickly become stagnant. This and undoubtedly negatively impact your team’s vendor performance management strategy and outcome.

To nurture a supplier relationship that optimizes outcomes for both parties, performance management should be an ongoing and continuous process. Relevant feedback delivered when the supplier still has the opportunity to correct their course is much more valuable and makes for faster improvements. Therefore, bi-yearly or yearly formal reviews should serve not as the primary mode of communicating and evaluating performance but to augment and document your daily efforts and outcomes.

Building the communication of constructive feedback into your day-to-day operations ensures you keep your objectives at the forefront and foster a culture of goal-directed performance improvement.

To mitigate the risks of poor supplier performance, your ongoing process should include:

Effective Goal Setting for Better Vendor Performance Management

Achievable but challenging goals are the foundation of an effective vendor performance management process that motivates vendors to give their best effort. Although you may want to push your procurement suppliers if you set an unrealistic and unattainable goal, you’re more likely to demotivate them.

Goals must be clear, objectively written, and contribute directly to your overall department goals and organizational strategy.

Remember, to be understandable and easily evaluated and tracked, goals should be S.M.A.R.T.:

Goals should address the supplier’s responsibilities and your expectations while also covering the ‘how’ and ‘what.’ For instance, deadlines and delivery dates, expected costs, quantity, and quality would all fall under the ‘what’ while service levels and demonstrated behaviour would fall under the ‘how.’

You may also choose to set a start and finish date for your goals, with milestones in between. This allows you and the supplier fair warning and time to take corrective action if they veer too far off track.

To ensure you remain aligned with your overall objectives and further motivate procurement suppliers, you may want to consider using the new and more progressive S.M.A.R.T.A.—Aligned or S.M.A.R.T.R.—Reward.

Data-First Performance Monitoring

To track against your S.M.A.R.T. goals, you’ll have to take a data-first approach. However, collecting, aggregating and analyzing data through emails and spreadsheets can be time-consuming and prone to human errors.

Over the last few years, procurement technology solutions have seen massive growth. Increasingly, organizations are using cloud-based performance management systems that break down data and communication silos. Some offer little more than electronic appraisal forms, while others are more expansive, offering full performance and goal management.

Whichever approach you take, give careful consideration to how and what data points you want to monitor and any relevant market data you’ll require. Of course, you’ll want to ensure you have access to the data that allows you to evaluate progress against goals and make the comparisons necessary to support decision-making. You may even want to look for a system that allows you to drill down to item-level detail, update statuses and communicate back and forth on the nitty-gritty, all in one consistent platform.

If you require the supplier to provide you with any data, communicate this to them and confirm their capabilities at the beginning of the relationship or during the project kickoff.

Feedback and Coaching

Providing feedback in a timely fashion allows your supplier to respond and adjust immediately, correct performance plans, prepare contingencies and tackle any other obstacles that may be hindering outcomes. The squeaky wheel gets the grease, especially in procurement. 

Without regularly tracking progress against goals, productivity is likely to dip as attention is quickly averted elsewhere. By having short but regularly scheduled performance talks, you keep your procurement suppliers’ eye on the ball and avoid any surprises come review time. 

Here are a few tips for effective supplier communication:

Governance

Create your governance framework—a schedule of mutually agreed-upon review meetings—with vendors and your key stakeholders. For example, your framework may consist of monthly contract or Service Level Agreement (SLA) performance reviews. In addition, quarterly reviews may focus on the supplier relationship and evaluating long-term strategic value. 

To ensure ongoing resilience and risk management, you may want to set biannual reviews of risk mitigation plans. And to keep your organization and leaders aligned and further nurture the relationship, you could arrange for an annual executive review.

Your governance should also include a look back at past issues and any corrective actions taken. Were the actions successful in addressing the root cause? Is the issue ongoing? Was the supplier proactive and expeditious in dealing with the issue?

Lastly, a few extra tips:

If your team needs training on a specialized public sector procurement topic then please check out our topic based webinars: https://theprocurementschool.com/webinars-trainingformyteam/

Resources

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By The Procurement School Without effective communication, relationships with your procurement partners can quickly become stagnant. This and undoubtedly negatively impact your team’s vendor performance management strategy and outcome. To nurture a supplier relationship that optimizes outcomes for both parties, performance management should be an ongoing and continuous process. Relevant feedback delivered when the supplier […]

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