Do you want to manage your vendors better? Do you want to see better results from your vendors? Although most of the posts I’ve written thus far focus on how to work better with internal stakeholders. I have written about getting along with others better, I’ve written about representing yourself better, and I’ve written about self-improvement practices. Today I want to write about external stakeholder management. I am writing this because every organization has vendors that they have to manage and work with. Some of these principles may even work in your personal life as you use services from businesses and people.
Disclaimer:
I want to be clear, I make no promises with this article, every vendor relationship is different and requires different management techniques. What I’ve learned, practiced, and experienced has worked for me, however, take these as general guidelines that you can learn to adapt and apply to your unique situation.
- Everyone has needs
- Know your leverage points
- Meet regularly
- Document everything
Everyone has Needs
It is normal and understood that everyone has needs, the need to eat, breathe, and be loved. What I’m talking about here, however, is the needs in a vendor relationship. When you’re working with external stakeholders, remember that you both have needs. If you focus too much on your needs, then you lose the power that you may have in the relationship. I will give a personal example, suppose you were buying a car. When you attempt to buy the car, if you are focused on the fact that you need a car, then you will forget that there is another person in the transaction relationship. The key to this principle is that your vendor (salesperson, account rep., etc.) has needs as well. They need your money as much as you need their goods and services. Don’t mistake, if their product or service is positioned well then there may be a lot of competition and you may be disadvantaged, but you aren’t the only one with needs. In the car example, the salesperson is going to get a commission on the car, they need a paycheck and depending on the structure of the dealership they may not get a salary or an hourly rate, they may only get a commission, so they need you to buy as much as you need to buy. Every interaction you have with the vendor is 2-sided and that doesn’t just mean sales and purchases. To return to the car example, once you’ve purchased the car, you may need to have something looked at, if you return to the dealer to ask about the minor imperfection, they may take care of that on the spot because they need a good reputation (so that you will recommend them to your friends and family) as much as you need the car to be working 100%.
Know your Leverage Points
Leverage points are an excellent way to manage your vendor better. Knowing the points in the deal whereby you have an advantage is another key to managing your vendor well. The most obvious one is volume. If you think of your typical commodity purchase at a store such as bread. This commodity is something that you need, but you only need one loaf per week. You may purchase the bread today and the grocery store won’t see you for another week. You could go to the same grocery store or you could go to another grocery store, in this case, you don’t have the volume to leverage. In another example, whereby you do a lot of business with the vendor, the volume of business could be significant for them. The structure of most transactions is where the first x% of the transaction is eaten by cost (the cost for the product, delivery, and other overhead costs), then a small percentage of the price is profit. In a single transaction, there may be very small dollars of profit, but if you do a large volume, the profit dollars go up as well, so buying in volume may incent them to take some off the profit because there is more profit to take from. In the bread example, a $2 loaf of bread may have only 50 cents of profit on it after all of the overhead is taken out. If you wanted to discount that, the most you could do is get the bread down to $1.50 and then the store would be selling it at cost. If you were buying 1,000 loaves of bread, that would be $500 of margin, they could easily take off $50 or $100 from the price and still makeup to $400 in profit. Other leverage points to consider are future purchases. Although this can be tricky because there is no guarantee of purchase, it is a potential leveraging point. Another leverage point is the length of the relationship. If this vendor has done a lot of business with your company, then the length of the relationship can often yield a great many benefits if you invoke the tenure of the partnership. As you consider your vendors (personal and professional) think about their needs and how you can leverage other aspects of business and the relationship to ensure that you can get the best results out of your vendors. These techniques also don’t have to be used just for purchases, but they can be used for ongoing support and relationship. The relationship doesn’t end at the sale, there are other aspects of the relationship which each of these leverage points may help improve.
Meet Regularly
The timing of this post may make this more difficult than it seems, but do not ignore it yet. There are other ways to meet and although in-person is always better, phone, conference call, or video conference can also suffice when physical meetings aren’t possible. The principle of meeting regularly has a few benefits and caveats. The first benefit is that regular meetings ensure that business-critical issues are addressed quickly. Know when you’re going to be meeting with your vendor, compile an agenda of items you want to discuss, and bring them to the meeting to discuss them. These meetings don’t have to be “all bad” or “all good”. There should be a balance to the meetings whereby the appropriate information can be shared with the vendor and issues which could impact business operations in a meaningful way can be addressed. To give an example, if you are meeting with your supplier of office supplies, consider aspects of their business (quality of the product, price of the product, availability of the product, on-time delivery, forecasts, etc.). If the vendor’s performance in any aspect of the relationship is negatively affecting the service they are providing, that should be addressed. If the vendor is doing something to positively affect the service, then that should be celebrated. Celebrating the good things does 2 things, on the personal side it ensures that the vendor feels appreciated and valued, on the business side, it indicates what you like about their service and reminds them to keep doing that. When you meet, own the meeting agenda, own the meeting occurrence, and own the subject matter of the meeting. If you need the vendor to be prepared to discuss something in the meeting, ensure to provide an agenda with enough advanced notice for the vendor to prepare. It is also good to use these meetings to “state facts”. What this means, is to discuss current business states and establish what “status quo” is, talk about plans and intentions (sharing only what you can that will not negatively impact future business decisions), and remind about expectations. This gives the vendor a chance to give the “first right of refusal” if there is anything that’s stated in the meeting the vendor has the chance to say “that’s not OK” or “that’s not what we understood”. By addressing it in a meeting, if there are no objections then there is a tacit endorsement of the activity and does not open the door to change facts from the past.
Document Everything
In line with not changing facts from the past, document everything. There is a healthy balance about this whereby, too much and too little each have their own consequences. Each vendor will dictate what exactly needs to be documented, however, there are some benefits and guidelines to this that can help your business operation. I was taught this phrase “will it hold up in court?”, this is a phrase which generally doesn’t mean that you will have to defend a point in a courtroom setting, but it is referring to the principles that a legal defence would need to win an argument. In the case of vendor management, the biggest point is clarity. If you’re writing to the vendor and you don’t explicitly state that a particular project is expected to start on a specific date (or finish by a specific date) then you cannot expect that they just “know” when the project is supposed to start or finish and therefore your project timelines won’t hold up in court. Other examples whereby any dispute or disagreement could arise, explicitly state where your position is and give the vendor a chance to disagree. As discussed in the meeting regularly section, if there are set of business metrics on which the partnership has agreed to operate and the business metrics have shifted slightly (still within acceptable limits for your organization), then document that and share that out with the vendor after the meeting to ensure that if a disagreement were to arise, you could prove that this was agreed upon. Typically, whenever a meeting has taken place, any key points need to be shared with all key stakeholders within 24-48 hours after the meeting. These meeting notes are typically sent out by email but you can use the communication method that works best for you, the key principle is that all appropriate stakeholders (usually those that attended the meeting) have equal visibility to the notes and to whom is receiving the notes. Also, be sure that the communication is stored in a way that is easy to retrieve. This is to ensure that a dispute couldn’t use the lapse in time to say that the details weren’t fresh or the window of time to dispute items had closed. This discipline of documenting everything will ensure that everyone is on the same page. When communicating your meeting notes, some helpful tips make it clear for everyone. Separate the “general notes” and the “action items”. The notes are simply for reference if someone needs to review the items discussed, while the action items call out what needs to be completed or actions taken by a given date/time or before the next meeting. For all action items, provide a clear date that the item needs to be completed by (if possible). Call out this date in an eye-catching way (i.e. colour it red) so that it doesn’t get missed.
If you look for it, there will be 101 ways to manage a vendor. Everyone has different techniques that they use with their vendors and the techniques listed here are just simply broad principles that can be used to manage internal and external stakeholders. However, using some of these techniques can help ensure that you get the performance you’re expecting from your vendors.