For nearly two decades, Maple Street has been empowering credit unions and community banks to thrive. Our team is constantly looking for ways to solve the problems our clients face.
The key problems
Some of the key issues we’ve uncovered go hand-in-hand – Institutions not getting the performance they want, not getting the results they expect, and being stuck in a long-term contract. If you’re not happy with your vendor, you usually have to wait it out, then convert to another vendor.
However, this comes with another set of problems. If a member’s or customer’s debit card transaction is denied, who gets the blame? Not the processor. You let them down.
Maple Street has been grappling with this problem for a while, so we took the time to find out why it keeps happening. We learned there are a number of issues in the selection, buying and contracting process that contribute to the problem, but there’s one specific thing we noted with the usual way of selecting and contracting with vendors.
The traditional contract process
It starts with understanding the way we buy. The traditional process is to gauge what the need is and start shopping by talking to vendors. Then you sit through presentations and discussions, looking at the features in vendor products and listening to the benefits the vendor presents. After that, you review the technology and connectivity, then move to contracting. In other words, you buy based on the assumption that having the features in the vendor’s product will get the results you want.
What we often fail to learn is that having the features available is sometimes a long way from getting the desired results. Results require investments of time and effort.
The traditional contract is a transactional contract. The structure is “you pay x, and I’ll deliver y.” After the sale, some services are provided (often not well defined), but the vendor limits its responsibility and its service – support, such as it is. You now get to live with your choice for five years, post implementation (or, heaven forbid, longer than that).
We believe a way to change that is to select and contract with vendors differently. Maple Street uses a process called relationship contracting.
Performance Addendum – the relationship contract
The process of reviewing vendors and their products, understanding the features and benefits of their products, and understanding the technology are still important. But Maple Street adds a new dimension to how vendors are ranked and chosen by using relationship contracting. We call it the Performance Addendum.
The process involves working with you, the client, upfront to identify the specific results you want from the investment in the vendor’s product, and by specific we mean specific. For example, in a debit and credit card processing project, a specific result could be “reduction of fraud losses by 5 percent per year.”
Then we ask the vendors in the RFP, “How can you and your product help us get the specific results we desire and what will we have to do to accomplish them.” Now vendor selection isn’t just based on an assumption, but on the plan the vendor provides to get your results.
Key contracts, like data processing, digital banking and card processing, are long-term commitments, expensive, hard to change and complex. Having a vendor that is truly a partner means you have a better chance of achieving results in your ultracompetitive environment.
The Performance Addendum is added to the vendor contract to build a communication and feedback process – one that goes beyond “support” – into the vendor contract. Instead of “you pay x, I’ll give you y,” the vendor commits to a process of providing information and data about results and works with you if results are not achieved.
The data and information the vendor provides is used to create a scorecard, showing results achievement. If results are not achieved, the vendor commits to working with you (and Maple Street), to understand why they’re not being achieved and what can be done about it.
The vendor doesn’t promise to achieve the results (they won’t), but they agree to a process of evaluation, discovery, and commitment to the end goal.
The Performance Addendum and relationship contracting is the new approach Maple Street is taking to help our clients thrive. We’ve had some success with vendors agreeing to use this approach including Alkami, Lumin Digital, Q2, Co-op and PSCU. We believe the Performance Addendum can make our clients more competitive in this merger market.
Are you interested in learning more about Maple Street’s approach to relationship contracting? Give us a call at 800-513-6839 or email email@example.com to learn more.