Here’s a short story about why you’ll want us to
Written by Josh Layne, VP Vendor Management & Compliance
Maple Street has negotiated vendor contracts for our credit union and community bank clients for 20 years and, for the last several, we’ve been encouraging a strategy we call “Relationship Contracting.” It’s a concept only Maple Street is using in negotiations for better vendor performance results for financial institutions – but the idea has been a part of wider business strategies for a long time.
So, what are we talking about? I think a short story about you and Awesome Inc. will help me explain.
When you partner with a new vendor, let’s say for a complex software platform, you go in with expectations. There are problems to solve and goals to meet. Targets to hit. Depending on the platform, it could be you want to increase loan volume by X percent or grow your membership or customer base by Y number of accounts annually or reduce employee resource time by Z hours weekly.
You launched a new vendor project and in the end, the vendor you deeply vetted, carefully selected and contracted with is Awesome Inc. This vendor is confident that by implementing its software platform, all of these targets are not just possible, but likely. And you agree. Awesome Inc. will…be…awesome.
High fives at happy hour!
Fast forward a few years after implementation and the shine of the platform has worn off. The Awesome Inc. platform is embedded and working fine, just not as well as expected. X, Y and Z are being measured, but the original targets and goals were not hit. X, Y and Z are still underperforming even though Awesome Inc. assured you it would. Over the last few years Awesome Inc. became (Not So) Awesome Inc.
Gripes at happy hour, change is needed.
After going back to the market, shopping a little and searching alternatives, a new vendor is looking very interesting. Better Stuff LLC is the one you want now. You reach out, learn more and Better Stuff tells you it has the BS-1000. This software is what you need. The BS-1000 will fix everything that (Not So) Awesome Inc. couldn’t do – specifically for X, Y and Z. You and your team work through a proposal, complete your vetting and contracting processes, and are ready to go and start the conversion with Better Stuff. You prep and send your termination letter to (Not So) Awesome Inc.
Out of respect, there are no happy hour high fives, instead quiet nods and soft clinks to cheers Better Stuff.
Now (Not So) Awesome Inc. wants to chat. It wants to know why you’re leaving, what it did wrong, how it could have stayed partnered with you. You want to let them down easy because you’re nice. When you eventually chat with (Not So) Awesome Inc., letting it know you moved on to Better Stuff, it asks why. You share Better Stuff understands your targets X, Y and Z and has a way to hit them – the BS-1000. No hard feelings.
Awesome Inc. gets upset and then drops a bomb…
Awesome Inc. tells you not only do you have its T-200 now, bought and paid for that you’re not using, but it also has a T-2000. The T-2000 does more, has been available for a couple of years, is at a lower price point and, as a customer, you could have been implemented on the T-2000 at a discount and have it in place right now.
Happy hour is postponed, something else came up.
To quickly sum up what we think happened:
- During the sales process, you and Awesome Inc. were clear on the targets of X, Y and Z.
- After implementation, Awesome Inc. assumed you knew how to achieve X, Y and Z.
- After implementation you assumed X, Y and Z would be covered.
- Everyone forgot about effectively implementing the Awesome Inc. T-200.
- No one really revisited and measured how to achieve X, Y and Z using the T-200.
- You measured only if X, Y and Z were improving.
- Awesome Inc. then didn’t let you know about the T-2000, meanwhile you found the BS-1000 at Better Stuff.
- Or maybe Awesome Inc. did let you know about the T-2000, but did so poorly and you didn’t understand how it would help with X, Y and Z.
We see the story of (Not So) Awesome Inc. all the time, and many relationships between vendors and financial institutions end this way, unfortunately.
Over and over, banks and credit unions buy software platforms or engage vendor services to solve specific problems and meet expected targets, only to underestimate or misunderstand the required resources, time and training needed to get the most out of the product. We also see a lot of vendors do a so-so job of explaining the requirements in the sales and contracting process, and an even worse job in the support and service phase once a platform is up and running.
When we discuss the idea of relationship contracting, it’s installing obligations in the contract to go beyond a perfunctory customer-vendor association and hope things work out. We want to encourage clients and vendors to contract and build an actual, effective relationship. You and the vendor agree to come together at prescribed timeframes a few times a year, discuss and set targets and goals. The vendor is very clear on what specific activities or best practices are required to achieve those goals, to hit the targets you agreed on. You and the vendor measure, meet and discuss how that process is performing through a scorecard, then adjust as necessary.
- The vendor has a hand in you driving the process and changes needed.
- You both have a way to measure agreed on areas with a scorecard.
- The vendor now has a stake in your specific goals.
Now Awesome Inc. clearly shows you how and when the T-200 (and later the T-2000) gets you to your agreed to X, Y and Z, and using a scorecard and periodic check-ins to track progress, you both adjust as needed to get you there.
High fives at happy hour!
Now Maple Street wants to take our own medicine. We want to put a relationship contract in place for you. We want to share recommendations and collaborate on specific targets and goals for your vendor management program with you. Once we agree on targets, we will create and manage the scorecard for us to measure progress, check-in periodically to discuss the scorecard and your program’s progress and adjust as needed. By scorecarding, we can assure we have clear targets and can help you hit your program’s goals.
Some ideas of what we can measure and add to the scorecard would be:
- Complete, update and log our Vendor Inventory by X date
- Refresh vendor management procedures
- Re-train Business Owners on Maple Street’s CADi system
- Obtain and review 100% of critical vendor due diligence information each year
- Reduce vendor expense by 25% over the next three years
We want to focus on your specific vendor management goals and manage a scorecard that reflects those. We’ll be responsible for scheduling time, facilitating the discussion and checking-in to assure we are progressing.
If you have questions or want to learn more about our scorecarding service, please contact the Client Success Management Team at Maple Street directly at CSMTeam@MapleStreetInc.com.
We look forward to getting you to X, Y and Z and high fives at happy hour.