At Maple Street we have been advocates for doing vendor management differently for 20 years. We have told our clients to chuck the check list and focus on management where vendors actually perform and deliver results.
But to get to true vendor management, you and your institution must first create a cultural foundation where vendor management can flourish. If your institution treats vendor management as a compliance exercise, the process is flowing from the bottom up with employees collecting data and leadership playing a small or non-existent role. Very little value is placed on that work.
Instead, successful vendor management depends on creating a value-focused discipline that starts from the top down, making oversight an institution-wide priority where everyone participates and knows what is expected of them. In other words, vendor management becomes ingrained in your organization’s culture and has a high value.
Culture Change Begins with Top Down Commitment
Vendor management starts with a commitment from executive leadership that makes it clear they not only talk the talk but walk the walk. Leaders should participate in vendor assessments, monitoring, planning, negotiating, and measuring to underscore the strategic importance of vendor relationships. They need to allocate enough staff and funding for the program.
Once leadership has aligned itself with the changes required, it can begin to roll out the new vendor program starting with introducing a policy that is clearly defined, risk-based and delineates roles and responsibilities. All employees must understand that they are a critical link between vendor performance and customer satisfaction.
A culture shift like this doesn’t happen overnight. It requires ongoing training plus examples set by leadership. When change happens from the top down, employees’ perception of vendor management changes from an external mandate to an internal competitive advantage everyone takes part in.
Guardrails vs. Mandates
The less employees know about what is expected of them, the greater the chance that they will be uncomfortable and even confused in their roles. As previously stated, leaders must define and clearly communicate program prerequisites from the branch to the boardroom, with full buy-in. Guidelines should be just that—rules that provide guidance and guardrails without being too rigid or restrictive. This means defining required responsibilities while giving employees the flexibility to act based on vendor risk, contract specifics, and other factors.
Management must change its thinking as well and commit resources to procedures that evolve, rather than manuals engraved in stone. To make sure policies and procedures remain relevant, regular reviews will be needed.
Set Well-Defined Roles & Responsibilities
The most important reason for assigning roles among employees is that it creates a clear system of accountability. Accountability creates communication, a quicker resolution to issues that arise and cohesive vendor lifecycle management.
One of the most important roles you will designate is that of vendor owners who will serve as internal relationship managers of each vendor. The actions of these individuals are crucial to the success of your overall program, so choose them as carefully as you would your vendors. Vendor owners are your liaisons between end users, procurement teams, IT, risk functions, and external partners. They connect the dots across your institution. Here are some questions to ask yourself when assigning vendor management roles:
- What departments or teams should have input on vendor owner selection? How will you get their buy-in?
- What qualities or skills make someone an effective vendor owner?
- Which vendors or service categories should have dedicated relationship managers? Which can be grouped?
- Who in your organization shows potential to thrive in the vendor owner role? What makes them a good fit?
- How will you clearly define and communicate vendor owner responsibilities across the institution?
- What training or resources do vendor owners need to excel in the role?
By creating a cultural framework that is supported from the top down, you will be on your way to developing a vendor management program that changes vendors from liabilities to assets.
With a holistic, comprehensive approach to vendor management, credit unions and community banks can reduce expenses, increase ROI, minimize risk and gain the tools they need to succeed.
Have questions? We can help answer them. Give us a call at 800-513-6839 or email mssales@maplestreetinc.com.