The Vendor Relationship: Partner or Pain?
Written by Alex Jimenez
Do you have a vendor, or do you have a partner? The vendor relationship in any business is complicated, but does it have to be? Everybody wants a great vendor—one who provides value to their internal team, helps them scale and brings more than just a transaction to the table. Ask any stakeholder in any business, and they will tell you that they want a “partner.” If everyone wants this, why is it that so many organizations struggle with their vendors or swap them out more regularly than they upgrade their phones?
Before I go any further, I will acknowledge the following: there are terrible vendors across every industry in the world. Subpar work, subpar customer service, and subpar pricing are constants, unfortunately, and we have all dealt with that at one time or another in our careers. For the sake of what comes next, let’s agree that there are really bad vendors who do not deserve the work and leave it at that.
Now that we have eliminated between 25% to 35% of the potential vendor pool, why do you continue to struggle with establishing solid vendor relationships that last for years? It may be that your selection criteria and operating reality do not align with your goals. It’s that simple. Here’s what you should (re)consider about your vendor selection criteria:
Is pricing your number #1 decision criterion?
Some business needs do not require in-depth expertise or a partnership model to support them. Suppose you have a vendor for office supplies. In that case, pricing is always going to be a primary factor because the competitive nature of that market sets the value, so there is no need for a greater business strategy. If you are evaluating an IT partner, pricing is still important, but you should weigh other priorities and selection criteria before signing on the dotted line. In many cases, IT is fundamental to a business’s infrastructure, so the cheapest route is not usually the most recommended. Below are some examples of selection criteria. How you decide to prioritize is up to you, but I would recommend keeping your priority criteria to no more than three variables.
- If pricing is the top consideration, it is important to level set additional expectations. This is not to say good service should be sacrificed for low price, but it is less likely that you will receive the partner relationship if price is the deciding factor in vendor selection. Don’t buy a bicycle and expect a Bentley.
- Don’t forget to include your onboarding and training costs when estimating the cost of a new vendor. This is no different than the ramp-up period when bringing on a new employee. There is always a learning curve.
- Determine a target. For example, in 12 months we would want to deliver 30% more of X while not adding additional internal costs.
- It is extremely important to make sure your process documentation is up to par before bringing on a new vendor. If you are unable to deliver on the service consistently now with your internal team, your probability of success with the vendor will be low right out of the gate. A new vendor is a new variable. Strong accountability and responsibility structures must be in place for any chance of long-term success.
- Is your team comfortable with change and adept at managing it? If not, be cautious when expecting an innovative solution from your vendors unless you are outsourcing something entirely to them. Even so, adopting new solutions in the face of internal resistance to change will negatively impact your team. The vendor may become a source of constant friction.
You say you want a partner, but do you actually need a vendor?
When I got married, I knew my wife would have opinions and feelings that did not align entirely with mine all the time, and that is ok, as long as we have the same goals in life. Strategic business partnerships are similar. A partner should give you candid, honest feedback based on your business’s goals and their experience. Some of this may not align with what the business has done in the past, but it can still be valuable input. Do you need to implement all of it? Of course not. But, continuously asking for a partner’s input and then disregarding it will likely cause the partnership to suffer over time. Likewise, if you continually ignore your significant other’s advice, they will likely become incredibly frustrated with you over time. A partnership is a two-way street. A vendor provides widgets; a partner offers valuable insights, support, and solutions. Ask yourself if you’re open to the strategic counsel a partner offers, or if what you really need is a straightforward, transactional vendor relationship.
Are you continually replacing your vendors for the same reasons?
If you are not effectively holding your team accountable, you may not be ready for a partner. This scenario is the one that hurts the most to recognize. If you are frequently swapping out vendors for the same reasons, then maybe the problem is not them. Is your business operation mature enough to properly manage vendors? Do your staff hold themselves accountable for their work and engage vendors with proper feedback, or do they consistently blame the vendor for the business’s shortcomings? You may think it is easier to find a new vendor instead of taking a good, hard look at your team. A reliable partner can help you overcome pain, while a weak internal team adds salt to the wound. A good external partner can be an extension of your team. If you are not prepared to manage your internal team, then the external partner’s value will be minimal, and their longevity will be limited.
With the volatility of the marketplace, a good pool of partners will help you scale and succeed over the long haul. Today, more than ever, it is critical to have good partners in place. If you do not, then the first steps are making sure your organization is ready for them and knowing what you’re looking for from the relationship.