Managing vendors is never a fun or easy exercise. Cleaning your desk and throwing out old files can seem like a better alternative at times. Admittedly, it’s a little easier for those of you in large enterprise companies, since being in the Fortune 500 carries a certain amount of cachet and will earn you a spot on a vendor’s “NASCAR slide”. Your company size helps you earn the vendor’s “A” team players, and your potential customer lifetime value gets some attention. However, for those of you in the mid market space, your challenge becomes a little more interesting and likely requires a little more time investment.
But just because you aren’t in the Fortune 500 doesn’t mean all is lost – it just means you have to work a little harder. Here are some of the tips I have learned over the years as I have partnered with vendors while working in a variety of enterprise and middle market companies.
- Think about what type of fish you want to be. Do you want to be a little fish in a big pond, or a big fish in a little pond? If you want a lot of attention and vendor responsiveness, sometimes it pays to partner with a company where your revenue contribution would be considered relatively significant. Sometimes the smaller players try harder (as Avis used to state in their advertising slogan). There is a certain comfort when the CEO of a service provider hands you their business card with their cell phone number and says call me anytime you have an issue. And yes, I have taken them off on that offer when I needed to escalate an issue.
- If you are ok being a little fish in a big pond, don’t accept a “B” or “C” team readily. No company is made up of all superstars, and it shouldn’t be surprising that often the best resources are assigned to the clients that provide the most revenue. When resources are assigned, ask for some history of the individuals being put on your project or initiative. How long have they worked for the vendor? Only 2 months? Pass. How many projects do they have under their belt? What does their resume look like? Can you speak to a reference or two where that resource was involved in a project? I’ve learned that it often pays to be a squeaky wheel. Don’t be afraid to squeak – I promise some of your competitors probably aren’t bashful about it. Someone will end up with a “C” team – just work on making sure it isn’t you.
I have found no greater satisfaction than achieving success through honest dealing and strict adherence to the view that, for you to gain, those you deal with should gain as well. – Alan Greenspan
- Strong-arm tactics aren’t sustainable. It’s often tempting to continually drive costs down, but if you choose to be a little fish you need to balance your desire for proper attention and responsiveness against your need to get down to rock bottom prices. To a certain extent, you usually end up getting what you pay for. Try to understand that your vendor needs to make a fair margin on their goods or services. To me, the level of service you receive is often tied to the margin the vendor is receiving. Very little margin sometimes means very little extra and feeding. For mission critical projects, sometimes you need the vendor to jump at a moment’s notice. Partnerships work best when there can be a win-win proposition involved in some way.
- Relationships are always two way streets. My guess is none of us have ever shied away from telling vendors what they can do better. And we shouldn’t – after all, we are the customer. But have you ever asked a vendor what you or your company can do better in order to drive even more value from the partnership? It’s easy to put our blinders on and assume that our department is always performing well, but sometimes that isn’t the case. Sometimes vendor emails or phone calls are never returned or acted upon. Sometimes we don’t communicate as effectively as we could (or should). Sometimes we take vendors for granted. Keep in mind that relationships rarely get better on their own. If the vendor relationship is important to you, do what you can to nurture it.
Content builds relationships, relationships are built on trust. Trust drives revenue. – Andrew Davis
- The best business relationships are built upon mutual trust and respect. Open and honest communication between you and your vendor is one of the most straightforward ways to build a relationship that you can learn to depend on. None of us are perfect, so why do we sometimes want to appear perfect when we describe our environment or our challenges to our vendors? If the vendor admits to making a mistake, do you scream and rant and rave, or do you listen and work together to help avoid future mistakes? Try not to train your vendor to hide issues from you. Transparency on both sides of a relationship is part of a solid foundation on any business (or personal) relationship.
- Instead of a transactional and adversarial relationship, work towards a mutually beneficial partnership. Sometimes we only interact with a vendor a few days before we need to acquire goods or services. And often in a panic because we have to move fast fast fast. For your most strategic vendors, consider involving them in annual planning sessions where you talk about your upcoming plans for the year. Help them understand where your company is headed, and give them some time to process the information and discuss amongst themselves how they might be able to help you in the coming year.
Everything is negotiable. Whether or not the negotiation is easy is another thing. – Carrie Fisher
- Negotiate terms. And everything else that isn’t in your favor. It’s amazing to me how many vendors ask for Net 10, or Net 15. I’ve rarely seen where this isn’t negotiable. Auto renew clauses? Strike them out. Rarely does it work in your favor to have something auto renew, and vendors aren’t known for reaching out and reminding you that you have an out when your auto renew is about to kick in. Instead, have the contract state that the service becomes month to month at the end of the term so that you aren’t left in a lurch if you don’t remember to renew the contract in time. Don’t accept a boilerplate contract – it wasn’t designed to benefit you!
- Trust, but verify. We often get comfortable with trusted vendors, especially ones we have used for years and years and that have been through thick and thin with us. Sometimes we share the same wounds that were obtained during tough and challenging projects. As a result, we often assume that they are giving us a good deal after all we’ve been through together. Um, maybe. But maybe not. It never hurts to price shop a little bit and ensure you are being charged a fair price.
- Develop a vendor report card. This doesn’t have to be complex or fancy, but having concrete examples and details of items that have disappointed you speak much more clearly than a rant or negative side comment. Grade your vendor on the items that are important to you and your project, such as SLA’s, responsiveness, and such. Schedule quarterly meetings (in person is always better) to discuss the good, the bad, and the ugly. And don’t forget to mention when services are rendered as expected or even better than expected. The quarterly assessment isn’t a bashing session, it’s an honest appraisal of what went well and what didn’t, and coming up with ways to improve in the areas that are currently lacking.
As with any relationship, business relationships require time to nurture, to strengthen, and to maintain. If something isn’t working, take the time to make it better. Or try a different vendor. But do something. Work on making vendors an extension of your team. Share your objectives and challenges. Help earn their trust and respect by being transparent, being honest, and by showing them that yes, sometimes even you are human and make mistakes. It’s a tough business climate out there, and you need trusted allies by your side. Take the time to build that trust. I’m guessing you’ll be glad you did.