Vendor Management: Quarterly Review Methodology

Performance management is a fundamental aspect of managerial effectiveness. Establishing clear goals with your boss, peers, and employees is essential. With vendors, you have contractual service level agreements.

At certain points in the year, good managers check-in with their team members to provide feedback on progress to goals. At the end of the year, employees get final reviews – complete with bonuses and merit increases. With vendors, you have the quarterly review – one of the most important tools in a successful vendor manager’s tool belt.

In this article, we review the essential aspects of quarterly reviews.

There are six key elements to successful vendor manager quarterly reviews.

Planned and Prepared with a Firm Agenda – A quarterly review is not the typical meeting. It is a formal review of prior performance and improvement opportunities. As such, planning is essential. Service level performance metrics must be collected, distributed, and reviewed in advance of the meeting by all participants. In fact, participants should be prepared to address all items that could result from review of performance metrics – this is a very data intensive process at times. As such, it is important to establish a firm agenda that allows different participants to join for their key sections. With that said, we encourage open meetings so that vendor managers from one area can listen to challenges and successes of other areas.

Participants with Clear Meeting Roles – Broad participation should be encouraged as the purpose of quarterly reviews is clearly to celebrate successes, resolve performance issues, and challenge current practices. Senior executives, day-to-day vendor managers, and support teams (e.g., training, quality, and operations management teams) should view quarterly reviews as opportunities to review the outsourced business’ operations performance – something that occurs with increasing rarity after a business process is outsourced. Given the wide participation, establishing roles are key to good meeting management. Day-to-day vendor management leaders should lead the discussion regarding individual functions’ performance in an interactive manner with the vendor, but senior vice presidents and vice presidents should be invited to chime in to place emphasis. The difference is that the presence of executives is part of ensuring vendors understand the importance of performance. The vendor should have similar representation.

Service Level Review with a Root Cause Analysis and Improvement Plan(s) – The key aspect of quarterly reviews is discussion regarding service level agreement performance. A typical program will have between four and seven service level agreements and each should have three data points (remember: quarterly service level agreements are not effective). In addition, a variety of additional supporting data should be reviewed, including forecast accuracy, scheduling accuracy and adherence, and training progress. If any service level is not achieved, a root cause analysis should be completed by both parties – even if the root cause is your own company’s doing! It is important to identify root causes using standard processes, but it is even more important to monitor progress against improvement plans. Time and time again, we see RCAs sitting on shelves collecting dust while performance issues remain unchanged. The quarterly review should look back at each of the RCAs to check progress.

Satisfaction Survey Results – A key aspect of vendor management is providing empirical feedback. While most aspects of a business process can be measured, less tangible relationship issues are more difficult to track. These are the parts of a relationship that often breakdown in outsourcing. Examples include providing feedback on vendor problem resolution, identifying whether a suitable ROI has been achieved and maintained (tracking changes against baseline data), or the relationships’ flexibility to meet changing demands on both parties. We’re drafting an article to delve into this topic much deeper, but we stress that effective vendor managers should survey internal stakeholders and the vendor regarding their level of satisfaction with different aspects of the relationship. The results should be openly shared and used to create discussion. The key is to ensure the survey is very focused, short, and usable while facilitating the discussion without adversarial undertones (or overtones!). We’ll have more information on the topic soon.

Guidance for the Future – One great feature of quarterly reviews is the opportunities for each company to provide the other guidance for the next three to six months. This may include transaction volumes, organizational changes, system changes, or corporate initiatives that could impact the other company (e.g., SOX audits, green initiatives, etc.). Effective vendor management executives use this opportunity to align strategic relationships and to seek opportunities to help each other.

Offline Communication Channel – Large audiences can sometimes interfere with certain communication. For example, maintaining a careful eye on your vendors’ financial health and discussing upcoming organizational changes in both your and their organization are sensitive topics. Effective vendor management executives ensure that sensitive communications have an appropriate channel. We suggest that executives have preparatory meetings before quarterly reviews to cover sensitive topics.

Finally, it is very important to differentiate quarterly reviews different than monthly reviews. Monthly reviews are venues for day-to-day action with hands-on team members. A successful quarterly review meeting elevates the discussion and holds parties accountable for performance. We encourage vendor managers to not substitute monthly close discussions for quarterly reviews: a year should consist of twelve monthly close meetings, three quarterly review meetings, and an annual contractual review (which we will be discussing in more detail in a future article).

How do you structure your quarterly reviews? Do you have questions? Let us know by commenting below or contacting us.

Update: Brad at Strategic Outsourcing Professionals just wrote an article on quarterly reviews that further expands on the subject.


Related posts:

  1. Vendor Managers Can Satisfy Internal Stakeholders
  2. Another Tale from “When You Don’t Have Vendor Management Governance”
  3. Offshore Outsourcing Management – What’s the Problem?
  4. Paying Outsourcing Vendors
  5. In the Absence of Outsoucing Governance or Vendor Management


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  1. [...] like to read a similar article on managing a QBR, you can check out a site I like to frequent – 360VendorManagement.  This author needs to remain anonymous, but he is a tenured professional and I respect his ideas [...]

  2. [...] performance should be part of quarterly reviews (our suggestions for quarterly review are found here).  Remember: just because a company is private does not mean it cannot share financial results [...]

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