A funny story told to us by an employee of a major US company (which we’ll call XYZ) with thousands of outsourced call center seats (domestic and international):
XYZ has two call center programs. One is a major inbound customer service program and the other is a small (about 45 agents) complex inbound/outbound marketing programs that focus on driving customer loyalty and create a significant revenue lift.
XYZ’s marketing and customer service organizations feud regularly about vendor management. Customer service insists on “owning” the vendor relationships and requires the marketing organization to liaise with the vendors through customer service’s vendor management team, which was insufficiently staffed and generally lacks vendor management experience. This inadequacy led the marketing team to circumvent the customer service vendor management team and they began to manage the vendors directly. The vendor management team became irate and the resulting seething rift between the two organizations was/is palpable.
Then came Christmas, the busiest 60 days of the year for XYZ. The customer service vendor management team made a significant forecasting error and found themselves delivering a 3% service level over several weeks. Yes, that meant that they answered 3% of calls in 45 seconds, which is terrible. XYZ is a major company. This was a nightmare.
Meanwhile, the marketing program was hitting on all cylinders. It was creating a record ROI and the vendor and the vendor agents were ecstatic. Attrition was a minuscule 10% annually.
This is when things got personal. Jealous by the success of the marketing program, the customer service team ordered the vendor to immediately put all of the marketing program’s’ agents in the customer service queues. They didn’t notify the marketing program.
We should point out for those less knowledgeable on the subject that a program that has thousands of seats is not going to create a meaningful lift in service level by adding a mere 45 agents. This decision was almost entirely political, and was also poorly calculated.
In this case, XYZ sacrificed a successful marketing program and gained nothing, as all but 9 of the agents left within two weeks of joining the customer service queues. Furthermore, XYZ squandered the returns they were creating in the marketing program - about $1M.
Funnier yet, the marketing program didn’t notice that their program had stopped until one week later…their success had less to do with their own vendor management capabilities than the vendor’s awesome execution. Dumb luck?
Can’t we all get along?
Before outsourcing, internal operations teams usually spend significant effort appeasing senior management by explaining every reason why deviations from performance were outside their control.
Marketing launched a new campaign. IT’s servers were slow. The telecommunication vendor’s T1 was hit by a backhoe. The competitor launched a misleading campaign. The weather shutdown deliveries in Chicago.
Well, have you noticed the change in tone after the call center or backoffice team was outsourced?
Customers don’t like foreign accents. The vendor cannot manage attrition. Prices are more expensive than they are [insert nearby city]. Quality is bad. The contract is the problem.
In a classic Dr. Jekyll/Mr. Hyde transformation, internal stakeholders apparently have no qualms with scorching the earth with “it’s the vendor’s fault” or “outsourcing was a bad idea” type comments. Frankly, its disingenuous and doesn’t contribute to the success that is so necessary for today’s competitive environment.
Believe it or not, vendor managers can satisfy internal stakeholders. They can create a productive, opportunity-seeking environment. Use best practices to paint accurate, compelling pictures of your vendor-managed operations.
Here’s how.
Read the rest of this entry »
Earlier this week we posted an article describing vendor management job descriptions. Yesterday day, Tim Minaham’s article on the Supply Management Talent Crunch led us to reflect on the “talent crunch” also facing vendor management. Let’s face it - good vendor managers are hard to find. Why?
- The positions require deep operations experience.
- The positions require great relationship-building and alignment-building skills.
- Most vendor manager positions are individual contributor roles, even though they manage operations of hundreds or thousands of FTEs.
- Vendor management positions are typically paid less than their peers managing similar internal operations.
- Vendor management positions require great focus on details: metrics, processes, and contracts.
- Vendor managers must be big picture thinkers with moderate strategic thinking skills.
- Vendor managers rarely have clear career paths.
Sounds like a tough job, right? It is.
That’s why most vendor managers lack all the skills necessary to perform their jobs exceptionally well. More importantly, there are few training courses available to them. Organizations like IAOP sometimes appear to be more focused on developing vendor and advisor sales channels than developing the skills of vendor managers. The COPC offers good courses, but they aren’t hands-on. Companies like ICN offer negotiation, selection, and contract courses, but they are tuned for IT procurement/vendor management teams. All these organizations lack training in the operations or technology that vendors managers typically manage.
Simply put, vendor managers must be developed by building performance management processes that guide activities and gradually increasing the responsibility of vendor managers. Standardized vendor management processes result in regular, predictable performance. Increasing responsibilities of vendor managers allows vendor managers to build experience with more complex issues - experience that vendor managers can leverage with delving into root cause analyses, relationship development, and negotiations.
If you lack an experienced vendor manager to develop our processes and resources, it is usually better to hire an external resource or hire an advisory firm tasked with developing vendor management processes, templates, and stakeholders. Forward thinking executives hire these resources before or during vendor selection, which gives them a leader for transition management and the time to develop the necessary processes in advance of implementation.
Do you have a methodology for hiring or developing vendor managers? Share our thoughts!
The valley of despair in an outsourcing relationship is when vendor managers consult with their legal counsels. Disputes that go “contractual” (the vendor management version of “nuclear”) can irreparably damage a relationship. Your job as a vendor manager or vendor account manager is to ensure the client-vendor relationship never sours. However, what do you do when it does?
Today, we take a deeper look at dispute resolution.
Read the rest of this entry »
Job descriptions are difficult enough to write when roles are clearly defined. The ambiguity of vendor management organizations and the fuzzy lines that separate them from procurement, finance, project management, business analysis, and operations organizations make vendor management job descriptions many times more difficult to write. The importance of attracting and selecting the right talent to manage major outsourcing or service vendors is essential for the well-being of a company.
This article covers the details of vendor management job descriptions.
Read the rest of this entry »
Operations teams have historically organized themselves very effectively around their core operations centers. Dedicated training, quality, reporting, and operations professionals were located very closely to the daily riotous call center and back office operations. With little argument, close proximity ensured clear lines of communication, close collaboration, and the ability to quickly bring the right talent to daily operations issues.
As Phil mentions in his article on globalization, your focus as a vendor manager or outsourcing executive is on the global labor market. Now that your operations are located in India, Jamaica, Central America, or the Philippines, effectively managing operations from North America or Europe is far greater challenge. Your domestic teams are asleep during the action, or they are separated by thousands of miles and significant cultural differences. In addition, reading real-time or daily reports does not give you the same information that a walk through a call center floor does, where you can see opportunities to improve efficiency and keep the peace among agents. It’s simply more difficult to manage operations from a distance. If you have not considered an alternative management model, maybe you should. In this article, we will address some of those opportunities.
Read the rest of this entry »
Outsourcing vendor management is not any easy discipline to learn. In fact, as compared to project management, vendor management is terribly difficult to understand and learn. Immature certifying bodies, generally limited outsourcing experience, dissimilar outsourced operations, internal personalities, and the social politics of outsourcing all create an environment ripe for limited vendor management standardization. What should you expect when you are climbing the steep learning curve?
Read the rest of this entry »
There are as many different organizational designs as there are flavors of ice cream. We couldn’t dream on commenting on every imaginable formation of vendor management organizations, but today we’ll attempt to describe the major types.Before we get started, let’s ground ourselves in some common definitions:
- Vendors - The companies who perform outsourcing services
- The Business - The internal organization which ultimately responsible for business outcomes created by the vendors
- Vendor Management Organization (VMO) - A dedicated internal team assigned to managing vendors
- Vendor Managers - The internal resources that are assigned to managing outsourcing vendors
In-Line Model - Frequently, Vendor Managers are imbedded in The Business. The results are clearly controllable outcomes for The Business and Vendors who clearly understand who their stakeholders are. However, this type of organizational model definitely has shortcomings.
- In particular, in large organizations where few Vendors are shared across business units, it becomes difficult for internal business units to coordinate activities and perspectives.
- If the Vendor fails to meet one group’s Service Level Agreements (SLAs), the Vendor often has little accountability to the other business unit, regardless of program sizes.
- Internal organizations also have difficulty sharing and enforcing the use of vendor management best practices. The disconnects are so great that sometimes different business units will establish independent contracts.
- Vendor Managers do not have clear career tracks, and are often left to managing Vendors and therefore not given promotion opportunities typically left for employees with deep internal operations management experience.
- To the Vendors, multiple stakeholders raise the cost of supporting The Business - and the cost savings are left on the table.
In-Line VMO - With increasing frequency, organizations are realizing the shortcomings of approaching Vendors differently. To ensure best practices are leveraged, Vendor Managers within a single business unit are consolidated into a single VMO reporting to The Business. The Business therefore develops shared best practices, improves Vendor relationships, and improves the operating efficiencies of the Vendor while maintaining control and creating career development opportunities for Vendor Managers. However, The Business still fails to achieve synergies that could be gained from leveraging Vendors in other business units and little coordination between the teams develops. In fact, we’ve seen more BPO vs. ITO organizations developing than ever before.VMO Governance Teams - Large companies that are removing intra-departmental silos through re-organizations or that are seeking greater savings opportunities/better vendor management controls are building small corporate VMO governance teams that assist In-Line VMOs with information sharing. Corporate VMO’s accelerate vendor management best practices and can serve as corporate level governance, depending on the amount of decision-making control granted to them. It’s exactly this decision-making control that creates conflict among In-Line VMOs and different business units. While the corporation as a whole benefits from lower vendor costs, improved decision-making, and better controls in contracts and vendor performance visibility, the different business units begin to lose decision-making authority. Operations management teams who typically hold traditional viewpoints on keeping decision-making power close to operations leaders are left in an uncomfortable situation where outcomes are decided by corporate employees with different incentives - and The Business will often express this quite vocally, creating an internal power struggle that erodes the ability of best practices to take hold! In addition, in the business environment where CFOs believe less is more, Corporate VMO Governance teams have a business value that is hard to quantify.Centralized Corporate VMOs - Some organizations are consolidating all In-Line and Corporate Governance VMOs into a single Corporate VMO. These teams are held responsible for creating outcomes for their respective internal business unit stakeholders and are better able to leverage vendor relationships by focusing on fewer relationships. The results are more uniformity in vendor results, lower costs, and deeper vendor relationships. In addition, with the growing complexity of outsourcing contracting, Centralized Corporate VMOs are better able to leverage high-end skills and develop new skills. The challenges with this model are clear: The Business Unit is left out of the picture (a point it will make clear whenever results are below expectations) and improperly managed VMOs create massive failures. Centralized VMOs are also challenged with budgets and business unit chargebacks - especially where vendor fees are intermingled across different business units (e.g., call center and mailroom environments). The other challenge is aligning internally managed operations with VMO managed operations.What model is best? We don’t believe any single model is best. However, we would recommend that business leaders employ an organizational model that best fits the immediate strategic needs. If you’re failing to achieve synergies among the widely distributed supply base or achieving common results, centrally governing or managing vendors is a good idea. If you’re facing a business environment where local differentiation is essential, give your business units high degrees of autonomy by placing VMO teams close to the day-to-day operations leadership. If you’re looking for a compromise, the VMO Governance model is a great way to facilitate best practices and place controls on certain aspects of vendor management (e.g., contracting, IT support, and vendor selection).Do you have a perspective you’d like to share? Share your ideas in a comment below!
