Deciding to establish new vendor relationships is risky, and even the most thorough vendor selection process doesn’t mitigate all risks.
One must consider…
•Execution risk – The chance a vendor does not perform
•Financial risk – The possibility that return on investment (ROI), for whatever reason, will be less than expected or required
•Professional risk – The chance the decision maker’s judgment will be questioned in the future and affect him or her negatively
My premise is that a strong client-vendor relationship built on mutual trust will reduce business risk. Conversely, relationships not built on trust are inherently more risky to business leaders and their companies. Managers are responsible for minimizing business risk and maximizing business reward. Consequently, paying attention to the nature and quality of client-vendor relationships must be a priority.
Six Ideas to Reduce Risk Exposure and Embolden Mutual Trust
1. Corporate values start at the top
It’s always a good idea to build relationships with a vendor’s senior management. No matter how small your business is in relationship to the vendor, you should be able to reach a senior manager (general manager, vice president, C-level executive). Why is this important?
Corporate values start at the top. Interaction with senior management can affirm the decision to partner and instill greater confidence. If the conversation leaves you questioning the vendor’s values, abilities or priorities, you have the opportunity to reevaluate the selection decision…before doing so becomes difficult and more costly.
Confidence in the decision to select a new vendor is engendered by a comfort level with the vendor’s account relationship team and key staff involved in the project or program.
2. Trust doesn’t replace good contracts, service level agreements and communication
Before entering a relationship, make sure what will be delivered and when are well-documented and understood. Service level agreements are often under-documented, lacking detail and not understood by all parties. Particularly in a new relationship, it’s critical that expectations are well-understood through project requirements.
Equally important is monitoring progress against requirements and agreed-upon service levels. Good contracts and service level agreements form the basis for trust, which progress can be measured against.
3. “Trust, but verify”
President Reagan popularized the phrase, “Trust, but verify.” The new vendor should communicate regularly throughout the project or program. While it’s important to trust the vendor, verify what you’re being told by asking others…
•Ask the vendor’s account relationship team
•Ask the vendor’s on-site resources
•Place a call to the vendor’s management
Raise concern if you identify inconsistencies. Sometimes vendor communication among its own staff has gaps. The project benefits from being proactive in this way.
4. Trust is built over time through shared experience
Keep in mind it’s OK to ease into a trusting relationship. Like any relationship, trust is built as client and vendor work together over time. Trust is built when the parties experience challenges and work through them, collaboratively. Trust is built when the vendor meets its commitments. The best perspective is to view the project or program as a journey through which trust grows and evolves.
5. Don’t forget that trust is a two-way street
Don’t expect to build a trusting relationship with a vendor unless you are trusted also. While the vendors interests are subordinate to the client, from the client’s perspective, clients must endeavor fulfill commitments to the vendor. Small things such as timely feedback, clear communication, and collaborating on project/program challenges make a big difference toward keeping the vendor’s support and building a productive relationship.
6. Broken trust is a difficult fence to mend
Along the way, evaluate your level of trust with the vendor. Like a marriage, successful client-vendor relationships are based on mutual trust. If trust in the vendor falters, it’s difficult to rebuild. If distrust arises, consider requesting a staff change, or even account or project management changes. Changing vendors is always an option.
Broken trust is a difficult fence to mend. Often changing vendors is less costly in the long run. It offers the chance to build a new trust-based relationship without the baggage of the past hanging overhead.
Follow these steps to reduce your company’s risk and create shareholder value, two key objectives for all business managers.
What ideas do you have? Do you have some examples where these concepts apply or situations where they wouldn’t?