Vendor Scorecards

Over the years, we’ve all seen a great many management fads come and go. You may recall the One Minute Manager, Management by Wandering Around, Total Quality Management and Management by Objectives. All of these techniques had their strengths, but most had a common flaw: they were based in part or whole on subjective information. To really manage a process, you need objective data. That’s one of the reasons that today we’re seeing more people using vendor scorecards as a key component of their vendor management process.

Tools like vendor scorecards are being used to help managers decide how long business can be sent to any individual vendor. In businesses like ours, financial services, vendor problems of any kind come back to haunt the lender or servicer. Compliance problems in particular can be very costly. We must measure our relationships very objectively. This is one reason we discount the salesperson’s opinions on vendor ratings of any kinds. We know they win business based on the relationships they build, but those relationships are not measured objectively.

By establishing a vendor scorecard for each relationship, agreeing on the metrics that will be tracked and the performance standards expected and established in the Service Level Agreement, the vendor scorecard becomes a shared record that allows anyone looking at the relationship to assess it on a very objective level.

We use scorecards to manage the vendors we work with in our business, but we are also the subject of scorecards required by the customers we serve. This has put us in a position to help our vendors aid in the management of our relationship, even as we work hard to manage the relationships we have with our clients.

It can be challenging to set up an organization to capture and report on performance in an honest, objective fashion, but given the fact that your customers are doing so in regard to your performance makes it a competitive mandate that you do the same.

While these tools make it easier to collect and evaluate objective data, that’s not to say that other kinds of information won’t find there way onto the scorecard. It’s totally acceptable to score a vendor on how easy they are to work with. Sure, this is a subjective measure that is subject to the strength or weakness of the relationship that vendor shares with the operational folks within our own firm, but we trust those people to give us an honest view into how they feel about working with a certain vendor.