Strategies to managing outsourcing vendors performance

Strategies for Managing Outsourcing Vendor’s Performance

Outperform!STRATEGIES FOR MANAGING OUTSOURCE VENDORS PERFORMANCE

Take a look at where we are at the

moment:

1. 55% of the Nigerianworkforce arecontingent.

2. That is about 40 millionNigerians.

Owei, D. (2010)

These 40 million people add value daily to their organisations.

1. Reduce Costs

3. Mitigate Risks4. Optimise

Operations

2. Increase Revenue

They help them to:

However, the benefits provided by

the use of contingent staff will not

be optimised if their vendors are not

effectively managed.

It is therefore imperative for organisations to begin to consider vendor performance

management as a way to extract maximum value from their outsourcing

arrangement.

Establish outsourcing objectives

Select outsourcing vendor

Establish performance measures

Measure and analyse

Take appropriate actionTa

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2

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4

5

Establish outsourcing objectives

Select outsourcing vendor

Establish performance measures

Measure and analyse

Take appropriate action

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2

3

4

5

Vendor performance management framework

Our proven 5–step strategic framework to help you manage your outsourcing vendor performance effectively is given below:

Many companies embark upon outsourcing without establishing clear objectives for what they intend to achieve. The absence of

clear objectives can create difficulties in managing the performance of outsourcing vendors.

1. Establish outsourcing objectives

• Your objectives should reflect theunderlying motives for consideringoutsourcing as an appropriate strategy

• To develop your objectives, you mustthink carefully about what you want toachieve using outsourcing

• At this point, do not try to identifyspecific tasks you want your vendor toperform instead, it should contain thebroader goals you hope to meet byworking with a vendor

1. Establish outsourcing objectives

1. Establish outsourcing objectives

Refer to the following list for examples:

1

2

3

Free up staff to perform more critical tasks

Save money by eliminating salary, benefits and overhead of fulltime in house training staff

Gain targeted expertise (e.g., access to high level, specialised talent for a specified, budget driven period of time)

2. Choose outsource vendor

Once you have clarified your objectives, examine the context in which vendors will operate, identify activities and tasks to outsource, and choose a vendor that closely matches your

organisation’s profile

2. Choose outsource vendor

To choose an outsourcing vendor, think about the kind of culture that is important to you in a vendor organisation.

2. Choose outsource vendor

In choosing an outsourcing vendor, consider the following:

1

2

3

4

Management style.

Approaches to decision making.

How information flows from vendors to clients.

Assumptions and norms about their relationship with clients.

3. Establish performance measures

1. Decide on what should be measured.Priority should be given to the most important aspect of the process

3. Performance standard should be established as a reference pointThese performance measures should be incorporated into the service level

agreement.

Performance measures should then be developed.Performance measures should be expressed in meaningful terms to be

easily understood by the vendor

2.

4. Evaluate and analyse

• This should be done in order to reduce

risk and pre-empt vendor failure to meet

requirements and performance

expectations.

• A formal mechanism to determine

whether the vendor meets the

performance levels set and whether the

objectives are being achieved should be

set up.

4. Evaluate and analyse

The use of appropriate software can help in understanding and interpreting your

findings. Some software to consider when analysing your data are:

Microsoft dynamics innervationMicrosoft Excel

5. Take appropriate action

• After the performance of your vendor has

been evaluated, necessary actions should

be taken.

• Performance measures determined prior to

and during the relationship can serve as a

benchmark for improvement.

How well do you manage your vendors?

• For free tools on managing vendor performance, visit www.workforcegroup.com

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