The Three M’s of Vendor Management

Measuring, Monitoring, and Managing to High Performance

By: Execs In The Know

Organizations choose to outsource CX operations for many reasons — cost, scalability, expertise, business continuity, and global coverage, to name a few. Choosing the right partner is often a daunting challenge because organizations are entrusting that entity with its most precious asset — its customers. Outsourced partners become an extension of the organization, so it is a huge decision and responsibility. When organizations go down the path of choosing outsourced partners, they typically spend significant time and resources in the search, procurement, contracting, and onboarding of that partner. But that is just the first step — Vendor Management Organizations (VMO) and roles are there to ensure there is alignment between the organizations, with the customer front and center. What happens after a partner is onboarded is critical — effective processes and management structure must be established to ensure customers continue to receive the service that client organizations expect to be delivered.

In “normal” times, vendor management is important, but given the events over the last 18 months, it becomes even more crucial. Execs In The Know, in partnership with COPC Inc., uncovered some interesting data in its 2020 Corporate Edition of the Customer Experience Management Benchmark (CXMB) Series. As seen in Figure 1 (next page), over 50% of respondents said that the COVID-19 pandemic negatively impacted their outsourcers’ ability to meet strategic goals. And only 21% were very satisfied with outsourcer’s performance.

While on the surface it might be convenient to place responsibility squarely on outsourcers, organizations and VMOs are also accountable. They should look inward to determine how they can better support, manage, and partner with their outsourced partners to achieve desired performance levels.

So, this article will break down the Three M’s of effective vendor management:

1. MEASURING PERFORMANCE

Measuring performance seems obvious because as they say, “you can’t manage what you don’t measure.” So, the first step in driving high performance among your vendors is measuring it. There is typically no shortage of metrics being measured for outsourcers, but there are some keys to doing it right to achieve results.

Establish Outcome-Based Metrics vs Activity Metrics – Focus on the desired outcome versus specific activities. What is meant by an “activity metric?” For example, creating a metric for how many quality evaluations outsourcers should be doing is an activity metric. Instead, the outcome that is likely desired is high Issue Resolution and Customer Satisfaction. If outsourcers are focused on “activities” versus outcomes, performance will often not improve as it becomes about “checking the boxes” of said activities. Focusing on outcome-based metrics will not only simplify the metrics but will put the responsibility on the outsourcer to determine HOW they will achieve them.

Don’t Sabotage Performance – Ensure you don’t have metrics or expectations that potentially sabotage (or conflict with) another. For example, if Average Handle Time is disproportionately prioritized by vendor managers, be aware of the domino effect it could have on quality or customer experience if it is perceived that is most important. Additionally, having a handle time target that is not realistic based on the actual time required to resolve issues effectively, it will drive adverse behavior. Efficiency should be measured, but there should be a balance and appropriate targets established.

Create a Balanced Set of Metrics with Clear Targets – Continuing the thought from the previous section, it is all about balance. While customer experience is always a focus, so too is efficiency, quality, service, and cost. In the past, many believed it difficult to meet customer experience targets while also minimizing costs. That has proven to be untrue over the years and should be reflected in metrics. Targets also need to be clearly understood by all parties, including how they are calculated and their source. And most importantly, ensure targets are established based on sound logic, often from the customer’s perspective. For example, data should be analyzed to determine what customers expect and at what point a decline in performance will negatively impact the experience. This applies to handle time, service level, and abandonment rate just to name a few. In short, outsourced partners and all involved must understand the “why” and “how” of each metric.

2. MONITORING PERFORMANCE

Measuring performance is just one piece of the puzzle. Once the right measurements are in place, implementing a consistent and structured approach to monitoring performance is the next critical step. For VMOs to effectively monitor and assess performance, the following are key elements:

Ensure Data is Accessible and Consistent – First, data must be readily accessible, consistent, and accurate. If data being measured and monitored lacks integrity, partners lose trust in it, leading to conversations about the accuracy of the data versus how to improve performance. Create a user-friendly dashboard or repository that is relevant to those monitoring and measuring performance. There should be no “surprises” at the end of a reporting period or discrepancies in data.

Establish and Conduct Consistent Business Reviews – Monitoring performance goes beyond reviewing data and metrics. VMOs need to treat outsourced partners as just that — partners. So, a structured approach for reviewing performance on an ongoing basis should be established. There may be different levels of reviews, but they should be clearly outlined with expectations understood by all parties. For example:

Daily operational reviews with workforce management personnel to assess staffing or volume challenges.
Weekly business reviews to assess month-to-date performance of key metrics, action plan progress, and adjustments that need to be made.
Monthly business reviews to review key metric performance, month-over-month trends, and action plans based on performance for the
following month.
Quarterly business reviews to assess overall results for the quarter, lessons learned, and any key strategic decisions or adjustments to be made.

It should be noted that while the VMO should establish the structure, outsourced partners should be compiling the data and driving these discussions.

Implement Effective and Holistic Quality Monitoring Process – When one hears the term “monitoring”, the immediate thought is typically “quality monitoring.” That is indeed a critical process to monitoring performance. The mistake that many organizations make is implementing a quality process required by their outsourced partners to follow that does not actually drive performance or provide valuable insights. So, organizations and VMOs must create quality processes that allow for monitoring AND insights at all levels. One size does not fit all, but generally there should be two distinct approaches to quality monitoring:

Agent level – Team leaders and supervisors should be responsible for monitoring the performance of their agents and teams. As discussed previously, this does not mean requiring vendors to monitor a certain number of evaluations per agent. It means creating quality forms to be used by Team Leaders, ensuring they are calibrated and trained to score correctly, and most importantly that they use these results appropriately in coaching and developing agents.
Business level – Monitoring at the business level means evaluating a random sample of transactions at the overall program or site level to get a clear and accurate picture of overall performance. Best practice is for organizations and VMOs to create centralized quality teams
that are conducting these evaluations, so it is completely unbiased. These results capture not only agent behavior but also issues outside the agent’s control, such as policies, processes,
or technology issues.

Most importantly is to ensure quality forms being used at either the agent or business level are focused on the items most critical from the customer, business, and compliance perspective. Keep it focused on truly critical attributes versus the “nice to haves” that will not have a significant impact on performance. Refer to this article for more detail about effective quality monitoring programs.

3. MANAGING PERFORMANCE

The last, but most important piece of the puzzle, is effectively managing performance as well as the relationship. The latter is even more important with the new “normal” the industry is experiencing. Organizations were forced to heavily rely on outsourced partners at the beginning of the pandemic for business continuity planning and the shift to Work-From-Home changed the entire management landscape for everyone. There are many critical factors to managing partners’ performance, but the most
critical, especially now, are:

Require and Drive a Structured Performance Improvement Process – As previously mentioned, consistent and structured business reviews are essential to monitoring performance. However, those reviews are only productive if a structured process is strictly followed for improving overall performance. This involves discipline in uncovering root cause for any performance issue and creating action plans which directly impact root cause. And finally, a closed loop process must be followed to manage those action plans to completion and adjusting when not effective. Most importantly, the VMO must hold the partner accountable, as well as their own organization.

Prioritize Collaboration and Respect – When asked what has changed the most about working with outsourced partners, many leaders have emphasized the critical importance of treating these relationships as true partnerships. Organizations and VMOs must recognize that their partners are experiencing many of the same challenges they are, so working together to solve problems is critical. With regards to costs, it is inevitable that cost structures may change and although more staff are working from home, that does not necessarily reduce costs for outsourcers. So, being sensitive to these challenges and creating an environment of mutual trust and respect will go a long way to managing these relationships and ultimately performance.

Create Robust Virtual Management Capabilities – Conducting site visits quarterly or semi-annually have long been a standard operating procedure in managing outsourced partners. COVID-19 has prevented these visits but that does not diminish the importance of these “visits.” The most successful organizations have created a standardized, virtual approach to these visits. While not the same, the spirit is indeed the same. Vendor managers and leaders continue to spend time remotely observing agents, meeting with operational leaders, and assessing each key process such as Workforce Management and Quality.

Additionally, considering the increase in Work-From-Home (WFH) staff, virtual training and coaching processes must be formalized since WFH is not a temporary situation.

As seen in Figure 2, which is a chart from the 2020 CXMB Series Corporate Edition report, over 50% of those surveyed have outsourced employees working from home, a significant increase following the pandemic.

In Figure 3 to the right, over 60% say they will not revert to “pre-pandemic” staffing models.

This means that organizations and VMOs need to work with their partners to ensure training material and delivery meets the needs of remote workers. Furthermore, outsourced partners need to ensure they have structured approaches in place for virtually monitoring and coaching agents.

Summary

Outsourced partners are critical to many organizations’ success. As such, effective vendor management is more important than ever. Now is a good time to take a step back and assess how VMOs are structured and if the the M’s reviewed in this article are producing desired results. Measuring, monitoring, and managing performance sounds straightforward, and in many respects it is … but as the industry continues to change and adapt, so too should VMOs in each of these
key areas.

Sources:

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