A Strategic Approach to Vendor Management
Successful vendor management is about more than oversight — it’s about partnership. Implement vendor management processes that promote collaboration and accountability.
Hospitals and health systems depend on a variety of vendors to streamline operations, reduce costs, and improve financial performance. But without a proactive strategy, vendor management can become a complex and resource-draining task.
Challenges in Vendor Management
Lack of Oversight and Accountability
Many organizations struggle to monitor vendor performance because they’re missing a designated internal stakeholder to support the relationship. Without this designated owner, it’s easy to miss instances of underperformance or improvement opportunities in a vendor’s owned areas.
Absence of KPIs and SLAs
Another common obstacle is an absence of key performance indicators (KPIs) and service level agreements (SLAs). Without these defined performance standards, organizations lack a reliable way to measure success. Vendors may provide vague or irregular performance reports that make it difficult to determine whether they’re truly meeting expectations.
Administrative Burden of Vendor Management
Monitoring vendor performance can be time-consuming and resource-intensive. Organizations struggle to compile the appropriate data, consistently analyze it, and validate vendor-reported metrics. Without metric validation, it can be hard to know the true impact of the vendor’s performance.
Transactional Relationships
Relationships with vendors can feel transactional on both sides. Vendors may not be aligned with the organization’s goals and communities, and decision-makers may not be aware of the value a vendor can bring. This can result in vendors not actively engaging and leadership not providing sufficient support.
Actionable Steps to Optimize Vendor Performance
1. Establish Vendor Relationship Managers
First, confirm there is a dedicated team member supporting each vendor relationship. If there is not one, appoint an internal stakeholder to serve as the relationship manager. This person will:
Act as the main point of contact for the vendor(s)
Own the relevant contract(s)
Attend regularly scheduled performance reviews
Help remove barriers for vendor(s) to achieve their goals
Foster a culture of accountability and collaboration
On a similar note, ensure your organization has an identified point of contact for each vendor relationship. Who should your relationship manager interface with on the vendor side?
2. Compile and Review Contracts
Locate your vendor contracts and organize them into one central location. Review the contracts to understand the terms of each relationship, including the outlined performance expectations. This will improve visibility and ease of access for both relationship managers and decision-makers.
3. Set Standards and Reporting Processes
Reviewing the contracts provides a starting point for identifying areas of opportunity. Let that information guide you in setting evaluation criteria where it may be missing.
Create a framework for assessing each vendors’ performance:
Implement KPIs for each vendor that are specific, measurable, and relevant to your organization’s objectives. Set goals with clear timelines.
Confirm that regular performance reviews are in place to review metrics, challenges, and observations. Consider increasing their frequency. For example, replace quarterly reviews with monthly touchpoints.
If the contracts don’t allow for accountability against KPIs and other metrics, reach out to your legal department. Understand how you can amend your contracts to include performance expectations.
4. Document Key Successes and Opportunities
Establishing measurable benchmarks and regularly tracking performance helps relationship managers identify what is and isn’t working. Use these insights to identify strengths, spot weak points, and inform decision-making. Communicate transparently with vendors about gaps in performance (as well as the wins).
5. Foster a Partnership Mentality
Strong vendor relationships are founded on open communication, active engagement, and alignment in values. Take steps to build a true partnership:
Confirm internal stakeholders understand where vendors fit in with the overall strategic vision.
Hold internal teams accountable to actively supporting vendor success.
Invite vendors to provide honest feedback about the relationship.
Understand how the vendors provide financial benefit, community benefit, or community differentiation. Personalize the relationship accordingly based on these goals.
Don’t simply manage vendors — collaborate with them. Value their expertise and the new ideas they may bring to the table.
Manage Vendors With Strategic Support and Guidance
Implementing guardrails to manage and support your vendors can help confirm each vendor relationship adds measurable value.
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