Good governance should take place at an organisational as well as a relationship level.  The inputs for governance include information on SLAs – but also risk, issues and customer satisfaction.  If you want to move from a proactive reaction to SLA reports to a genuinely proactive approach to steering relationships to drive value then you need to have a consistent and clear approach to collecting this input information.  Your process should look like this….

Is this how you do it??

The collection process drives unnecessary time and effort.  If you want to accelerate the path to value from your sourcing relationships – then drive down collect effort and ramp up analysis.

Evidence is about capturing the objective truth about the quality of the relationship.  Whether it is a HR, Finance & Accounting, IT or any other shared service relationships.  The evidence typically consists of three key inputs -= performance information (whether it is KPIs, SLAs, OLAs etc.), issues and risks.  All of these together create a picture of where you are from an objective perspective.

Experience – so this is pretty intuitive – how do both parties to the relationship feel about what is being delivered?   It doesn’t matter who is right and who is wrong – knowing how people feel is key to understanding the health of the relationship and identifying areas for concern and improvement.

So what?  The learning for me last week was that success in Shared Services is dependent upon good and effective relationships.  At ServiceFrame we exist to support companies to build better business relationships. We do this by making it simple to capture information on KPIs, Risks and Issues.  We ensure that you can view the information in simple dashboards and make quick effective decisions.  Traditionally we treated customer satisfaction as just another KPI but maybe it is more than that – maybe we need to clearly articulate how evidence and experience correlate to inform the quality of relationships – so that is exactly what we are doing.  Watch this space.  Good relationships do indeed make good Shared Services.

Many organisations are now starting to ask this question.   Procurement has always had strong enablers to support purchasing but organisations are now recognizing that real VALUE can be only be measured by effective ongoing vendor management.  This involves consistent and effective tracking of KPIs in contracts and SLAs, of Sourcing Issues and of Sourcing Risks.  Clear visibility of the interaction between performance, risks and issues at vendor level gives the only reliable indication of how well vendors are delivering on their obligations – everything else is intuitive.   Systematic reporting on issues, risks and performance across all vendors also allows you to easily aggregate information to give you an accurate picture on performance across all vendors.

So – the message is simple – if you are still managing vendors using spreadsheets – stop – move to a best practice solution to manage vendors systematically based on evidence.

In vendor management there tends to be a lack of consistency in the way organisations capture information, evidence and reports that are used to analyse the performance of individual vendors and / or overall organisational sourcing performance.  In particular you may notice that it is difficult to get consistent information on performance levels on SLAs, risk profiles and issues profiles across individual and multiple vendors.  Check: Have you multiple different spreadsheets with different sets of information?

Clear visibility of SLA Performance, Risks and Issues are the ‘bread and butter’ for all organisations who take vendor management seriously.  These mature organisations seek to do two things

• Manage individual vendor relationships effectively - they do this to ensure that the service being provided by the vendor is delivered effectively and that the client organisation is getting value for money.
• Assess organisational sourcing performance - this refers to the process of understanding how well vendors are managed right across the organisation.  This type of activity seeks to ensure that there is consistent process in place to manage vendor relationships.

Both individual vendor management and group sourcing management require a consistent approach in order to drive value from vendors.  This type of analysis should address a few areas;

• At Individual Vendor Management Level
  • What is the traffic light status on each KPI in the SLA and why?
  • What is the relationship between traffic lights status and volumetrics?  is there one?
  • How does the issue profile on the relationship align to the SLA performance?  Does it?
  • What is the risk profile on the relationship?  Remember these are not just vendor risks but any risks that may impact the potential for the relationship to deliver value to the client.
  • What is the relationship score?  Do you having a scoring mechanism which allows you to factor in SLA performance and risk profile?  Sometime RAG status is not meaningful – especially where you intend to aggregate performance across vendors.
• Organisational Sourcing Performance
  • Compare the level of service delivered by different vendors?  Where you have a multivendor strategy you should be able to compare services e.g. helpdesk etc.
  • Aggregate vendor scores in certain ‘catergories’ to understand how well you are managing these relationships in general
  • Compare risk and issue profiles across all relationships to understand where there are areas of common concern – this may point to process, skills or technology gaps in your own organisation.
  • Identify vendor relationships with lowest score and prioritise actions.

Your ability to drive an effective vendor management strategy is directly influenced by the quality of data you use – do not fool yourself into thinking that intuitive or opinion based reports on vendors can compare to objective fact based reporting.  The key to sucess is driving a consistent approach to capturing the appropriate level of information, at the appropriate time on all relationships.

Traoloch Collins is CEO of ServiceFrame.  ServiceFrame is a web based innovative vendor governance tool. Visit www.serviceframe.com for more details.

SLA Dashboards and balance scorecards are a generally accepted method of getting a quick and accurate view on overall performance in a shared services team or vendor relationship.  They are relevant at a given point in time and a good tool to highlight areas of strength and areas that need improvement.  However whilst most people acknowledge the importance of measuring KPIs, the truth is that information on performance against SLAs is not as readily accessible as popular discourse might lead you to believe.  So why is this the case?

Agreeing on KPIs can be time consuming and controversial. Here are a few tips.

• Don’t set an expectation that you will measure all the right things from the beginning. If you can be flexible in your approach then a trial and error method will get you to where you need over time.    Avoid lengthy projects to ‘define KPIs’.
• Focus initially on what it is you want to measure rather than performance levels.  Very often there will be heated discussion about target service levels – often when no one has any real understanding of the baseline or current service levels.  Start measuring to see where you are and agree a checkpoint to discuss service levels.
• Ensure that you pick KPIs that are measuring outcomes that are important to your business.  Don’t measure things just because you can.
• Equally ensure that you select KPIs that you can measure.
• Focus on agreeing the process to ensure ongoing measurement of KPIs as much as the process of selecting KPIs.

Tracking performance against KPIs can be manual and time consuming;

• Ensure that there is clear agreement on how often you will report on KPIs
• Agree who will provide the input information against each KPI – will it be done manually or automatically.
• Agree a standard format for reporting on all KPIs
• Try to automate the process as much as possible
• Keep the process as simple as possible.  Very often teams will try to over-engineer the process with high levels of automation – very often this creates significant delay in implementing a reporting process rather than speeding it up.  Try an approach where you can automate KPI input over time as required.

My SLA looks green but we are not happy with performance!

• In some cases dashboards show performance as green but there is a general level of discontent with service quality.  In this case the service levels and/or the KPIs are not aligned to the business requirements.
• Ensure that you capture issues as effectively as you capture KPI performance.  A combined view of current and open issues as well as KPI performance will give you a very clear pointer to where there is misalignment between KPIs and requirements
• Have regular review meetings where service levels and issues are reviewed
• Be open to change and an ongoing process.  Your SLA is not a static document – be open to changing KPIs and service levels over time – aligning them to business requirements.
• Ensure that service levels are clearly understood – in some cases service levels may be met but clients are unhappy – this can be caused by unclear and unrealistic expectations.

Governance in Shared Services and Vendor Management is a key focus for organisation who seek to be world class.  Traditional spreadsheet management of issues and SLAs is now recognised as being too labour intensive and a barrier to effective analysis of performance over time.  Many organisations are now turning to us to deploy a simple web based solution which ensures that all sourcing risks, issues and KPIs can be managed online.  Leveraging the benefits of Software as a Service our clients get up and running in days for a small annual fee.  If you would like to move governance to a robust online environment visit our SLA Governance website or contact us.

Innovation is typically at its strongest when companies work together – sharing ideas, challenging each other and trying to understand what others have done to overcome issues and barriers. We are fortunate to have a large number of clients who are open to sharing ideas and suggestions with other companies – in the hope that they will also gain some insights in return. We all know that there are conferences and large benchmarking and research organisations who can provide good insights – but this would be an opporutnity for something a little less formal. A kind of ’starter’ if you like -just a brokered introduction with like minded individuals and an opportunity to share ideas. If you would be interested in meeting with some colleagues in a similar shared services operation to yours then please do get in touch and we’ll see what we can do!

About ServiceFrame:   ServiceFrame is an innovative governance solution for Shared Services – gathering information on performance, risks and issues.  All information is then published via an online portal.  Shared Services organisations can start using ServiceFrame for as little as €5000 per year.

Risk management and risk reporting needs to be undertaken on an ongoing basis.  The process for identifying, capturing and taking actions to mitigate risks ought to be simple, consistent and effective.  All team members should have the ability to document and action risks as soon as they identify them – with risks being stored, tracked and analysed from a central source.

Historically there have been few solutions available to Shared Services Leaders to manage performance, issues and risks in a structured and consistent way.  Manual efforts to drive consistency using e-mail and spreadsheets tend to be difficult and very labour intensive.  By using ServiceFrame Shared Services Team move to one central portal to drive all reporting on SLAs, Issues and Risks – thereby driving world class governance.  Importantly all team members can raise risks when they need to – assigning them to the relevant parties and driving the correct actions.  Managers and Team Leaders can then download risk reports and risk dashboards when they need them.

Fig. 1  Capturing Risks using ServiceFrame.

Capturing Risks using ServiceFrame

Typically the issue is that organisations enforce rigorous management at ‘engagement level’ or ‘vendor level’ for important and strategic deals.  They will have good visibility of performance and risk at the deal level but in most cases each deal will be managed differently.  These differences might be different spreadsheet formats, different meeting times and agendas, different roles in engagement meetings, different escalation procedures.  Does it matter you might ask – so long as each contract is managed?  

It does matter because each bit of variability between the way different contracts are managed makes it more and more difficult to assess how well you managing vendors at an overall level.  Specifically it makes it very difficult to aggregate information to compare performance across vendors or to get an overall picture of performance levels.  High performance organisations are interested in not just assessing how well a ‘deal’ is performing but also assessing the overall performance of the organisation to manage sourcing.

Driving a standardised approach to managing performance, risk and issues is absolutely critical to managing sourcing at organisational level.  To achieve this using spreadsheets and e-mails is impossible – people like to change and ‘tweak’ files etc. and the result is immediately obvious.  To drive world class consistent vendor management then consider a portal where all information on sourcing performance is collected and where all issues and risks can be captured in a consistent way.     Information can then be presented and reported in a format that allows meaningful analyses and comparisons.

If you would like to learn more about how to manage vendors consistently then please do check out our governance solution which can be deployed rapidly and at low cost.

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