Effectively Managing Vendors for Outsourcing: Scorecarding and Double-Sided Scorecarding – A Best Practices Approach

Many organizations use balanced scorecards to monitor and manage performance.

As a best practice I will discuss:

  • Applying the balanced scorecard approach,
  • Developing partnerships and use of “double-sided” scorecards,
  • Partnering ‘continuum’: contract, performance management, monitoring and control and continuous improvement,
  • Guiding principles, practicalities and parameters.

I like the rigour in collaboratively developing the criteria, assigning measurements, applying a rating scheme, performing the evaluation and having that discussion about current results and future directions that the scorecard affords.  This collaboration can result in a true partnership with your suppliers.

Have you ever heard of ‘double-sided’ scorecarding?  No, this does not mean printing a scorecard on both sides of the page!  I learned this while facilitating a senior executive roundtable on ‘IT Outsourcing’.   One executive used it as a metaphor for ‘dialogue and partnership with your suppliers’.  He said many times they experienced a drop in service level or failure to meet established metrics; it was their fault not the supplier’s.  It is important then to look at both sides of the scorecard!  This ‘joint’ or ‘partnered’ approach ensures that measurement and indeed improvement occurs.

Monitoring and control can be exercised using the scorecard. Other forms of measurement include regular reporting or periodic audits to ensure everything is on track.  There is always change happening, both internal and external so that refinements and ‘benchmarking’ enable the quality, cost, and capabilities of the goods and services bought to be aligned with your needs and market conditions.

A few principles to consider include documenting key objectives, working under mutually beneficial parameters, and balancing the interests of all, sometimes very diverse stakeholder groups.  Speaking of practicalities and parameters, it is important to ensure your principles guide you, and the scorecard itself must afford ongoing dialogue as opposed to serving as a platform for argument and dissension.  Adhering to these three Ps- Principles, Practicalities and Parameters – is most certainly a best practice!  □

The contract or agreement is the first step in the ‘partnering’ continuum: both parties must be onside; there must be clarity and protection provided to both.  Performance can be managed using scorecards, running the gamut from quarterly, to end of major event or significant ‘matter’ as is the case when dealing with legal suppliers.  Sometimes the scorecard is tied back to the contract and specific SLAs whereby remedies, penalties and rewards for performance can be applied.

 

Anne Donaldson-Page, with over 20 years of experience of sourcing products and services for organizations like Boston Consulting, BMO- Bank of Montreal, has been providing strategy and sourcing solutions as the Principal of stratAHEAD  Consulting.  In addition she is an author, writer and speaker.  Anne lives in Toronto, Canada and can be contacted at anne@stratHEAD.COM