Given that the property manager’s core responsibility is managing third-party risk, failing to regularly monitor vendor performance verges on neglect. So here are 10 questions to ask when evaluating vendors.
Given how time-consuming it is to properly vet vendors, it is easy to see how property managers can become complacent with poor service. Unless a vendor’s shortcomings are particularly egregious, it’s easier to overlook them and forgo the drudgery of investigating a replacement.
However, tolerating sub-par service, can lead to larger, more costly problems down the road. Indeed, given that the property manager’s core responsibility is managing third-party risk, failing to regularly monitor vendor performance verges on neglect.
No matter how thorough your vetting, you can’t assume a new vendor will meet expectations. Nor can you assume that a long-term vendors performance won’t slip. Businesses are run by people and people’s circumstances change. Owners sell their businesses, hire new managers or become distracted by illness, divorce, addiction, and other personal problems. All these events can result in sudden changes in performance that can expose a community to additional risk.
That’s why it’s best to take a proactive approach when managing vendors, just as it is with employees. If an employee makes a mistake or neglects their responsibilities, good managers don’t wait two weeks to bring it up. They pull the employee aside as soon as possible to confirm the facts and see what if anything can be done to correct the problem and/or avoid a recurrence. Vendor performance management (VPM) requires the same approach. Provide feedback early and often to ensure both parties are aligned around the same goals and expectations.
Price vs. value
When evaluating vendors, it’s important to distinguish between the prices they charge and the value they provide. Evaluating a vendor strictly on prices or costs risks overlooking the overall value of everything they do. Conversely, choosing the lowest bidder may cost you more in the long run than it saves you short-term.
To capture all the value a vendor is providing, world-class organizations work with vendors to develop key performance indicators, or KPIs, to measure each other’s performance, notes GateKeepinghq.com, a U.K.-based VPM platform.
“The most important goal of each measure or metric is to motivate the appropriate behaviour of not only the vendors, but the buying organisation too,” according to the company.
One must learn to walk before they run, however, so here is some basic guidance for creating a vendor performance management system.
Tips for VPM systems beginners
Determine how often and when you should evaluate vendors based on the risks they pose. A vendor who provides a frequent and highly visible service such as a landscaper or pool service, may merit quarterly evaluations, while annual or semi-annual evaluations may suffice for others. Make sure the evaluation is performed and reviewed prior to contract renewal so that there is enough time to search for alternative vendors before the contract expires.
Be specific about what information will be needed, who will provide it and how long it will take to gather and evaluate it? Make sure the person(s) who will be responsible for collecting the information and/or conducting the evaluation agrees with your assumptions. In the beginning, it’s critical to create a simple and streamlined process everyone can buy into. You can always refine it later.
10 questions to ask
The following list of questions may serve as a good starting point until your organization can develop specific KPIs. By applying a numeric score of 1 to 5 — with 1 being “unacceptable” and 10 being “consistently exceeds expectations” — you can begin to develop a standardized method for evaluating vendors. You may want to create a spreadsheet template to track the process, link to relevant information. Consider adding a column for comments to provide additional context.
- How competent is the vendor? Are they fulfilling their contract obligations?
- Do they consistently meet deadlines?
- Do they consistently come in at or under budget?
- How accessible is the vendor? Is there a clear point of contact and are they easy to reach? Is it clear who is the point of contact when their crews are on site?
- How promptly does this vendor respond to concerns, requests, or questions?
- Are they proactive? Are they good at alerting us to potential snags, delays or costs before they occur?
- Can they scale up – provide more manpower – if the project extends or expands beyond initial expectations?
- How consistent is the vendor? Do they meet expectations regardless of circumstances?
- Does their culture align with our own? Are they easy and comfortable to deal with? Do they treat their employees with respect? Is their instinct to take ownership or dodge responsibility? Are they candid and transparent? Are their employees courteous and properly dressed? Do they clean up after themselves? Are they unobtrusive?
- Are they cost competitive for the value they deliver?
Establishing a periodic evaluation system that includes key performance indicators can help ensure that your relationship with vendors continues to meet the expectations you had upon hiring them. Develop a solid understanding of what works for your community and staff and create your own checklist to make sure that your vendors meet your standards. Third-party vendor relationships are critical to the success of any association. Connect with thoroughly vetted vendors in VendorSmart℠’s comprehensive, web-based marketplace and let our team of experts assist you in finding the help you need with confidence in their competency and compliance.