Most businesses will at some point engage with third party vendors that work as extensions to their team. However, you can quickly run into problems with these vendors when they start making promises that can’t be kept, and deadlines are being missed. Depending on the scope of the work it could have a major impact on your organization both financially and with your client relationships.
We sat down with Scott Aberg, Business Execution Specialist at Results, to find out how he is helping his clients manage third party relationships.
What kind of third party relationships are your clients engaged in?
My clients are exposing themselves to a wide range of third party vendors like never before. I have construction clients that are managing extensive parts of their construction schedule through subcontractors, client businesses that are reliant on third parties to provide integrated software solutions, and others that have contracted a marketing company to enhance their target market presence.
Why do your clients engage in third party relationships?
Their need is clear – to provide organizational value and competitive advantage through external enterprise and resources offered by these third parties.
What challenges and risks do your clients face when engaging in these relationships?
Many of my clients have expressed a great deal of frustration and angst with the performance level of some of their third parties. When you engage with third parties, you are creating an extended enterprise and if not managed appropriately you are exposing your company to a significant amount of risk.
If a third party fails to deliver there are a number of consequences you could face: financial damage and loss of revenue, damage to your reputation through faulty or lack of delivery, legal or regulatory breaches which may impact your compliance or violation of law, and there could be a serious disruption to your operation.
What advice are you giving your clients to overcome these challenges?
I caution my clients to calculate the risks of these third-party agreements, and to do their due diligence and ensure that they are partnering with the right vendor for both your needs and your budget. Before engaging with any third party you should be interviewing many different options, doing reference checks to verify their past performance, and ensure the third party truly has the bandwidth and competency to execute on your requirements.
Most importantly, you need to identify, clarify, and gain agreement on the significant milestones that the third party needs to deliver on. Many clients expect that these third parties are as interested in you and your needs as you are, but of course that’s not the case. Third parties often have multiple contracts and relationships and yours is just one of many.
What is the biggest mistake you see your clients making when engaging in these relationships?
Many of my clients are failing to deploy the simple keys to accountability. What comes more naturally internally with their own people is abandoned externally. For example, you need to deploy the appropriate meeting rhythms with your team and your third-party vendor to ensure a high degree of communication and accountability.
If you hold the third party to the same level of accountability that you do with your internal employees, you are going to stay on track. Provide open and honest feedback, and let the third party understand where you feel the friction and be prepared to allow them to share their sense of friction with you. Any good relationship is built on trust and these relationships are no different.
What can your clients do to protect themselves in these relationships?
I recommend that my clients prepare contingency plans in the event of non-performance or the need to terminate the contract. Knowing you have framed a back up plan gives you the confidence to hold your third party accountable. I also recommend that at the contract stage you have a termination agreement that you can both agree to. Being held hostage by the contract in a situation where the performance of a third party is well below your expectations is very draining, time consuming, and costly. Put in the work up front so that you can work with confidence that your risk is within acceptable limits.
Here are some simple keys to accountability that will help you manage third party relationships appropriately:
1. Strive for clarity – your expectations should be clear. Articulate your vision, what success will look like at the end of the contract and what the major milestones are along the way.
2. Demand transparency and open communication – develop appropriate meeting rhythms with the right people and maintain that cadence throughout the length of the contract.
3. Provide feedback (both good and bad) – If they are delivering then let them know by offering praise. If they are not delivering then you need to confront this and let them know you won’t tolerate mediocrity or worse.
4. Protect yourself in contracts – gain their agreement to all of your above expectations in writing. Clarity of outcomes, major milestones and dates. Outline consequences for failure and write in a termination clause you can live with.
Scott Aberg, Business Execution Specialist
Results Canada Inc.
Scott Aberg is a Business Execution Specialist (BES), and Partner at Results Canada Inc. Scott has a proven track record of unleashing the business potential and driving business execution in North American Based companies. He is an accomplished consultant, professional facilitator and professional executive coach. He’s a well prepared and inspirational business leader committed to help you take control of your business and deliver extraordinary results! Scott is a business asset to his clients, offering discipline and efficiency with a sense of humour and confidence to ensure the results are transformational and world class.