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3 strategies to ensure vendor accountability when outsourcing

Accountability can be a tricky thing, especially when you’re outsourcing. But fear not! Here's how to ensure you're not left holding the bag.
Daniel Zacharias

Code Power Team

November 24, 2023

Outsourcing — It reminds me of that time I hired a magician for my niece’s birthday. He promised a world of magic but left me empty-handed, vanishing with my deposit.

Just like some vendors, right? Accountability can be a tricky thing, especially when you’re outsourcing services to an external organization that might not even be in your same country. But fear not! Here’s how to ensure you’re not left holding the bag.

The “Trust but verify” approach

Imagine leaving your cat expecting it to behave around your goldfish. Sure, Mr. Whiskers might resist, but wouldn’t you rather be certain you won’t be finding Nemo? Well, exchange “cat” for “outsourcing” vendor and “goldfish” with “project” and you’ll see where I’m getting at.

That’s where the “Trust but verify” approach comes into place, an essential way of engaging with outsourced vendors.

Here’s how the groundwork works: 

  1. Regular check-in. Before you jump into a digital nanny role, check-ins don’t mean you have to be breathing down your vendors’ necks. Instead, think of them as your scheduled visits to see how the cat is doing. Don’t just wait for the vendor to update you. Because let’s face it, if the cat had their way, they’d tell you he was just admiring the fish’s colors, not plotting Nemo’s demise.  
  2. Performance metrics. Every fishbowl needs its covers. Set clear KPIs that’ll act as your bowl’s covers and project’s guidelines. If they’re not meeting them, it’s time for a water sprinkler!
  3. Feedback loops. Feedback loops are your training manual, enveloped with open communication. If there’s an issue, you need to know about it ASAP. After all, you wouldn’t want to find out about the cat’s fishy adventures after it’s too late, would you?

The “Carrot and stick” method

Outsourcing is a lot like driving a donkey forward with a carrot on a stick. Now, before you jump on me with your pikes and torches, let me explain. You see, vendor outsourcing is a delicate balance between rewards and repercussions. It’s simply not humanly right for you to exploit your vendor nor it’s fair for them to rip you off and deliver a roadkill project. 

To strike that delicate balance where both parties are happy, you need three things in motion.

First, create your reward system — the carrot. They go a long way and oftentimes motivate your vendor to go the extra mile. Performance bonuses, extended contracts, and recognition are all things vendors love. Don’t be a cheapskate and truly offer them when your vendors show the effort. Secondly, the stick isn’t about punishment or deception. It’s simply about correction. Not all vendors will have your best interest at heart. If they start to slack, penalties or stricter contract terms serve as a nudge to get them back on track.

The sooner you realize that and set clear boundaries, cementing yourself into them, the better!

Thirdly, regular performance reviews are your way of adjusting the first component — the carrot. It’s how you maintain an effective balance. Adjust your incentives and penalties based on these reviews to keep the vendor relationship healthy and productive.

Fun Fact: Vendors are more inclined to share knowledge when their performance surpasses their aspirations. This effect, Motivation 2.0 or the “carrot and the stick,” is even more pronounced when you have vendor managers with a systems approach in interpreting feedback.

The “three strikes, you’re out” method 

But what if the cat can’t resist? The first time he tries to swipe at your fish, you might give him a gentle warning. The second time, he gets a more stern reprimand. But by the third attempt, you realize it’s time to move your fish to a safer location.Every time Mr. Whiskers swipes at Nemo that’s a strike! 

Well, the same thing happens with outsourcing vendors. Whenever they do something that doesn’t agree with your signed contract or with your project’s planning, that’s a strike. Every strike should be carefully documented so there’s a clear record of any vendor missteps. But don’t just wait for all the strikes to happen. Act when the first strike happens by communicating your concerns. 

Let’s see that in more detail. 

First strike

The question you should be asking yourself after a first strike is “Why did it happen and why was the driving force behind it?”

An example email that you can send to vendors after the first strike may go like this: 

“Dear [Your vendor’s name], We’ve noticed a few discrepancies in the recent deliverables. Can we schedule a call this week to discuss and ensure we’re aligned on expectations? We believe that getting both teams aligned is critical for delivering a successful project and further growing our relationship.”  

Second strike

We are humans and second mistakes do happen. In that case, my response would be: 

“Dear [Vendor Name], We’ve observed recurring issues despite our previous discussion. It’s crucial for us to delve deeper into this. Let’s have a comprehensive review meeting with both our teams and see where our project is slipping through the cracks.”

In this stage, it’s critical you take a detailed walkthrough of the recurring issues, get vendor feedback on the challenges they face, and tighten up the feedback loop for quicker issue resolution. Remember — try to look at things from an objective viewpoint before you call a third strike.

Third strike

Your vendor’s out! Three consistent vendor failures might indicate it’s time to reconsider the partnership. Unfortunately, Mr. Whiskers needs to go.

The email you don’t want to write but need to be prepared for during your outsourcing sounds like this: 

“Dear [Vendor Name], Despite our efforts, we’re still facing challenges. We need to have a decisive discussion on the way forward with our key team. Please be prepared with a detailed analysis of the situation from your end so we can both share a more objective perspective on the matter and see if this partnership is an actual fit for both parties.”

Don’t sugarcoat it! Be direct and simple. Otherwise, the fish will be the one going down the toilet.

Firm but fair conclusion

Outsourcing is a magical experience, but only if you have the right vendor and strategies in place. Otherwise, it’s a development disaster!

Using these strategies you’re not being distrustful, nor disrespectful, but rather you’re ensuring that you get the performance you’re paying for. So, be firm but fair when using these strategies so your outsourcing journey is as smooth as a magician’s card trick!

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