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Effective vendor management can considerably impact a successful relationship with your BPO service provider.
In fact, according to one study from Deloitte, vendor management can help drive stronger results, with “significant savings” reported by 43% of respondents. Plus, the study indicates that more resources within contact centers should be dedicated to effectively managing vendor relationships.
While many people mainly focus on the workforce aspect of outsourcing, when it’s a strategic business function, that’s about much more than putting people in chairs.
An essential aspect of building a solid and effective partnership with your BPO service provider is managing them in a way that allows you to optimize the relationship. However, in many cases, internal resources aren’t equipped for strategic implementation.
More often than not, when things aren’t running smoothly with your BPO vendor, it’s a problem with the process, not the people.
That’s why a robust vendor management office (VMO) is essential.
To help you ensure you’ve got a solid plan in place for working with a BPO service provider, we’re breaking down what a VMO is, their role and four management best practices to consider.
What’s a Vendor Management Office?
A vendor management office is a centralized function within a company that works with an outsourcing partner. They oversee the program and manage the interactions and relationships with external vendors.
The primary role of a VMO is to ensure that the BPO vendor is strategically aligned with their client’s requirements and goals, as well as being managed effectively and delivering value to the organization.
The responsibilities of the VMO will vary depending on the needs of each organization and the type of partner relationship they are engaged in.
Organizations typically have someone on the team responsible for managing the relationship with the BPO. However, it’s not uncommon for this individual to do this on top of other priorities, so the outsourcing relationship doesn’t get the time and attention it needs.
The VMO has a strategic role, so you need individuals primarily focused on managing and optimizing the relationship. Simply tasking someone in your existing operations (who already has a full plate) can result in your outsourcing partner(s) not being managed effectively, meaning they can’t execute your vision successfully.
BPO Models: You Get What You Pay For
Before we get into what you can expect the VMO office to handle, it’s crucial to understand that different types of outsourcing relationships will require different levels of oversight.
The four most common BPO outsourcing models are:
Progressive: This model is highly collaborative, with your outsourcing partner being heavily involved in the strategy and oversight of the program. A progressive model offers the client a high level of resources and will be the most effective in helping organizations meet their KPIs.
Progressive Traditional: In this model, you can expect collaboration, but not at the same level as a progressive model. You’ll get the same things as you do with a progressive model — strategic support, oversight, resources — but to a lower degree.
Traditional: A traditional BPO model involves the vendor collaborating when asked, and the strategic support will be far less. You can expect you’ll need more internal support from your VMO to provide direction and consistently meet KPIs.
Directive: A directive model is precisely how it sounds — your partner will do what’s asked, and only that. The BPO isn’t responsible for strategic direction or anything other than its defined scope. This model will require the highest level of involvement from your VMO.
With any outsourcing partner, you pay for the level of support you receive. For example, if you choose a partner using the directive model, your VMO will need to create and drive the strategy. Progressive and progressive traditional providers have a higher price tag, but they do most of the strategic work.
The Role of the VMO
With your VMO, you need individuals who can work collaboratively with internal stakeholders, translate strategy into operational plans and more.
Again, this isn’t a role that should be an afterthought. When formulating strategic direction, you need people who can work with your executives and your compliance, marketing, finance, and IT teams.
As an example, the voice of the customer is critical to your CX and is typically done in collaboration with the marketing team. The VMO would help bridge the gap between marketing and your outsourcing partner to ensure the voice of the customer enhances your CX.
Why? Because these decisions ultimately impact your organization’s NPS.
Other core functions of the VMO include:
#1. Relationship management: The VMO is a central point of contact for vendor relationships. They foster and maintain strong relationships with outsourcing vendors, facilitate communication between the organization and vendors, and address any issues or conflicts.
#2. Performance monitoring: The VMO monitors and evaluates the performance of vendors against predefined key performance indicators (KPIs) or service level agreements (SLAs). They track performance metrics, conduct regular performance reviews, and provide feedback to ensure continuous improvement.
#3. Risk management: The VMO assesses and manages vendor-related risks. They identify potential risks associated with vendor relationships, implement risk mitigation strategies, and ensure compliance with regulatory requirements and industry standards.
#4. Cost optimization: The VMO plays a role in optimizing costs associated with vendor relationships. They analyze vendor spending, negotiate pricing and discounts, identify opportunities for cost savings, and ensure that vendors deliver value for money.
Other areas of oversight that VMOs may handle:
- Policy and procedure creation
- New program implementation
- Data analysis
- Quality monitoring
- Staffing/capacity planning
- Performance reporting
- Change management
- IT system/functionality
Leveraging Your VMO for Improved Performance
A well-run VMO can offer huge benefits to your organization. By having dedicated resources overseeing your operations, you can achieve:
- Strategic alignment.
- Cost savings.
- Improved performance results.
- Increased flexibility with staffing.
- More agility to respond to changing business needs.
- Standardized policies and procedures.
It’s the Processes, Not the People
Selecting a BPO service provider is a big decision, which is why you’ll want to be clear on what your vision is before you hire. Training, data collection, quality assurance, service levels, staffing factors, overall knowledge base, and ongoing performance monitoring are all key factors that will determine whether a specific partner is the right fit.
Ultimately, when people struggle with their BPO, it’s usually the process, not the people. Building a skilled VMO function helps you avoid common pitfalls organizations experience when working with a BPO service provider while getting the best possible business results.