Unless it’s a two-way scorecard, then I give you a C- for effort.

Don’t get it wrong, SI likes two-way scorecards. It’s the only scorecard ever developed for Procurement that’s any good. There’s no other way to properly capture subjective opinions which can be just as important as objective relationship measurements. If there are misunderstandings or personnel issues, a focus on improving processes or efficiency based on objective measurements will be all for nought since whichever side believes the problem lies with the other will be adverse to making any effort (and if you’re only capturing one side, who knows if you’re capturing the right side).

But many SPM platforms define the (two-way) scorecard as their entire foundation of relationship management when it’s just a minor tool. A very important tool in the toolkit … like the measuring tape that a carpenter shouldn’t do anything without — as no relationship manager should be without a two-way scorecard, but still a tool.

But that’s just a tool to measure alignment. You need to focus more on ensuring there’s alignment to start with. This means you primarily need to:

• ensure you select the right supplier in the selection process
• clearly define what you expect from the engagement
• define milestones and key metrics you will be monitoring and agree on the definitions
• regularly meet to discuss improvement, stagnation, decline

ensure you select the right supplier in the selection process

Your selection process must ensure:

• you vet them for any risks or red flags that go against your policies
• you clearly define the product / service requirements
• you analyze their offering against those requirements
• you analyze their culture

Frankly, you’ll never have good performance if

• the relationship ends up being short term because you missed a red flag that legal or risk management won’t put up with
• you don’t define precisely what you need in functionality and service level requirements
• you don’t ensure the supplier’s product or service isn’t a great fit for you
• their culture doesn’t mesh with yours

clearly define what you expect from the engagement

It’s not just saying you want a product that does A through ZZZ or a(n outsourced) service that provides you a detailed transformation plan, takes over your procurement function for tail spend, or helps you onboard your suppliers. It’s a

• detailed description of what functions you are looking to transform, whether you are just looking for process redefinition support or the selection and implementation of new technologies and automation platforms, and how much project management and assurance you need
• detailed definition of what tail spend is in terms of categories, amount, frequencies; what type of tail spend can be catalog/punch out, which should be quoted, and when it should be passed back and included in a (modified) category or treated as strategic spend; along with detailed platform requirements, the data collection and model requirements (for integration with your master data and analytics systems), and whether or not it’s okay to use a GPO
• what processes you use now, the data required for every supplier as well as specific data requirements by category or region or spend, who is responsible for support during on-boarding and post-on-boarding and for what, what systems should be integrated with, and so on.

Just like there’s no success without clear requirements, there’s no foundation for a good relationship without clear requirements of expectations.

co-define milestones and key metrics you will be monitoring and agree on the definitions

In order for a party to perform well, they need to know precisely

• what they are being judged on
• how the metrics are defined
• what the ultimate goals are

The reality is that what get’s measured gets managed, and the management that happens is that which aligns the performance to what improves, or at least maintains, the metrics — whether it is the right thing to do, or not. For instance, if your supplier is hooked on your early payment discount offering as a form of financing (it’s not, by the way, but that doesn’t stop most organizations from treating it like it is), and you make that availability contingent on a 95%+OTD metric, and every shipment that arrives the next calendar day, even if the difference is 4:00 pm for end-of-day unload vs 8:00 am for start of day unload, is counted as late, your supplier is going to do everything it can to not only be on time, but attempt to get all deliveries out early to make sure construction, weather, or unexpected delays don’t stop the shipment, even if that means paying a trucker to sit in a parking lot with unloaded inventory for 2 days! And if getting it out that early requires factory workers to go from 10 hour shifts to 12 hour OT shifts, which makes them tired and increases error rates after hour 9, so be it! End of the day, you’ll get your OTD and pay more for delivery and have to deal with higher defects and waste and all of the tracking and return costs incurred. If the goal in introducing OTD was just to minimize customer stock-outs, you didn’t exactly achieve it because if you end up having to reject a (considerable portion of a) shipment due to poor quality, you’re stocked out (and the OTD metric gives them a pat on the back).

This is why we said “co-definition” — both parties should work together to define (blended) metrics (and scorecards) that will not only achieve the goal, but allow each party to be measured fairly.

regularly meet to discuss improvement, stagnation, decline

Emailing your counterpart a scorecard and saying “You did great here, acceptable here, but sucked in these parts — Do Better” is not relationship management because it doesn’t even imply any sort of relationship. Relationship management is developing the collaboration and desire for both parties to work together, not just pointing out deficiencies in a scorecard and saying “do better”.

All of this means that if you want to do true relationship management, you need to build in relationship management into everything you do because just defining a scorecard-driven program after the fact when the supplier performance isn’t too your liking isn’t relationship management.