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hello everyone thank you all for joining us today for our how to effectively evaluate a vendor's performance webinar my name is Jesse Redman and I will be your host on your screen you should see multiple widgets that you can use including ask question media player slides related content widget speaker bio request demo and help all the widget boxes are resizable and movable so feel free to move them around to maximize your screen space at the bottom of your screen our icon buttons you can use to show and hide those widgets you can expand your slide area or maximize it to full screen by clicking on the arrows in the top right corner of that widget If you experience any issues or have technical questions you can use the help widget or submit them along with any other questions through the ask question widget don't worry we do capture all questions throughout each session we will be answering some during the webcast but those that we do not have a chance to answer live we will address with you via email today's live session is eligible 41cpe credit if you wish to receive the credit please remember to answer all the polling questions that will appear on your screen during today's presentation you will also be sent a follow-up survey link 24 hours after the live session that will need to be completed in order to receive the CPE credit today we have Hillary jewhurst Vin minus head of third party risk education and advocacy she will discuss the essential components of vendor Performance Management including understanding the differences between a service level agreement and a key performance indicator we'll also dive into planning effective performance reviews addressing performance issues and engaging your vendor in the performance management process you'll also see a link to a copy of today's slide deck a link to our website links to our understanding vendor performance metrics and scorecards ebook and scorecard templates our eight vendor service level agreement best practices infographic in our vendor issues and challenges what leverage do you have ebook as well as the link to our library of additional resources in the related content widget with all that being said I would like to hand it over to Taylor Hillary the floor is yours welcome everybody we're so happy you could join us for our webinar today we will be discussing vendor Performance Management we're going to jump right into why it's so important in four key components of Performance Management and then we'll move through the presentation to talk about metrics scorecards vendor performance reviews and then we'll wrap up with some best practices okay I'm going to say the most important thing right now and that is the vendor Performance Management is essential okay if your organization isn't managing vendor performance it really isn't managing risk now I'm not saying that to make anyone feel like they have an inferior program or lack standards but all that perfect cyber security the best business continuity plans most robust Financial Health aren't going to help you if that vendor doesn't have good performance and I know that it can be really easy to get solely focused on managing all those risks we identify through the inherent risk assessment but still forget to consider the risk of non-performance which is something we can't see until it's actually happening the truth is when you think about it right we engage vendors for a reason they are supposed to help us fix a problem or realize an opportunity in Vendor Performance Management is the key to making sure that those vendors are helping you and your organization meet their strategic goals for example let's say I engage a vendor to take over an email campaign that I want to reach a bunch of people and convert them into customers so first of all Yes I need to know that they're reaching the targeted users but what if they're reaching them and the messaging is really bad and so we're not really converting those individuals to customers that email agency may have Stellar cyber security but in the end we are wasting our money and a valuable chance of improving our market share so when it comes to Performance Management we always need to verify that the vendor is providing products and services as we expect them to with the right level of quality and agreed upon price and that that product or service is helping us reach those organizational goals so by doing this we can constantly confirm that the benefit to our organization outweighs the risk posed by the relationship so how do we get started with this process well I want you to start with your organizational objectives or goals and I know everyone wants to jump in with metrics and SLA but good Performance Management really starts before you ink the contract it really even starts before you select your vendor it starts with understanding how that vendor is going to support your organizational objectives or goals so let's consider that every organization has some objectives or goals here are some examples right maybe we want to increase revenue or diversify our revenue streams or break into new customer segments maybe we want to increase our net promoter score you're familiar with these type of things but we should be able to understand how any one vendor contributes to or supports the organization in Meeting those goals that understanding and articulation is really the foundation of excellent Performance Management foreign management has at least these four components so the first one is established and agreed upon performance measures so these identify what specifically the vendor is responsible for what's important here is that both parties agree upon what will be measured and if there will be any penalties for misperformance the second thing is data collection and Reporting so we need to access and review data relevant to that performance that data may be system reports stakeholder feedback inventory levels you know customer satisfaction scores defect reports all of that kind of stuff is data that we can review but both parties must agree on the data type and the sources keep in mind that there should never be any surprises here both parties should be able to access and review the data the next thing very important is our performance review meetings so once we agree upon metrics data and Reporting we need to establish our performance review meetings now keep in mind these are formal meetings right they're scheduled at regular and predictable intervals and are specifically designed to discuss and review performance these are not a casual discussion out on a golf course now it is okay if you devote a segment of another meeting say a business review or production meeting and dedicate that for vendor performance but make sure that you can evidence that these meetings are happening and by evidence I mean you have notes scorecards action items and the status of any open issues because you always need to be prepared to show those details to an auditor or an examiner at some point especially for critical and high-risk vendors finally Whenever there are performance issues they need to be tracked and managed and by managed I mean we're addressing them ASAP if for example our vendor doesn't need a contractual service agreement we would need to document that and make note of what the expected Financial or other penalties will be and if our organization has been appropriately compensated you know maybe there isn't a huge issue but the vendor just fell right under that acceptable range for a kpi we'd still need to document that and include the reason or the root cause for the failure if actions are to be taken to improve performance record those and note that due date for remediation and just to make sure that everyone is taking issue remediation seriously any issues that are at risk or past due should be escalated to Senior Management so let's take a look on the next slide to see how we start to utilize these components now we have been told that examples can be very helpful in these webinars So today we're going to work with an example throughout the presentation now this is a fictitious company called Birthday Bash Incorporated and they've made a business out of planning and delivering birthday party packages of course these packages come with a cake but there's been some issues with those cakes and you can read about it in the Box on the left but they are now engaging a new cake vendor called bake tastic Cakery so when we think about Birthday Bash Incorporated let's look at some of their organizational goals first of all they want to deliver Best in Class party services and products they want to remove the stress of party planning they want to wow the customer they want to increase sales by 10 over last year increase repeat business by 20 and increase referrals to account for 15 of new business and right from the beginning we want to think about how those strategic goals or objectives are going to travel down they're going to trickle down to our vendors and we're going to be able to distill them into vendor Target so why do we think about that first well first of all like I said the vendors have a role to play they're there to help you meet your goals or contribute to the process that's going to meet those goals they can only do that when they're directive is clear and they have a way to measure success the second thing is that those vendor performance objectives and targets help you articulate the Strategic value of that vendor relationship and finally giving your vendor these targets really helps them have a bigger mission that goes beyond just a purely transactional relationship so when we look at the new bakeries targets it looks like they are on the hook to help increase repeat business help improve customer referrals and really wow the customer is a celebrant and the guest so now that we've covered those targets let's start talking about metrics when we're talking about vendor performance monitoring and metrics it's really important to learn how to design and use these tools effectively understanding the differences between say a Target your goal or knowing if a measure is subjective or objective can really make all the difference in effective Performance Management it's really important for example to know when to use a service level versus when a kpi will be sufficient now keep in mind as we go through that how you and your organization manage vendor performance is totally up to you you determine the metrics the data capture reporting and issue management and that's exactly how it should be and some of the concepts I'm sharing with you today may not work perfectly for you but that's okay because there are endless opinions and methods for Performance Management what I'm going to share today are really some of the tried and two methods that have proved to be really effective during my third party risk management career we're going to talk about metrics just a little bit the first thing is that metrics come in two flavors right they're either objective or subjective now we'll get into more detail about each type in just a minute but I want to say first of all that all types of these metrics are valid and both can be used when you're talking about your vendor performance however we shouldn't share is that objective or quantitative metrics account for the majority of our metrics so let's talk about both types to understand why so objective metrics are also known as quantitative which you can remember this because it has the root word of quantity meaning something that can be counted or measured so obviously we can we can count things or volumes or capacity time Etc but when it comes to measuring performance these objective or quantitative measurements should account for most of your metrics so let me tell you why because you get a consistent and comparable measure that allows you to see performance over time or within a context so let's use our birthday bash Incorporated example let's say we have a contract contract excuse me for the baker to provide the right flavor decorative style and size of cake at least two hours before the planned start of the party now with all of those elements I can clearly determine if you brought me the right style of cake the right size cake the right flavor of cake and if it's on time but what if I tell you to bring me a beautiful and delicious cake okay now we're waiting into subjective or qualitative metrics now I just want to take a pause if you're asking yourself why on Earth we are talking about birthday cakes say versus NPS scores or something more relatable for your organization I'm going to let you in on something so first of all I talk about this stuff a lot so mixing it up doesn't really keep it interesting for me but more importantly it helps everyone really focus on the concepts so everybody else loves to talk about widgets but given my choice between a widget and the cake I will take a cake every time so we'll continue with our cake example as we move through the presentation now let's talk about subjective metrics so subjective metrics are just that they are subjective and they are accounting for something that is observed experienced or felt which can be a lot more difficult to measure and they can be extremely variable depending on the perspective of those doing the measuring so let's go back to our cake example our customer ordered a chocolate unicorn cake and the cake vendor believes that the unicorn cake is perfect and beautiful but the mother of the birthday girl is not happy because the image of the unicorn on that cake is a little more cartoonish than what she had in mind maybe she wanted some really detailed fantasy creature sure the bakery provided a chocolate unicorn cake that can serve 10 to 12 people on time but is it fair to derail their whole performance because of the image on the cake probably not now let's not just say that the look of the cake isn't important because if you've ever had a seven-year-old girl you knew that it is but if we haven't done the work or taken the time to define the desired look of the cake we aren't really being fair it's not that subjective metrics shouldn't hold as much weight as objective ones but they should always be balanced and supported by objective ones and it's also important to consider that the subjective measurement can change depending on the mood someone is in so that mother for example who hated the unicorn cake could have really had a very bad morning and so that little unicorn detail was really exaggerated for her which made her opinion of the cake and maybe the whole party really different than it might have been on another day and you'll see this a lot in customer service so you could measure your call center just by how your customers feel but if you're running a collections call Center for example your customers may not feel that great to begin with so whenever you can make sure subjective metrics are supported and balanced by objective metrics now we know the basic difference between subjective and objective let's talk about service level agreements so some people use the terms SLA service level agreement kpi K performance indicator interchangeably and they're not the same thing so let me tell you about this service level Agreements are documented performance agreements and they represent the must-haves for the engagement you need to think of a service level agreement as a deal breaker absolutely non-negotiable because there's usually some sort of agreed upon penalty if they aren't met right these are legally in the contract in many cases that penalty will probably be a rebate or discount or other sort of financial remedy but there may be other treatments that might get determined between the organization and the vendor in the case of our Bakery we might have a service level agreement that says any cake represented as gluten-free must be made in isolated kitchen free of any gluten contamination so this is really crucial for removing unnecessary liability and for safety but also ensuring that the customers are not harmed and that they're satisfied so this would be a big deal so we would probably want an SLA or a gluten-free kitchen A good rule of thumb here is that service level Agreements are developed with the vendor during the contract negotiation in that the term service Global agreement is only reserved for those require requirements that are in the contract and while you think about that we have our first poll of the day Jesse and this brings us to the first poll question of the day you should see the poll question now in the size area if you have any issues please feel free to send us a message using the ask question widget and we will be happy to assist as a reminder if you wish to receive the CPE credit for today's session you must answer all poll questions and be in attendance for the entire live session this poll question is does your organization have established formal vendor performance monitoring practices yes we have established metrics reporting in regular reviews with our vendors yes we have established metrics reporting and regular reviews but only for vendors that are high risk High spend or considered critical partial some performance monitoring takes place but no not for all vendors or practices are not formalized no or you're unsure and Hillary it looks like we have some time now to answer one of the questions that has come in so far okay great let's do it all right that question is do we have to do when your Performance Management for all vendors or just critical well technically you should be doing it for all vendors to some degrees but if you're in a situation where you absolutely have minimal resources definitely prioritize your critical vendors now I want to not give anyone the impression that that means it's just okay your high risk vendors have a lot of things you need to keep an eye on and ideally both of those critical and high risk will be monitored um formally once a quarter if you want to do your moderate you can also do them one to two times a year and for your low you may not need to do it depending on the product or service I hope that helps thanks everyone for answering that poll question here are those results and by the way you may have noticed reactions such as a thumbs up or heart coming across the screen if you find this feature distracting you can turn it off by clicking the four arrows in the top right hand corner of the slides widget which will expand the slides to full screen and no longer show the reactions we move on as a reminder in the related content widget you'll find informative resources such as our understanding vendor performance metrics and scorecards ebook and scorecard template vendor scorecards are a valuable tool to help you track and measure vendor performance so we encourage you to check those helpful resources okay Hillary I'll pass it back to you great let's pick back up by looking at some SLA examples so again remember these are your must-haves your non-negotiables the deal breakers you know you're not a bakery you might have other things like response time up time or repair time you know cost might be an SLA or safety or customer satisfaction maybe you want to have their cyber security controls as an SLA all of these things could be memorialized in your contract but it's really important to note that not all slas have punitive consequences for some specific Services as the Lays are commonly used to incent above average performance so you'll see this a lot in customer service call centers or collection servers Services rather for every month maybe the customer call center is above 90 of customer satisfaction they might get a bonus right and that bonus could be sliding scale depending on you you know what the midpoint is considered average and everything up from that so keep in mind the slas can also be used to incent good performance okay how do we make our service level agreements effective right how do we structure them well the first thing is we want to define those overall objectives right we want to connect the dots back for the vendor we want to leave them no questions as to why what they're doing matters right the next thing is we always want to create those service level agreements in collaboration with the vendor right so if you go off and create some unachievable SLA one of the things is going to happen the vendor side are going to sign up for it and miss it or they're not going to sign up for it and that doesn't put you in a very good position that's not to say that you should have low standards you shouldn't but slas do require some give and take on both sides and we definitely want a good description of the product or service right there should be where it's going what it is who's who's getting it when is it required so let's take a look at a few more we also want to identify the performance standards right what specific kpis are we using to substantiate the SLA what specific measurements are we asking for we really want to be clear so that everyone's on the same page because for the next bullet we have to identify compensation or service credit so when you miss that barely very clearly spelled out level of performance this is what you owe our organization this is how it will be paid will it be a rebate or discount and when it's to be paid is it immediately is it within 30 days the next billing cycle alternatively if you're going to use those slas for incentives you want to do the same thing for the vendor spell it out very clearly the last thing here is that a really effective SLA defines critical failure right so what constitutes a critical failure where we can cancel the contract that's slas let's jump into key performance indicators or kpis so another very widely used type symmetric is the kpi or the key performance indicator these metrics are generally used to measure performance and indicate Trends it's similar to slas they should measure it's the most important aspects of performance kpis are also used to substantiate certain slas but all kpis are not necessarily detailed in the contract and don't have a specific penalty right so the kpi can give you a lot of really valuable information especially when it comes to spotting problems and potential root causes you don't have to have a ton of kpis right if you're having like 500 kpis that might be too much what you need to do is measure the things that matter most and that can be different aspects of the vendor's performance in terms of quality service timeliness costs Etc so now let's take a look at some kpis that are going to be specific to our imaginary cake vendor you'll remember that our kpi should tie back to those performance targets we discussed earlier in this case our cake vendor has five specific kpis that we're going to be measuring the first is the quality of the cake so we're going to measure from a customer service uh customer satisfaction survey that rates how delicious the cakes are so maybe that's on a scale of one to ten in this particular kpi we want 80 or more of the cakes to be rated as delicious okay subjective metric here now we also want the cake orders to be accurate that means the flavor size and ingredients we have a lot writing on these cakes so that kpi is set at 95 or higher and that's an object of metric since we're always marketing that we're on time and we have this two hour window we have a very high expectation that the cake vendor is going to get those cakes there on time so we're asking them to hit 98 of the time or better we also want really fun and cool cake designs that people can only get through Birthday Bash and so 70 of the cake designs that the baker is doing should be exclusive to us and our customers now this is listed as an object of kpi but it might be really hard to substantiate with data like what is exclusive so we may want to think about this kpi in the future and we also may want to change it from objective to subjective we want repeat business so we want our customers to keep being delighted and coming back to us that is completely subjective so looking over these metrics and kind of thinking better example maybe you can think about a few more objective metrics we could add uh Etc so maybe you're not so excited about the metrics for the cake Bender so now let's look at some example kpis that might be more relevant for your business so here is a list of potential kpi categories and examples uh they might be more relevant for you so we have a couple different areas here starting with marketing we might want to measure online engagement page views search engines ranking in it maybe we want to look at downtime or number of information security instance or help desk resolution operational metrics we can have a lot of those time to Market wave defect cycle time operating expense rework and customer we may want to look at our net promoter score or customer complaints or customer retention remember the kpis you choose for the vendor is totally up to you and your organization they hear good rules to follow one track your kpi so that they have a connection back to your organizational goals and objectives and are measuring the performance that matters most kpis should be able to be validated through reliable accurate and timely data we want to use the smart formula so that specific measurable achievable and realistic And Timely I want to stop here just for a moment to say that achievable and realistic are super important no product or service is going to be 100 perfect all the time so when we expect that it should be 100 we're just setting everyone up for failure that's not to say that you should have low standards you shouldn't but you should be realistic about it next thing is to track your kpis over time to help you spot Trends and show patterns so a good example might be let's say we have a retail online store we have a call center and it operates really well from say January to October but starting in November those numbers always seem to take a dive well obviously you and the vendor could probably sit down and determine that maybe there's not enough personnel and calls are going unanswered or it's taking too long to answer them most importantly effective kpis are always created in tandem with the vendor because they're the ones that have to achieve the performance and I think most of us can relate to a situation where you know we're with our manager and we have the opportunity to Identify and discuss our kpis versus just having them handed down to us you know what situations preferred and which one works better and while you're considering that I believe it's time for another poll Jesse does your organization require contractual slas for high or for critical or high risk vendors yes for all critical or high-risk vendors partially for some vendors but depending on the product or service no or you're unsure and Hillary I have another question here that I think we can go ahead and answer your question that question is can we cancel a contract if a vendor misses an SLA well that depends on the contract so when it comes to service level agreements as part of putting that in your contracts you need to put the conditions under which you would be able to cancel due to an SLA being missed generally speaking you don't cancel a contract because they miss one SLA but if it becomes a habitual thing they're just not cutting it then if your contract is structured appropriately you would be within your rights some contracts have something called termination for cause or convenience but most of us do not write our contracts that way so it's really important to one not pull the trigger after one SLA Miss and two make sure your contracts are structured so you do have that leverage should you need it foreign thanks again everyone for taking the time to answer the poll I would also like to point your attention to the related content widget where you can find our eight sir vendor service level agreement best practices infographic available for download I'll hand it back to you Hillary thank you Jesse let's talk about data and reporting for a minute because those two elements are really the foundation of any performance evaluation now in a lot of cases your vendor will be providing data to substantiate their performance that's fine however when you're reliant on a data source you need to occasionally test that data to make sure it's accurate especially where it's one you don't control I personally have experienced this one so performance data said one thing but internal operational data said something very different it turned out that an equation had the decimal point in the wrong place and the variance over time went crazy so we had to get everyone in and pull everything apart if the team had just thought about testing that data before there was a giant error that situation would not have occurred so test all your data occasionally make sure that everything adds up and that you are in fact measuring the right data factors another really important consideration is how often you should pull and review that performance data so I like to say that A good rule of thumb is built around the service cycle or the transaction links so let me use an example suppose your call center gets about 2 000 calls a week each one of those calls is going to contribute to the vendor's performance and your MPS rating and each one of those calls presents the opportunity for something to go well or to go wrong and in some cases very wrong in this situation we'd want to look at that data more frequently because if we don't spot trouble early there's a lot of opportunities to go wrong to illustrate this we have approximately 8 000 opportunities a month what's one in four calls was below your quality requirement you could spot that in the first week and immediately start remediating it or if you wait a month to review it you find that now you have 2 000 unhappy customers maybe you only look at it quarterly and you find you have 6 000 unhappy customers so that probably isn't the best plan so consider the service cycle or transaction frequency when you're deciding how often to review the data supporting the performance when it comes to formalizing your performance review you know you need to have a documented meeting you need to do this with your vendor on a regular predictable basis and you should do the formal review at least quarterly for your critical and high-respenders you can do it maybe once or twice a year for your modern vendors and maybe not at all for your low vendors depending on the product or service now I want to emphasize that if there is an issue that pops up calling your vendor up and saying hey we had a problem is not the same as having your formal performance review and I want to emphasize that you should not wait until just before your vendor performance review to look at how they're performing that is the point of ongoing monitoring right that is consistent and the best way to avoid any unpleasant surprises is to pay attention to what is going on with those vendors at all times all right so now we can start discussing scorecards all right let's talk about vendor scorecard components first of all this may be one of those areas where your organization has completely different way of doing that and that's fine for the purposes of this conversation I really want to focus on those of you that are new to vendor scorecards or are implementing scorecards at your organization for the first time if you're an existing scorecard Pro bear with us a lot of this information will still apply so the other thing to consider is there's just as many ways to put together your scorecard as there are stars in the sky and there are countless templates and services and software uh software offerings out there but I want to start with a really very basic and simple way to assemble a scorecard now there are a couple things to keep in mind here the first of which is that a good scorecard has all the essential data on a single page you can of course present all the supporting data with that support card but don't expect most folks so we'll get it more than that first page so let's say that you include performance scorecards for your critical vendors as part of like quarterly board reporting package a lot of organizations have anywhere from 15 to 30 critical vendors maybe more so what you include must be concise easy to read and to the point so your reader should be able to look at that scorecard and get a really good feel about what is going on with that vendor now the elements that I recommend here are we want to State our Target we want to talk about service level agreements now if we don't have room to list them all we can talk about where there were exceptions we want those key performance indicators what are the things that are supporting those objectives or goals and could substantiate the service level agreements if we have other metrics we can include those we want open issues if there's issues we want to see some remediation plans some highlights of that open issues and emerging risks are issues as well as a place or vendor commentary and a summary statement now let's look at a scorecard that uses all of this information okay we have a sample scorecard we've put together for bakedastic Cakery our cake vendor and this is a very simple scorecard to be used as an example right at the top we have the reporting period and those performance targets right right up front we should be saying what we're holding this vendor accountable for how they're helping us meet our objectives the next thing is about slas so have they been met remember these are the contracted performance measures that are non-negotiable we could list all the slas if we have space on the page but in most cases we won't so we can list exceptions and be just as as effective and oh shoot looks like they didn't need that SLA for a certified gluten-free kitchen that's a problem the next thing below are the kpis we discussed earlier we list the goal and the resulting score I'm also looking at them for multiple quarters why so I can identify Trends I'm also using red yellow and green to help the reader differentiate what is happening at first glance so let's take a deeper dive on this first the quality of cakes rated as delicious well we've had a strong showing all year until the last quarter accuracy and timely delivery look pretty much the same and exclusivity has never been great it is barely above the Target now now I want to pause on this one just for a moment this goes back to having those realistic and achievable goals and here we look at this goal and they've barely made it or they've not made it to me this would be an opportunity to go back and re-examine if this is in fact the right thing to measure or if the data we're using to measure it is using the right elements the right data factors so use your scorecards to also help you figure out if these are the right performance measures all right so the next thing here is the customer Delight or the wow factor and this has been pretty unpredictable and seems to be on the decline below that we have some stakeholder feedback from our production coordinator letting us know that because of these missed deliveries we had to issue rebates to customers and we can guess what those missed deliveries are probably lowering the scores for customer delay also so let's look at some of the remediation plans that they have around those particular issues the first one is that there was apparently a problem with the gluten-free kitchen so there's subcontracting another kitchen until the existing one is certified and they've also scheduled three customer focus groups and Cake tasting maybe to talk about that wow factor and they also have a dedicated production planning manager that can probably help with some of those delivery issues that are popping up we also have emerging risks or issues so from our perspective that there's declining performance in the fourth quarter overall and we know that the communication regarding that uh gluten-free kitchen was really bad but more than that they lost two keeper smell including the senior Baker and the buyer so that could have some real impact on some of their kpis so here's something very important right below that is we want to give a place for the vendor to formally comment on the scorecard and this is so valuable because it forces the discussion and it forces a response from the vendor so let's say what they have to say about fourth quarter it looks like they're acknowledging the issues they're listing some root causes and they've put some specifics to remediating those issues this section can also give us additional information for things that we should keep an eye on so they're talking about doing additional training and that they've hired a new production manager we want to go back and see the evidence of that training who's backing who up you know when do the production manager start the the issues resolved that are timeliness improves finally we have the Vendor Manager summary right and and they're basically telling us that yes there were some issues we both recognized them the vendor looks back on track to take care of them and this is also the section where if I were a vendor manager and I thought they were really thinking I might put something in there formally about we may need to reconsider the contract or change some of the kpis um you know we're having issues or we're having issues that look like they're being reported but we want that Vendor Manager to to put their sort of summary statement in there because if I'm a board member or I'm sitting on the risk committee even though you've been nice enough to put this all on one page I may not even be reading the whole page so just make sure you put a summary in there this simple scorecard is painting a pretty good picture of what happened why it happened and what is being done to address the issues so someone who's not familiar with the vendor can get a really good idea of the vendor's performance and as you can see this really pretty simple it's pretty straightforward so hopefully this example gives you some food to facade on your scorecards and how to start organizing them and developing them but right now it is time for our last pour of the day Jesse our next poll question is does your organization have a formal and documented vendor issue management tracking and Reporting process yes for critical vendors only yes for all critical and high risk vendors partially some issues are tracked no there is not a formal process or you're not sure and Hillary let's go ahead and answer another question from the audience all right question our scorecards a regulatory requirement you know I can't think of a single regulation that says you have to have an actual scorecard but most of the major regulations do say that you need evidence of performance monitoring so your scorecard is a fantastic piece of evidence so you know you could interpret that as yes I need a scorecard but there is nothing in the regulations that I can think of that says you need an actual scorecard you could demonstrate that you were monitoring performance in a number of ways so that's my answer it's I'm sorry it's got more clear but no you don't have to have an actual scorecard that I'm aware of and here are those results thank you everyone for answering this question as it is interesting to see what everyone has to say before we move on I would like to point you all to our vendor issues and challenges what leverage do you have ebook that is available for download in the related content widget let's continue with the presentation foreign coming back to our scorecard example there were some performance issue and we had a missed SLA so when there's Miss South La you need to determine if the penalties are going to be applied and document what the expected remedy is and when it's going to happen so they owe us a 30 discount on the next billing cycle you need to go back and verify that that happens though that information should be retained as part of the vendor record and especially if you're finding that you they're happy to give you these slas every couple months you know these rebates or remedies because over time we might say you know what the standard performance is really uneven these Miss slas we might want to think about a new vendor here the scorecard also includes some very high level descriptions of the remediation plan but that is not a substitute for a detailed remediation plan that's documented that's between the vendor manager and the vendor and again that must be retained for the vendor records I do want to point something out that's really super important here and that is that scorecards and Remediation plans are not a substitute for formal issue tracking so issue tracking should be its own process and that information from the performance issue should be put into that process and tracked at the company level with all the dates on it so that as things come up you know people aren't going to look at 20 scorecards to determine if there's a remediation plan that issue management and tracking has to have its own dedicated process okay so now you know what to do but who's who's responsible for doing what so first and foremost the vendor owner is responsible and accountable for effectively managing vendor performance that means managing issues and their remediation and holding their vendor accountable as I say the buck stops here for Performance Management your third party risk or vendor risk management team needs to oversee that process making sure that everything is documented tracking the issues and holding the vendor owner accountable and then finally Senior Management is still responsible making sure that the policy is enforced so if your vendor Management's part of the policy you're not getting the results they should be able to track someone down and hold them accountable and get that taken care of so they are responsible for overseeing the whole process both what your team is doing your vendor owners are doing and making sure everyone is doing their job okay we've given you so much information today so let me just wrap up with a few best practices the first of which is be able to articulate how that vendor is supporting your organizational goals right that sets the stage for everything use slas in your contracts with the most important or non-negotiable requirements balances subjective and objective performance measures remember we want to keep most of them objective as possible you want to track your kpis over time to look at the trends because that can really help you tie together some loose ends and spot root causes make sure to test your data periodically whether it's your data or the vendor stated just to make sure nothing crazy is happening out there consider that service cycle transaction link when you're determining how often to look at those reports right don't let something with multiple multiple transactions pile up for months of the time if you can stop something early do it always document and track your vendor performance issues not just in the scorecards but in your official issue management tracking process and require documented remediation plans right we're having a big issue I want to see some details I want to see the who what why where when and how and we need to monitor that those actions are taking place and finally keep your scorecard simple again not everyone's going to read all the information you want to give them just a quick snapshot of what's really going on with the vendor and with that I'll thank everyone for their attendance today and turn it back over to Jesse for wrap up in Q a great thanks so much Hillary before we dive into more questions and answers I want to thank everyone for attending I would also like to thank Hillary for her time in sharing some really important information on your screen now you will see our upcoming webinars on August 9th how to classify who is a critical vendor at 2 pm eastern time and two webinars on August 23rd one at 11 A.M eastern time which is our understanding vendor business continuity disaster recovery and pandemic plan session and another session at 2 pm Eastern Time covering a deep dive into business vendor continuity disaster recovery and pandemic plans we hope you'll be able to join us for those sessions a link to register for those is in a copy of today's presentation sites let's now go ahead and answer some more questions that have come in during this session okay Hillary the next question is should we always have both subjective and objective metrics or can we just have objective objective ones you can just have objective metrics I mean I'm a fan of getting the most backed base repeatable metrics possible sometimes it's not possible but yes if you have to have just one objective is fine okay great next question my company doesn't use scorecards but we use a report to identify which vendors didn't meet their kpis is this acceptable it would be acceptable provided there easily accessible and you could give them to an auditor or an examiner sometimes individual scorecards work best for a smaller group but let's say your you know senior leadership's looking over that our report in that case may be a better option so yes it's successful perfect our next question what if a vendor disagrees with your Performance Management review that never happens no of course it does happen and there's a couple ways to go about it so the first uh there's a few things I would do just get ready for that conversation and go back and make sure that your kpis and slas are clearly spelled out but there's been a conversation so everyone's on the same page about what needed to be accomplished then the second piece of that is reviewing the data that substantiates that performance right so if you have this is what we're supposed to do this is how we prove we do it those two elements should be pretty undisputable but when it gets right down to it when we're in some of those subjective metrics or we haven't really defined everything that well there can be disagreements and so um if nothing else and at all is kind of going not well you may have to refer to your contract but I would always make sure you're checking that your kpis are clear and the measurements are clear and the data sources are clear um you're both on the same page before you have that discussion okay great our next question what should be the frequency of vendor evaluation it's really depends on a couple things one is how critical they are to your organization right so those very critical vendors we want to make sure we're really on top of that and the same is true for high risk really for critical and high risk you really want to make sure that at a minimum you're having those formal performance reviews oh now how often you look at the performance data it really does depend on that transaction length or the service cycle so there's a lot of transactions and a little time you're going to need to look at that data more often than every quarter for moderates I do think it's fine to do it once or twice a year depending on the service and for low risk you may not need to do a performance review because their performance may be as simple as we order paper to there was a direct price um there's not a lot of performances to kind of either or so I hope that answers that question that's great thanks our next question should subjective and objective performance metrics be considered for all vendors including those that have been considered low risk you know again it's really about the product and service pursue as many objective metrics as possible because it's hard to argue with them because it's not about someone's opinion it's about something happened or it didn't we could count it like I said with the critical high and moderate you want to have um the right metrics in place when you get down to those low risk metrics you know you shouldn't look at their performance I'm saying you have to balance out the value of setting up all those kpis and possibly trying to monitor monitor something that doesn't have a lot of data or you know it's just like hey here's your your invoice and your delivery receipt um you may find that there's not a lot of extra value uh in doing this risk and that time could be better spent really diving into your high risk and critical vendors so again it's totally up to you and your organization but I personally don't believe that all lowers vendors need performance management perfect question the so with potential penalties for a vendor that you have been working with for a long time and has not had strict measures in place previously well I think the right time to do that is as the contracts coming up for Renewal if you have a more immediate need to renegotiate the contract you know I would be very open I always felt with my vendors that honestly the best policy and if it's a matter of this is something we're trying to do for our organization we're trying to get more rigor around our service level agreements and we're really trying to hold people to them so this is something that's coming up but another helpful uh plan that you might put in place is to really look at what's common service level agreements for these if they're pretty common in that industry yet you don't have any with your vendor they shouldn't feel that surprised if you bring up the need to have them at some point okay great I think we have time for one more question and that is what is the difference between slas and kpis they sound exactly the same to me so a kpi can be any performance metric but in it should be measuring the most important things but service level Agreements are specifically called out in your contract they are like you know part of the contract whereas kpis might be covered under something that says you know more General language about acceptable performance but kpis are very sorry slas are very specific so the action is what the accepted level of performances and the penalty for not meeting that performance so they are different great thanks so much Hillary unfortunately that is all the time we have left for questions today thank you Hillary for taking the time to address some of those that came in any questions we did not have time to answer today we will address offline we would like to thank you all for attending and hope you found today's session valuable a big thank you to Hillary for her time and great content you can ask even more questions inside of our third party think tank in online community that is dedicated to third-party risk professionals and free to join just because today's session has ended doesn't mean the conversations and questions must post your questions at thirdparty think tank.com and see what your peers have to say in the community you'll find thousands of free educational resources related to third-party risk management topics such as vendor Performance Management to assist you if you like to become a member of third-party Think Tank you can register on the site or shoot us an email and we'll get you registered and send you a link to set up your password we did record today's session and that recording link will be provided to you in a follow-up email that you will receive tomorrow afternoon also in that follow-up email will be the survey link for you to request a CPE credit on behalf of inminder it has been a pleasure thank you and have a great rest of your day