Building A Vendor Management Office: Lessons From Insurance And Airports

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Managing vendors and procurement activities effectively has never been more important. Why? The drive to outsource activities and build more complex products means you need contributions from beyond your organization.

Alas, project management isn’t like Amazon. There’s no “one click” buy button or overnight shipping when you’re building a bridge, submarine or a CRM implementation. You need a more sophisticated approach. If you’re just getting started, read 6 Steps To Successful Vendor Management. To take your vendor management approach to the next level, stay with me.

This week, I attended an session on “Building A Vendor Management Office,” hosted by Fasken Martineau, a Canadian law firm. It was a helpful session with some great war stories. In this article, you will learn how two organizations in very different industries improved their vendor management practices. For more events like this, look into joining the International Association of Outsourcing Professionals (IAOP).

Economical Insurance: Vendor Management & Transformation

Economical Insurance was founded in 1871. Today, it is one of Canada’s leading property and casualty (P&C) insurance companies. That long history brings certain assets such as long standing customer relationships and a well-known brand. However, the company has also accumulated vendor relationships that needed to be revised due to a new strategy. Economical has committed to success in the digital world and the vendor management strategy has to support that goal.

Innes Dey, Senior Vice President & Chief Strategy Officer at Economical Insurance,  presented his experience. I appreciate his efforts especially considering he had a difficult cold!

  • Purpose: The company’s drive to modernize vendor management is part of a broader transformation agenda to ‘demutualize’ the organization. In a mutual structure, the organization is owned by employees and policy holders. It’s a rare structure but it is still used in some cases. Vanguard, a major investment firm known for offering index funds, is owned by its policyholders.
  • The Limits of Contracts. Be wary of assuming that a good contract is enough – it’s also important to have good people to work with at the vendor. After all, if the vendor team is rude, unprofessional or unresponsive, then you will not achieve value from your spend.
  • Engage in “productive overlap” with staffing. By partially overlapping responsibilities between staff, you can have support and collaboration. This is a great management principle. It also means that people can go on vacation without worrying that a critical process will fail.
  • Maintain Internal Unity When Dealing With Vendors. Innes  made the interesting comment that vendors are “skilled at exploiting disorganized clients.” If your executives are getting wined and dined by vendors, the vendor management office needs to know about it.
  • Be wary of conflicts of interest. Some consultants have business relationships with other organizations that may influence their recommendations. These relationships become problematic when YOU are unaware of these interests.
  • Staff Up To Achieve Value. If your organization is managing millions of dollars in vendor relationships, make the case for full time vendor management staff. Managing seven figure contracts with IBM, Deloitte and other large organizations requires dedication.

Greater Toronto Airports Authority: Managing Vendors & Becoming The Best Airport In The World

The Greater Toronto Airports Authority (GTAA) is responsible for operating Canada’s busiest airport, Toronto Pearson International Airport. John Alexis and Angella Dikmic presented observations from their journey on improving vendor management. While the GTAA presentation focused on IT and technology vendors, there’s no reason why these frameworks cannot be applied to other functions.

  • Understand Your Reality. The first step is to create a central repository of contracts. This point is especially important if your organization has multiple contracts with a vendor. Multiple contracts sometimes lead to problems like different pricing, payment terms and conditions.
  • Set Your Vendor Management Goals. Initially, the GTAA approach focused on cost reduction. Delivering cost reduction and cost avoidance to the organization was essential to win support from executives. Over time, relationship management and risk management have become more important.
  • Classify Your Vendors And Govern Accordingly. As you create a governance program, it’s important to apply different levels of governance depending on cost, risk and importance. Remember that a small spend vendor may merit a “Tier 1” approach if they provide enterprise critical services.
  • Plan Your Exit. Every business relationship comes to a conclusion at some point. If you don’t define how that will end, you could be in for a world of hurt. The speakers shared a story from another organization that underscores this point. A client ended a relationship with a buyer and asked for their data back. The vendor printed the data on paper and delivered it (ignoring the client’s request for the data in digital form). The result? Many months of client time spent typing up the data!
  • Be Part of the Contract Discussion. For large contracts, it is vital for the vendor management office to be part of the discussion. Leaving them out will make running a long term relationship with the vendor much more difficult. You don’t want to land in a situation where you are stuck with a painful, complicated contract.
  • Leverage Organizational Change To Introduce a VMO. There’s a saying in politics – ‘never waste a crisis.’ In the business context, the same idea applies. With the GTAA, they had a major contract with an IT firm close to expiration. Rather than simply go through business as usual and renew, GTAA management used this change as an opportunity to revamp their entire approach to vendors.
  • Conduct Regular Satisfaction Surveys. The GTAA regularly conducts vendor and customer satisfaction surveys to detect issues and areas for improvement. As vendors become more important in delivering your value chain, this is an excellent proposal to use. I’ve recently used Survey Gizmo to conduct surveys and it has been helpful.
  • Use Recurring Meetings And Calibrate The Detail Accordingly. The GTAA uses a series of recurring meetings with different audiences to execute vendor governance. For example, executives are briefed annually on the top vendors. Other vendors with a lower impact can be managed with a monthly meeting focused on operations.


5 Lessons Learned From Becoming A PMP

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Last week, I earned the Project Management Professional (PMP) certification. In completing this project, I learned a great deal about the art and science of project management. In today’s post, I will share some lessons learned from the experience. I intend for this article to be helpful to anyone working toward a challenging goal, especially one involving education or professional development.

1. Finding Your Why For The Goal

In late 2014, I went through Michael Hyatt’s goal setting course 5 Days To Your Best Year Ever. In that course, Hyatt explains the importance of knowing our why for any goal we choose. In my case, I had several reasons to pursue this goal. Here are just a few of the “whys” behind why I decided to pursue this certification.

  • Increased skills and capabilities. I’m interested in expanding my skills in project management and I liked the comprehensive approach that PMI takes.
  • Increased income. According to the Project Management Salary Survey (8th Edition) conducted by the Project Management Institute, project managers with the PMP certification tend to earn higher incomes than those without the certification.
  • Impressed by PMI Southern Ontario. As one of the largest PMI chapters in the world, PMI Southern Ontario has impressed me with the quality of the events and the people involved. By earning a PMP, I will be able to contribute and volunteer to this great organization even further.

Lesson Learned: To build and sustain your motivation for a challenging goal, take the time to write down several reasons why you are interested in the goal. When you encounter challenges, you can review this list.

2. Identify Role Models and Resources

Who else has achieved the goal you are working on? For many goals, there are often other people who have achieved what you want to achieve. It makes sense to learn from their experience. In summary, this is was a positive lessons learned from my experience. I benefited significantly from the resources outlined in this section.

In my case, I found instruction and inspiration from a variety of resources to complete the PMP.

  • University of Toronto Course. In the fall of 2014, I completed a project management course at the University of Toronto School of Continuing Studies to expand and deepen my knowledge of the field. Taking this course also fulfilled the formal education requirement needed for the certification.
  • Other PMPs. As I met other PMPs, I asked them about their experience. Often, I would gain new perspectives on the process and learn how people prepared for the exam (most people stressed the importance of practice questions).
  • Achieve PMP Exam Success (5th Edition) by Diane Altweis and Janice PrestonCornelius Fichtner strongly recommended this book. I bought it and worked through the chapters (and end of chapter quizzes).
  • PM PrepCast. This online PMP study course was highly valuable. Created by Cornelius Fichtner, the PrepCast is a great way to study in a variety of contexts. Most lessons are approximately thirty minutes in duration so it is easy to sit down for a brief study session. In addition, the course includes a number of extra interviews that explores issues in project management such as critical chain and lessons learned from new PMPs.
  • PM Exam Simulator. Practice questions are generally considered the best way to prepare for the exam. This resource provided eight full length practice exams. I went through all eight exams, some of them more than once. I found that the simulator was a very good simulation to the actual exam I wrote.

Earning the PMP is a highly structured process so it makes sense that there are published resources to use. If your goal is less structured, published materials may not be available. In that case, I would suggest dedicating more attention to networking and learning from people who have first hand knowledge of the topic.

3. Make Course Corrections To The Plan

Several months ago, I scheduled the exam for March. However, I realized that I was simply not ready. Fortunately, I learned this fact weeks in advance. I was able to reschedule the exam without any penalties.

Whether you are studying for an exam or working on another goal, course corrections are helpful. In my case, I used the grades I obtained on practice tests to indicate my readiness for the exam. In other contexts, consider what markers you can consult to determine if you are still on course.

4. Proactively Manage Exam Day

Completing the PMP exam was a major accomplishment. However, it is also an unusual experience. Fortunately, I took measures in advance to reduce anxiety and reduce uncertainty. Here are some of the practices I followed to prepare myself for exam day.

  • Visit the test centre in advance. It was reassuring to know exactly where the centre was located. I also had the chance to review the centre’s procedures with one of the staff.
  • Take the test day off from work. I was fortunate to be able to dedicate the entire day to the exam. It made a big difference in being able to relax and focus on the task at hand.
  • Arrive at the test center early. I arrived approximately one hour ahead of time, just in case test centre procedures took longer than expected.

In addition to the practical benefits of going through the above steps, I found it reassuring to go through these additional steps. As you work toward a goal that has uncertainty and risk, look for ways to reduce that uncertainty.

5. Celebrate Success

Obtaining the PMP certification was one of my greatest goals for 2015. As a result, I was looking forward to celebrating as soon as I read the examination report. I celebrated in two ways – I went out for dinner with my wife afterwards. I also treated myself to a few books from Amazon that I’ve been wanting to read for some time (Letters from a Stoic by Seneca, The Checklist Manifesto: How to Get Things Right by Atul Gawande, and The Goal: A Process of Ongoing Improvement by Eliyahu Goldratt).

If you are highly motivated by achieving results, you may be tempted to simply start working on the next activity. Instead, I encourage you to give some time to celebrate, whether it is is an individual goal or a group goal. We all have disappointments and problems in life and one way to cope with them is to have fond memories of celebration and success to fall back on.