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Outsourcing Success Tips: 8 Best Practices for Managing Your Vendor Relationships

2 min read
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Outsourcing a product or service comes with a price tag. Whether you think of it as an expense or simply the cost of compliance, you may often find that the work of outsourcing, while falling in a different area (i.e., compliance or risk rather than operations), simply shifts the burden of activities required to deliver your product to your customer.

However, when done well, outsourcing can also produce some terrific efficiencies

8 Best Practices For a Successful Outsourcing Strategy

  1. Have a well-defined process for selecting a vendor. This could be a formal RFP process or simply comprehensive selection criteria.
  2. Ensure that you’ve done your homework. What are the trade-offs of keeping a process in your organization versus moving it out?
  3. Carefully follow your third-party risk management processes. Ensure that the proper due diligence and a risk assessment have been completed well prior to the contract.
  4. Make certain the contract clearly outlines expectations of both parties. There should be little left to guesswork or potential misunderstanding.
  5. Define performance objectives and commit the third party to supplying regular reporting or audits.
  6. Continue to monitor for vendor performance. Address any changes in performance accordingly by notifying the vendor and documenting the information.
  7. Ensure there are firm agreements for steps toward termination. Include post-termination requirements to return or destroy data.
  8. Keep your senior management team and board adequately informed. Update them as needed in meetings and provide reporting.

There you go – when following these outsourcing steps you’re baking the recipe for a very successful relationship. 

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