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Due Diligence

The Relationship Between Vendor Oversight and Complaint Management

Dec 5, 2017 by Steve Greenfield

Complaint management plays a vital part in delivering a great customer service experience. But when it comes to vendor oversight, the initial complaint issue can have a lasting perception of the user experience. And, that complaint can tell a lot about your vendor. 

Complaint Management & Vendor Oversight

Fixing each issue as it occurs – sending out an apology note, gift card etc. to tell your client you’re “sorry” doesn’t get to the heart of the matter. If anything, that is a band-aid approach that so many reactive organizations do.  

A complaint should be viewed as an opportunity to improve and not to appease with a token gesture. Until you uncover and address why the issue arose, you really can’t make the statement “sorry this won’t happen again. 

If there is a pattern to the complaints, perhaps the same bad actors or scenarios keep appearing on the radar; prompting you to take the time to join up the dots and look a little deeper.  

This is also a fantastic opportunity to perform a root cause analysis. Take the complaint and follow the process back to the outset. It’s important that you are either fully aware of the steps in the process or have engaged the line of business to help you perform the analysis. Failure to perform a root cause analysis will prevent you from moving the needle in effectively and efficiently addressing your complaint data. 

2 Steps of Implementing a Compliant Tracking System 

Here are the logical steps on implementing an efficient compliant tracking system. 

  1. Create a shared system where the line of business has a line of sight with vendor management. Get out of working in your silo. Collaboration is key. 
  2. Log, track and escalate complaints as they are received. 

For this exercise, we will assume that the line of business will handle the customer interaction. As we know, communication and timelines are key in customer retention and satisfaction. A breakdown in communication between the line of business and vendor oversight can only add to delays in remediation and customer satisfaction. 

  • Review each complaint and begin to look for patterns. Is it the same vendor behind the scenes who is playing a part of the overall complaint volume? 
  • Meet with the vendor on a regular basis. I would recommend meeting a vendor at least monthly depending on the service, regulatory risk concerns which could be triggered by a complaint. 

Case Study: The Vendor Who Couldn’t Keep Up 

Let’s now go through an example together on finding an issue with a vendor through proper complaint management. 

  • The line of business had begun to submit a higher than usual amount of complaints concerning the use of their primary credit vendor. Upon review, it was noticed that the complaints had spiked on May 1st and had been increasing daily.    
     
  • The    vendor manager met with a cross section of employees who were handling the complaints at the customer level. By asking specific questions about the customer experience when dealing with the credit vendor, it was apparent that there had been an internal change in the credit vendors operation. The vendor management team had a pretty good idea what the issue was but needed to verify directly with the vendor. 

  • During the communication with the vendor, it was noted that they had migrated to an offshore customer-facing service department. This had caused widespread concern with the lender’s customers who didn’t feel comfortable speaking about their credit concerns with overseas staff. 

  • How had this happened? Surely the vendor would have notified their lender clients of such a change in operational  policy, right? The vendor manager had to keep on digging into the details. Turns out, the vendor had not formally discussed this pending change when it was initially planned but had merely sent a letter to their main accounts payable department. The interaction between the vendor and accounts payable was focused on bill remittance. The letter was lost in the mix and the communication between vendor and client was broken.   

  • The team discovered that the complaints began within 5 days of the offshore team becoming engaged with customers. Had notice been sent to the correct business owner, then at a minimum, the lender would have been better prepared to address any concerns. Instead, the complaint fall-out reflected badly on the lender.
    Reputational risk was beginning to brew. 
    Immediate action was required to address the complaints and corrective action at the vendor-level was required. 

That’s the end of the story. Right? Sorry, no… we go deeper.

Root Cause of the Vendor Who Couldn't Keep Up 

  • Remember when we mentioned root cause analysis? Well, the discovery of the offshoring activity was just a result of a larger underlying issue. CAPACITY. In reviewing former complaints at the client-level and their own internal matrices, the vendor had identified that based on the current volume, hold times were exceeding their own SLA. Capacity to adequately handle the high call volumes were negatively impacting their customer service scores. Vendor management had reviewed additional complaint data and the pattern of extended hold times was one of the key areas of concern with the vendor.    

  • The vendor management team had never performed an annual assessment and hadn’t really looked at the vendor with any deep understanding of their operational standards. All the data suggested that this vendor should be paid a visit to better understand the operations. 

  • Upon conclusion of the site visit, the vendor manager reported back to the executive board and risk team that the vendor presented an elevated amount of risk based on current staffing levels. Essentially, the credit needs of the lender had outpaced the capacity the vendor had been able to support. The vendor had tried to outsource a key function which only resulted an increase in complaint data and ultimately led the vendor manager to perform a long overdue    risk assessment. 

  • To better serve the line of business and the customer base, this resulted in an RFP (Request for Proposal) to be issued with competing vendors who could better support the credit volume of the lender. 

What to Takeaway From This Case Study 

  • It’s imperative that both parties are transparent regarding the expected volumes and capacity constraints to adequately deliver the appropriate service level agreement. 

  • Complaint management is a key indicator of vendor performance. 

  • Root cause analysis can help mitigate future complaint and risk events. 

  • Engaging with the correct business unit is key for a strong vendor partner relationship. 

  • Scorecard data and business objectives should be discussed on a regular basis and plays a key role in your ongoing monitoring activity. 

  • Risk assessments, which review operational capacity and regulatory compliance, will help identify risks which may have operational, reputational or strategic risk to your organization. 

Both the OCC and the CFPB reference the importance of effectively managing and understanding complaints at the vendor-level and have specific guidance regarding the need to review policies and procedures of such partnerships.  

While you may have outsourced a process, when it comes to handling something as sensitive as consumer complaint data the buck stops with you. If you have a customer service or complaint department within your organization, make sure you are engaging them and strategizing in best practices to effectively manage the complaint data. There’s no smoke without fire and complaints can quickly spread like wildfire.

To learn more about managing your vendor relationships, download our free infographic. 

Vendor Business Continuity for Third Parties

Steve Greenfield

Written by Steve Greenfield

Steve Greenfield, CMB, is Director of Third Party Risk at Venminder. He's an experienced vendor risk executive with more than 20 years of management experience in the financial services industry. Steve has expertise in the full spectrum of mortgage lending with an emphasis on risk oversight and consumer lending regulatory compliance as well as advising lenders on vendor software integrations to boost operational efficiencies and vendor consolidation opportunities. Steve joined Venminder from loanDepot, LLC where he held the position of Director of Vendor Oversight at their retail division, Mortgage Master. In this position, Steve led the implementation of a Vendor Risk Oversight Program that followed CFPB, OCC Third Party Oversight Requirements and managed the firm's Vendor Oversight Audit function.

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