Performance Management and Contract Compliance
Manage the obligations and responsibilities of both parties (as specified in the contract) to avoid or address incidents of non-compliance. Manage key performance indicators (KPIs) to inform decision-making in relation to supplier management.
Improvement Planning
Practices-Outcomes-Metrics (POM)
Representative POMs are described for Performance Management and Contract Compliance at each level of maturity.
- 1Initial
- Practice
- Best endeavours of available personnel.
- Outcomes
- Any interaction with suppliers is ad hoc.
- There is a lack of performance visibility which impairs the potential for identifying performance gaps and identification of improvement plans.
- Metric
- Historical Analysis: # IT supplier incidents
- 2Basic
- Practice
- Manage contracts based on price and delivery, with penalties imposed for non-compliance.
- Outcome
- A focus on price and delivery may impact on quality of product/service, and prevents relationships maturing.
- Metric
- % of IT suppliers that meet agreed performance objectivesHistorical analysis: # of quality incidents
- Practice
- Establish common order and fulfilment practices for key suppliers.
- Outcome
- Common order and fulfilment practices are emerging for a limited number of suppliers.
- Metric
- % of suppliers where standardized order and fulfilment practices are used
- Practice
- Agree some regular monitoring based on a few key performance indicators (KPI) e.g. availability and pricing.
- Outcomes
- A basic governance process begins to emerge.
- There is some visibility of availability and pricing criteria.
- Metric
- % of suppliers having governance KPIs in place% contracts where availability and pricing metrics are monitored
- Practice
- Introduce benchmarking for some IT suppliers based on internal company metrics.
- Outcome
- There is the ability to identify whether performance issues are unique to a given IT supplier or area.
- Metric
- % of contracts benchmarked against internal measures# of employees (FTEs) assigned to benchmarking
- 3Intermediate
- Practice
- Incentivize IT suppliers for good performance and quality against agreed SLAs.
- Outcome
- There is improved IT supplier performance and quality.
- Metric
- % of IT suppliers that meet agreed performance objectives Historical analysis: # of quality incidents, availability
- Practice
- Standardize order and fulfilment practices across most suppliers.
- Outcomes
- Standardization facilitates similar operational practices across most suppliers.
- Operating and switching costs are better managed.
- Metric
- % of suppliers where standardized order and fulfilment practices are used
- Practice
- Establish a defined set of monitoring KPIs e.g., performance and quality against defined SLAs agreed with the IT supplier.
- Outcomes
- A defined governance system is established.
- There is increased visibility of IT supplier performance and pricing against agreed standards.
- Metric
- % of suppliers with governance KPIs in place% contracts with defined SLAs
- Practice
- Conduct external benchmarking for all Tier 1 IT supplier contracts on selected price, performance and quality metrics.
- Outcomes
- There is an improved ability to recognise the significance of IT supplier performance gaps.
- There is increased pressure on IT suppliers to improve to meet external standards.
- Metric
- % of contracts with external benchmarking% of IT suppliers showing performance improvements
- 4Advanced
- Practice
- Incentivize key IT suppliers for effective agility and alignment with the organization's internal processes.
- Outcome
- There is an improved alignment between IT suppliers and internal processes; improved information flow between the IT function, the rest of the business and IT suppliers.
- Metric
- % of key suppliers aligned with internal processesHistorical analysis: # of quality incidents
- Practice
- Establish comprehensive order and fulfilment practices for all tiers of suppliers, and encourage preferred suppliers to carry out appropriate innovations.
- Outcomes
- Comprehensive order and fulfilment practices are in place for all suppliers.
- There is some tolerance for testing of alternative practices by preferred suppliers as a way of encouraging appropriate innovation.
- Metric
- % of suppliers where standardized order and fulfilment practices are used
- Practice
- Establish and consistently agree with supplier(s) a comprehensive set of KPIs and KPI reporting protocols and monitor rigorously.
- Outcome
- There is a comprehensive monitoring and management structure established for supplier governance.
- Metric
- % of suppliers with governance KPIs in place
- Practice
- Benchmark all Tier 1 price, performance and quality metrics against external entities as well as selected knowledge-sharing/collaboration metrics, where comparable data exists.
- Outcome
- There is an improved ability to pinpoint significant failings in communication and collaboration between parties.
- Metric
- % of contracts with defined knowledge-sharing/collaboration metrics
- 5Optimized
- Practice
- Incentivize key IT suppliers for innovation and collaboration with the organization and, when appropriate, with other suppliers.
- Outcome
- There is an improved level of collaboration between suppliers as well as innovative products/services.
- Metric
- Historical analysis: product/service innovations, availability of products/services via complex supply chain
- Practice
- Continually review and improve order and fulfilment practices' levels of efficiency and innovation.
- Outcome
- Order and fulfilment practices are maintained to high levels of efficiency and appropriate innovation, while minimizing switching costs for both parties.
- Metric
- Frequency of review of order fulfilment practices
- Practice
- Continually review and adapt governance KPIs to reflect current documented objectives and expectations for sourcing and supplier management.
- Outcome
- Reviews are carried out against the sourcing and supplier management objectives, the scope of services/processes being evaluated, and the sourcing decision integration and governance alignment.
- Metric
- % of suppliers with fully integrated KPIs that allow evaluation of achieved benefits, impact, and business relationship status specified in contract.
- Practice
- Manage IT suppliers on a portfolio basis as normal operational procedure.
- Outcome
- There is a marked increase in supplier contract performance levels.
- Metric
- % of products/services managed on portfolio basis