Executives Must Recognize Partner / Vendor Difference
Running a successful business requires many different areas of expertise and that success depends on building a great team. Larger organizations typically have a leader for each of the functional areas (Accounting, HR, Marketing, IT, Operations, etc.) They can build large teams that provide both internal and external services to the organization. When unique expertise is required, they hire consultants and external vendors to supplement the internal teams. What if there was no internal team? What if expensive consultants and an internal team was cost prohibitive to the business? The only option for the business is to bring in an outsourced team – a vendor to provide a defined scope of services for a set fee. This the challenge of almost all small-medium business leaders and the reason these business leaders need to form strong partnerships, not hire vendors. But what can a vendor offer, vs partner?
What is the difference between vendor and partner?
The terms are often interchanged, and the term partner becomes a marketing tactic to differentiate one business over others, but too often there is no substance behind the partner claim. There is a significant difference between partner and vendor, and as small-medium business owners, we need to strategically select the right partners and limit the number of vendor relationships as much as possible. Here is how I define each:
Partner – A firm that has critical expertise and resources aligned, integrated, and committed to the success of their client such that the interest of the clients is ahead of their own.
Vendor – A firm that agrees to provide expertise and resources around a set of agreed upon services in exchange for an agreed upon financial transaction.
Partnership – A Deeper Dive
Is there really that much of a difference? Why should a business owner or executive care? Well, if money were not a factor at all, would you rather have an internal team that shared your vision, was committed to your mission, and was rewarded and compensated based on their impact and contributions to the success of the organization? OR pay a vendor to provide the service where their rewards and incentives are based on how much time they bill and new projects they can sign, regardless of the impact they have on the business? Obviously, if money were not a factor, you would build a complete internal team. That is not reality, because cost is always a factor. The advantage of the outsourced model is that it provides a breadth and depth of resources in flexible way that can scale up and down based on the needs of the company. The resources are shared across other organizations and that leverage is what makes it a financially viable option. This is the case for both partners and vendors, the difference is alignment and commitment to the success of your business. A partner has three critical factors that make a significant difference:
- Shared success factors – KPI’s and other metrics that measure success are shared by the client and the partner together so that there is even greater rewards for both organizations to be working together to achieve these results!
- Win-Win – The focus of a partnership is set-up as win-win scenario, where results and outcomes provide financial rewards for both the client and partner (too often in the vendor relationship this is set-up as a direct conflict with the client)
- Money is “off the table” – the financial structure is set-up and agreed upon at the beginning and not discussed again until the next term, just like compensation for a new team member or a budget for a department. This allows the relationship, business results, and goals of both organizations to be the focal point, not billing, additional quotes, increases, etc. Plus, this allows the partner to provide services and recommend critical actions without the client having to question the motivation.
As small-medium business owners and leaders, we are fortunate if we can surround ourselves with great people that are just as committed to success as we are, but we are limited by the depth and breadth of services internal resources can provide to the company. You may have a financial controller, but that is not the same as an Accounting Team. A designated HR leader does not provide all the services of an HR team, and an IT guy does not make an IT team. The outsourced model provides a lot of advantages. Utilizing this model with the intention of looking for partnerships vs vendors can provide the best of both worlds. A partnership provides all the flexibility and scalability of an entire expert team combined with alignment of success factors and a relationship of working together toward a shared vision. That can be impactful on your business – on your clients, employees, and other stakeholders. When you are considering new or additional outsourced services for your organization, don’t settle for a typical vendor relationship. Look for an opportunity to create a true partnership.