Category Management of Professional Services: How Would YOU Measure Value When Hiring a Service Provider?


We have long been preaching the Value mantra – ever since we called for the death of Strategic Sourcing (SS) many, many years ago.  This is also why we changed our Maturity Model and pushed SS down to Level 4 and added the Value Creating Level 5.  In responding to a recent RFI from a client whose staff are alumni, they did what we taught them to do(which we absolutely love seeing 😊).  They asked us what KPIs or SLAs we would use to measure the services they were inquiring about (being an adjunct resource pool to their organization and source a number of categories).  As part of our curriculum, we teach that the supply base is an incredible source of information if you ask the right questions the right way.

We utilized our Value Driver (VD) methodology and sent them the list below (not in any order).  Our objective was to put ourselves in their shoes and determine what we thought their VDs should be keeping in mind the absolutely inviolable rule that Value can only be defined by the Customer/Stakeholder and not by the one providing the service.

  • Better than: On time, On budget, Savings Target – We wanted to address their biggest VDs upfront so that they didn’t think we were trying to de-commit from those and push the others
  • Transfer of Skill & Knowledge to the Client team – We believe this is a critical VD anytime you hire a consulting firm
  • Focus on Change Management & Stakeholder engagement (internal challenges are always the biggest obstacle) – We had told them that the biggest challenge to achieving savings was not going to be bringing prices in line with the market.
  • Expertise – This is an obvious one.
    •   Utility experience
    •   Category knowledge
    •   Relevant project experience
    •   Change Management Expertise
    •    Senior, experienced resources
    •    Consulting & Internal Functional (e.g. CPOs) experience
    •    Experience at Client
  • Access to proven process, tools, methods – This is related back to the transfer of skill and knowledge. Without access to the process, tools etc., the transfer is impossible.
  • Focus on Adoption (ensuring savings / benefits are ACHIEVED and not just identified) – We have seen many clients and others wonder why the savings achieved are significantly lower than savings identified and the singular reason is no focus on Adoption of the solution on which the identified savings are based.
  • Cost competitive
  • Sustainable solutions that suppliers support over life of contract – The supplier is also a stakeholder in the relationship and the viability of the contract for them has to be incorporated.
  • Active Risk Management – Obvious but especially important given that this is a major utility.
  • Regulatory compliance – Same as above
  • Contracts that focus on mutual value creation, not just contract compliance – This is based on our theory that Suppliers today represent the most under utilized asset for most companies. It just doesn’t get as much attention as other under-performing assets because it’s not on the balance sheet.
  • Strategic long term partnership between Client procurement and TMG
  • Enhance the credibility and reputation of Client procurement as strategic business partner – This is considered critical by us because if we don’t achieve this, we will have partially failed.

So put yourself in their shoes.  Is this the list you would have come up with to measure the service provider?  Is this the kind of Value Driver list you would encourage your Stakeholders to start using?  Is this what you put in your RFPs today?  Are you making supplier selection decisions using this kind of criteria?  And here is the biggie – Are you asking your customers/stakeholders to measure you utilizing a similar list of Value Drivers???  After all, you’re a service provider too!!! 



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