Are You Wasting Time Conducting Supplier Reference Checks?

Reference checks are a great way to cut through the spin we often see from a supplier’s RFP response or pitch presentation. Yet reference checks often either play a small role in sourcing initiatives or are ignored entirely.

Why? Because reference checks can take a lot of time and, done incorrectly, simply don’t add value.

Inefficient reference checking practices don’t pay off, and reference requirement too often end up relegated to the “just-another-formality” section of an RFP questionnaire – but they don’t have to be. Here are a few tips to hone your reference checking strategy to help you produce actionable results.

Reference Check Ground Rules

To be clear, this isn’t a rundown of every question you need to ask a reference. The right mix of questions for your needs depends on your goals, the type of supplier you are looking for, and the role they will play in your organization. What this list provides is a set of ground rules for making the most out of the process.

First things first: Not every reference provided deserves to be checked. Suppliers provide references they think will make the best case for them – regardless of how valuable they will be for you. Your first goal, then, is to identify which references are worth your time. So, what makes a good reference? Which ones should you avoid?

• Aim for similar organizations. This one is simple: Stay on top of the supplier to choose customers that are as close to your business as possible in terms of size, industry, needs, and implemented solution. Supplier who struggle to comply are either overly interested in cherry picking references or just don't have enough experience with companies like yours. Either situation is a red flag.

• Keep work history in mind. Speaking with new clients helps focus the conversation on implementation issues. However, there isn’t enough longevity to gauge the supplier as a long-term partner. Suppliers are still putting their best foot forward early in a relationship, and new clients may be more willing to forgive mistakes as part of the learning process.

• Seek out past clients. Related to the point above, a previous client will not only understand the entire life-cycle of their relationship, but is more likely to be candid about their previous relationship.

• Speak with the right contact. Low-level stakeholders who work with suppliers on day-to-day issues are often more valuable to you than high-level managerial leaders who inked the deal. Make sure you’re talking to titles that are in the trenches to get a true sense of how suppliers function as partners. Be sure to have those same titles on the phone on your side as well.

• Identify relationships in play. If you are looking for the supplier to play a mission-critical role, are they mission-critical to the reference company? How did the reference identify the supplier as a potential partner – through an RFP process, or was there a personal relationship in play? All add a great deal of context, and may make a reference more or less valuable in terms of applicability to your organization.

• Uncover conflicts of interest. While some clients offer to be references because they feel strongly about a supplier, others may have tit-for-tat arrangements, including free or cheaper services or other value adds. If a reference is getting a better deal on products or services than what you were offered, then their experience will be different from yours.

Once you have vetted your supplier’s references, structure the conversation in a way most likely to result in objective, actionable takeaways:

• Guide the conversation. Open-ended questions are excellent for reference checks, but leave a lot of room for references to choose where the conversation flows. Begin the conversation with a brief overview of why you are interested in the supplier, and what matters to you most. Otherwise, references will naturally focus on what matters to them. If your biggest concern is training, adherence to timelines, or an ability to proactively seek out cutting edge solutions, say so.

• Ask for actionable responses. Asking a reference to describe their relationship with a supplier won’t yield valuable information. Asking for specific examples of how a supplier has impacted their business gives more insight. What problem did the reference seek out the supplier to address? How long did it take for them to do so, and did the solution fall within the timelines agreed to? How often does the reference need to escalate issues, and how quickly are they resolved? In broad terms, was there a strong ROI on the project?

• Ask for specific, actionable responses. Asking a reference to describe their relationship with a supplier won’t yield valuable information. Asking for specific examples of how a supplier has impacted their business gives more insight. What problem did the reference seek out the supplier to address? How long did it take for them to do so, and did the solution fall within the timelines agreed to? How often does the reference need to escalate issues, and how quickly are they resolved? In broad terms, was there a strong ROI on the project?

• Give ‘em a gut check. Some questions beg for canned responses, such as asking about strengths and weaknesses. Better alternatives ask the reference to think about their own experience more fully. In hindsight, what does the reference wish they knew prior to signing with the supplier? What advice would the reference give to help you avoid headaches? What does the reference wish the supplier provided that they aren’t currently?

• Network. Even after your call is completed, stay in touch with any references that were particularly open and helpful. If you end up selecting the supplier in question, they can be invaluable assets in the future, as they’ve already travelled the road you are about to start on.

Finally, don’t treat reference checks as compartmentalized pass/fail tests. After you finish conducting your calls, don’t forget to apply what you’ve learned! If any specific weaknesses are brought to the surface, make sure they are addressed later when negotiating Service Level Agreements. If references indicate implementation milestones were missed or that employee training wasn’t proactive, build appropriate carrots and sticks into your KPIs.

 

Reference Checks – Worth the time?

There may not be a clear cut answer to this question at the outset. However, following these rules will help you determine if you should invest the time in reference checks, or if you are better off focusing on other methods of evaluating your potential suppliers.