Why you should regularly reevaluate your business vendor relationships

The Power of Two

Andrew McNeil (andrewm@arrowbenefitsgroup.com, 707-992-3789) and Rosario Avila (rosarioa@arrowbenefitsgroup.com, 707-992-3795) are senior benefits advisers at Arrow Benefits Group in Petaluma.

Read their previous columns.

We understand how comfortable and easy it can feel to work with a vendor with whom you have a long-established relationship. So many businesses avoid re-evaluating longstanding associations for this and a variety of other reasons.

However, we see big advantages in taking a closer look at these arrangements versus staying in your comfort zone. You need to make sure your business still receives the same level of quality and value as it did in the beginning of your relationship.

The better you know your vendors — and, more important, the better they know you — the more you will benefit from premier services, special pricing and better terms.

Reasons to re-evaluate a vendor relationship include these:

  • Vendor doesn’t provide industry-specific solutions for your business.
  • Vendor does not offer latest solutions available.
  • Vendor has had a change in personnel.
  • These are all valid reasons to see what other options are available to your business.

Vendor management: Best practices

Before you choose any partner, research their business’ health and whether they have a negative reputation among companies and individuals they’ve done business with. Are they growing or losing employees (this can give a clear indication of how your partnership will go), and do they offer services that will truly benefit your organization?

You should also have a clear understanding of what both sides expect of each other. Know who you’ll be working with and what each team member’s role will be. Understand how much “lifting” you need to do. If you end up doing more of the work than what you are paying for — if, for example, you are bringing services and solutions to the table that you want the vendor to then implement — you definitely need to re-evaluate the agreement.

Continuously monitor and track performance. Put key performance indicators (KPIs) in place and use tools, such as a scorecard, to ensure you stay aware of how your vendors are (or aren’t) meeting your standards and providing value to you.

Re-evaluate annually. Companies evolve, change and grow, and you won’t always need the vendors you have today — nor will they always be able to meet your needs. We understand that employers often stick with a vendor because it’s comfortable and they’ve been with them “forever,” but we have found using that approach delivers an overall disservice to an organization.

Case study: Benefits broker

We were referred to a mid-sized North Bay business by a third-party HR consultant. The employer had been with their benefits broker for 20 years and was comfortable with them. Initially, we did a compliance audit of their benefits program and found several areas where the business was out of compliance.

From there, we analyzed their systems and processes to find out which ones were out of date and inefficient. Based on our findings, we were able to show that the relationship was no longer serving the employer’s needs. Taking this deep dive into their practices ultimately saved the client time, money and efficiency.


Companies can outgrow payroll vendors or choose a payroll vendor that’s too big to give adequate service and support for what is needed. Payroll is often a hot-button item when we bring it up to employers, yet many do not want to take on the task of looking for a new vendor because they think it will take too much time and energy.

However, by not evaluating what’s working, and what’s still needed, a company can be in jeopardy of having bigger issues, especially when compliance penalties pop-up unexpectedly.

When there’s a disconnect with a company and its vendor, the relationship should be made a priority, either by trying to fix what’s not working or by making a move that will protect the company’s best interests. It makes things much easier on the business in the long term.


Having a partner that understands the need for up-to-date technology is key. If there is one thing the pandemic reminded us of, it’s that change — sometimes very quick change — is necessary. Whether or not you need computers, IT support or a special machine to make a widget, you want to be working with someone who understands your business and has the proper technology to support it.

The question you should ask when re-evaluating any vendor relationship is this: Is there something I’m not doing that I should be doing for more efficiency?

A successful relationship includes great communication, and vendor partnerships are no different. We’ve seen comfort keep many companies in dangerous territory, but if they can understand the need to move on, and to seek out up-market providers who specialize in their industry, they’re often shocked to see what services and support they weren’t getting before. It can’t hurt to just look.

The Power of Two

Andrew McNeil (andrewm@arrowbenefitsgroup.com, 707-992-3789) and Rosario Avila (rosarioa@arrowbenefitsgroup.com, 707-992-3795) are senior benefits advisers at Arrow Benefits Group in Petaluma.

Read their previous columns.

Show Comment