SIG University Certified Supplier Management Professional (CSMP) program graduate Susan Berkenbush describes how an effective and logical exit plan is one of the most overlooked topics in our space, and notes how relationships end for many reasons and when they do there must be a well thought out plan with clearly outlined tasks.
As strategic sourcing and supplier management professionals, we have a duty to protect our companies, employees, shareholders, and clients from harm. Depending on the industry, that “harm” can manifest itself in various forms, including financial, legal, and reputational compliance violations, improperly protected data, and employees’ physical safety. We typically invest a significant amount of time and resources in performing due diligence upfront during the RFP process and contract negotiation, as well as we should. But do we consistently focus on ensuring that due diligence is conducted at the end of a supplier contract as well? If not, it might be time to reconsider.
The practice of developing an exit management strategy as a standard step in supplier governance is crucial, especially in critical supplier relationships. If executed effectively, exit management clearly establishes roles and expectations for all parties, with the goal of achieving a balanced, fair dissolution if or when the time comes. It can help maintain productive communications and mitigate risk by keeping your team and your supplier centered on the tactical process of unwinding the relationship.
As we know, contracts can end for many reasons. They may simply expire. The client company’s strategy may have changed direction due to an acquisition or economic conditions. Another supplier may offer a newer, more innovative product. I’ve always referred to these types of terminations as the natural death of a contract. Poignant, maybe, but everyone understands the reasons and can remain fairly objective. In these situations, an exit strategy has operational value, but the parties will most likely work together to ramp down the partnership in a reasonable way.
Termination for cause or convenience, however, can evoke more emotion. There may be friction or disagreement between the parties. There may have been formal disputes and arbitration, making it more challenging to remain objective. This is where a previously established, solid exit management strategy can shine, mitigating disruption of services and any impact on your stakeholders. The exit management plan should include a timeline that indicates the start date (usually the date of termination notice) through the date services have fully transitioned away from the supplier. It should also include a RACI table for role clarity, robust communication plans, knowledge transfer plans, data transfer or destruction verification process, HR actions, and a service backup plan should the supplier default.
Ideally, an exit team responsible for managing every aspect of the transition is assigned. The team will oversee the plan, provide status reporting, troubleshoot, and generally facilitate a smooth ramp-down. Role clarity and strong communication are essential in successfully implementing the exit strategy plan. To reiterate, having exit strategy standards in place can help companies achieve the objectives of avoiding disruption of services and enabling a smooth transition when a supplier contract comes to an end.
So, when engaging key suppliers, always begin with the end in mind. We sourcing and supplier management practitioners have a fiduciary duty to our companies, shareholders, and clients. Due diligence is important throughout the entire contract lifecycle, and the best time to define an exit management plan is at the beginning of a contract. It’s too late to think about how and how quickly your company can unwind and separate from the supplier as termination looms. Are you prepared to insource or secure replacement services? Do you hope a current, trusted supplier has the capacity, or do you hope to transition to a new supplier? Hope is not a strategy, but investing sufficient time and thought in exit planning well in advance of when you actually need it certainly is.
The Certified Supplier Management Professional program is a five-week course delivered through SIG University’s unique education platform. Visit our website to learn more about the discipline of governance and enroll for the upcoming semester.
Susan Berkenbush, Senior Director of Global Supplier Management, The Fitch Group
I’m an enthusiastic and performance-driven SRM, supplier diversity, and strategic sourcing professional with experience in highly regulated industries. My passions include Driving real transformation through effective change management. Building diverse, motivated, successful teams. Coaching for optimal performance. Identifying and implementing continuous process improvement opportunities. Since 2014, I have also been an adjunct faculty member at Saint Peter’s University Frank J. Guarini School of Business, teaching several graduate business courses.
Outside of work, I’m an active volunteer, recently completing an advisory board service term with the Alzheimer’s Association (Greater NJ Chapter) and currently serving on the Music Village advisory board. I enjoy mentoring and have served as a guest speaker with a number of professional organizations. A common theme connects everything I do: nothing is more rewarding to me than facilitating success and happiness in others!
SIG University Certified Supplier Management Professional (CSMP) program graduate Susan Berkenbush describes how an effective and logical exit plan is one of the most overlooked topics in our space, and notes how relationships end for many reasons and when they do there must be a well thought out plan with clearly outlined tasks.
As strategic sourcing and supplier management professionals, we have a duty to protect our companies, employees, shareholders, and clients from harm. Depending on the industry, that “harm” can manifest itself in various forms, including financial, legal, and reputational compliance violations, improperly protected data, and employees’ physical safety. We typically invest a significant amount of time and resources in performing due diligence upfront during the RFP process and contract negotiation, as well as we should. But do we consistently focus on ensuring that due diligence is conducted at the end of a supplier contract as well? If not, it might be time to reconsider.
The practice of developing an exit management strategy as a standard step in supplier governance is crucial, especially in critical supplier relationships. If executed effectively, exit management clearly establishes roles and expectations for all parties, with the goal of achieving a balanced, fair dissolution if or when the time comes. It can help maintain productive communications and mitigate risk by keeping your team and your supplier centered on the tactical process of unwinding the relationship.
As we know, contracts can end for many reasons. They may simply expire. The client company’s strategy may have changed direction due to an acquisition or economic conditions. Another supplier may offer a newer, more innovative product. I’ve always referred to these types of terminations as the natural death of a contract. Poignant, maybe, but everyone understands the reasons and can remain fairly objective. In these situations, an exit strategy has operational value, but the parties will most likely work together to ramp down the partnership in a reasonable way.
Termination for cause or convenience, however, can evoke more emotion. There may be friction or disagreement between the parties. There may have been formal disputes and arbitration, making it more challenging to remain objective. This is where a previously established, solid exit management strategy can shine, mitigating disruption of services and any impact on your stakeholders. The exit management plan should include a timeline that indicates the start date (usually the date of termination notice) through the date services have fully transitioned away from the supplier. It should also include a RACI table for role clarity, robust communication plans, knowledge transfer plans, data transfer or destruction verification process, HR actions, and a service backup plan should the supplier default.
Ideally, an exit team responsible for managing every aspect of the transition is assigned. The team will oversee the plan, provide status reporting, troubleshoot, and generally facilitate a smooth ramp-down. Role clarity and strong communication are essential in successfully implementing the exit strategy plan. To reiterate, having exit strategy standards in place can help companies achieve the objectives of avoiding disruption of services and enabling a smooth transition when a supplier contract comes to an end.
So, when engaging key suppliers, always begin with the end in mind. We sourcing and supplier management practitioners have a fiduciary duty to our companies, shareholders, and clients. Due diligence is important throughout the entire contract lifecycle, and the best time to define an exit management plan is at the beginning of a contract. It’s too late to think about how and how quickly your company can unwind and separate from the supplier as termination looms. Are you prepared to insource or secure replacement services? Do you hope a current, trusted supplier has the capacity, or do you hope to transition to a new supplier? Hope is not a strategy, but investing sufficient time and thought in exit planning well in advance of when you actually need it certainly is.
The Certified Supplier Management Professional program is a five-week course delivered through SIG University’s unique education platform. Visit our website to learn more about the discipline of governance and enroll for the upcoming semester.