OK, so you’ve gone through the selection process to pick just the right outside company to handle a VIP (very important project). You’re feeling pretty good because you’ve gone through all the necessary legwork up front by defining the need, outlining the critical success factors, setting the budget, performing the RFI’s and RFP’s, conducting the demos and already began some preliminary negotiations.
Now it’s time to check the references.
No big deal. This is just a formality, right? I mean who is going to give you a reference that will not give a glowing review of the company you are just about to ink a contract with? While that’s true, this is an excellent time to look into a crystal ball and get a sense for things you should watch out for after you sign the dotted line. It’s also a chance to see how well you did in the selection process.
To do this well you need to set up a list of open-ended questions that you’ll ask each references. By asking the same questions to each reference you should notice a pattern in the responses. By asking open-ended questions you are much more likely to get information you can use instead of “Yes” and “No.”
These are the questions I use:
1. What is the nature of your business?
2. What were your reasons behind <insert the nature of the problem/solution here>?
3. What type of selection process did you employ – RFP, sole source, etc.?
4. Which other vendors did you consider?
5. Why was <vendor name> chosen?
6. What did you find out after you started working with <vendor name> that you wished you knew in advance?
7. What changes in costs/pricing/resources did you experience?
8. If we were to go with <vendor name>, what recommendations would you give to ensure a successful engagement?
9. What has the impact been since <rolling out the solution>?
10. Is there anything that I didn’t ask that I should have?
11. Would you recommend <vendor name> to use based on what you know now?
Here’s a breakdown of what I look for in the answers of each question.
Questions 1 and 2
These answers should give you a very clear idea about their business, the problem they were trying to solve and why they thought that products and/or services provided by the vendor in question where sought. Is their business model similar to yours? Did they have a similar problem and where their success factors the same? The more closely aligned their business model, problem and desired outcome is to yours the better.
If you notice that the types of businesses are very different than yours that could be a sign that it will take the vendor longer to really understand what you need. That means more up-front time for your resources at the beginning of the process.
If their problems and desired outcomes are different this could mean you are trying to leverage the vendors services and/or products in a new way. At this point you should feel pretty comfortable that they can make that leap. However this is something you should bring up directly to the vendor to gauge their answer.
Different problems or extra benefits could also be a bonus for you. This could head off issues you weren’t aware of or have extra perks.
Questions 3, 4 and 5
These questions will help you gauge the thoroughness of your own process and how informed the reference’s decision was. I particularly like asking them what other vendors where in the running. It tells me if I included everyone I should have. It can also tell you the caliber of contenders they considered.
Questions 6, 7 and 8
Here’s where it gets interesting. The answers you receive to these three will help you manage the engagement both internally and externally. There will be valuable insight into any risks that are likely to come up that you should watch for and manage.
Answers that point to the reference’s own internal struggles mean you should take a harder look at how prepared you are to meet these challenges at your organization. Differences in working styles or expectations with the vendor in question should be addressed up front in your own engagement to set clear expectations and guidelines.
You will want to understand any cost, resource and/or project overruns and how they could have been mitigated.
Did the reference get the results they expected and when they expected?
I like to throw this out to see if there is anything I missed. It also gives the referral a chance to give additional perspective.
Obligatory. You already know the answer to this one.
When posing these questions feel free to put your own style into it. Also feel free to ask additional question based on their responses. Just remember to keep this Q & A session short. I try to keep it to 10-15 minutes at the most. These folks are taking time out of their day for this so it is important to be considerate.
This is the last chance to get additional perspective about a vendor before signing a contract. Done right, the reference checks will give valuable perspective on what this relationship will look like. It can also provide some last minute negotiating leverage.
Tackle this step with the same rigor you put the rest of the process through.