Tom is a trusted advisor on procurement and third-party management to organizations across the United States. Having worked with over 120 organizations over his 30-year career, he has a unique ability to bring creativity and discipline to finding solutions for even the most complex challenges his clients face.If you’re leading a Vendor Management Office (VMO), you already know how much effort goes into building the infrastructure — policies, processes, systems, and stakeholder alignment. But once that foundation is in place, the real question becomes: Is it working the way it should?
Too often, VMOs fall into maintenance mode — focused on keeping the lights on, chasing compliance, and managing tasks. But the most effective VMOs don’t just manage what exists. They go further by putting governance structures in place that actively guide oversight and fuel continuous improvement.
That’s what separates a functional VMO from a high-performing one!
In this blog, I’ll break down the value a strong vendor management governance structure brings to your organization — and what that structure should actually look like. I’ll also share strategies for building a steady rhythm of continuous improvement, so your program stays relevant, effective, and capable of scaling with the business.
Let’s get into it.
Governance Is How You Lead Your Vendor Management Program—Not Just Maintain It
Strong governance is what keeps your vendor management program aligned, relevant, and able to adapt. It’s not just about compliance or periodic check-ins — it’s how you guide the program forward in a coordinated and accountable way.
Effective vendor management governance gives you:
- A structured way to engage leadership on vendor-related risks and decisions
- Oversight mechanisms to review performance and prioritize improvements
- Visibility into policy and process adherence — and whether they still make sense
- Clear escalation paths to resolve issues at the appropriate level
- A built-in process for evolving vendor management in response to risk, regulatory, or strategic changes
In other words, governance isn’t a passive review function. It’s how you lead the program, make decisions, and hold stakeholders accountable — across departments and over time.
What Governance Should Look Like (And Why It Needs to Fit Your Environment)
There’s no one-size-fits-all governance model. A 100-person nonprofit isn’t going to need the same structure as a global financial institution. But every organization needs a clear and practical approach to governance — one that reflects its operating environment, risk profile, and internal culture.
The structure should match your scale, complexity, and capacity. Otherwise, governance either becomes too lightweight to be effective or too cumbersome to sustain.
Here are five core components to consider to shape an effective vendor management governance structure:
1. Cross-Functional Governance Committee
A governance committee is your primary oversight forum — the place where vendor risk, performance, and program effectiveness are discussed at a leadership level. Its purpose is to drive accountability, support escalation and decision-making, and ensure the vendor management program stays aligned with strategic and risk priorities.
The committee typically meets quarterly and includes leaders from procurement, risk, legal, cybersecurity, IT, finance, and key business units. It should be responsible for reviewing program performance, approving key changes to policy or process, addressing escalated vendor issues and ensuring the program evolves to support shifting strategic priorities.
Right-sizing tip: In smaller organizations, this may not be a standalone committee. You can integrate vendor management oversight into an existing leadership meeting — as long as the right people are at the table and vendor issues are given appropriate time and focus.
2. Systems and Reporting
You can’t govern what you can’t see. A core part of effective governance is ensuring that the VMO, governance committee, and business owners all have access to timely, accurate, and relevant data about the vendor population and the activities that support it.
This includes visibility into vendor risk tiers, contract status, performance metrics, due diligence activities, issue trends, and overall program adoption. Without this data, governance becomes reactive and anecdotal — decisions are made in isolation, and business owners are left managing vendors without a clear picture of what’s happening.
Effective governance also depends on having the right systems in place to capture that data in the first place. Many organizations struggle here — key information is scattered across departments, locked in emails, or buried in spreadsheets. Part of the VMO’s role is to ensure that foundational systems, tools, and processes are in place to track the right information and generate insights that support informed decision-making.
Right-sizing tip: Start with the data you already have — even if it’s in spreadsheets. Focus first on a core set of metrics that matter to your stakeholders, then evolve over time as your systems and maturity grow.
3. Policy and Procedure Reviews
Governance isn’t effective if your foundational policies and procedures are outdated or misaligned with how the program actually runs. These core documents define how vendor management works across the organization, what’s in scope, and who’s responsible for what. They also serve as your first line of defense in an audit or regulatory review.
A key part of governance is periodically stepping back to ask: Are our policies still relevant? Are they being followed? Do they reflect changes in risk, regulations, and the way we operate?
Build in a regular cadence — at least annually — to review and update your vendor management policies, risk framework, and supporting procedures. This helps keep everything aligned with real-world practice and ensures the program evolves as your organization does.
Right-sizing tip: You generally won’t need to rewrite your policies every year — and in many organizations, formal approval is required before changes can be made. Instead, use the year to gather feedback from monitoring activities, audits, and stakeholder input. These insights can help you identify needed updates and prepare for more efficient policy revisions during your scheduled review cycle.
4. Vendor Portfolio Reviews
Governance isn’t just about managing individual vendors — it’s also about managing the full portfolio. Looking holistically at your vendor landscape gives you insight into concentration risk, underperformance, and potential opportunities to consolidate, diversify, or renegotiate.
Vendor portfolio reviews help leadership understand where risks are concentrated, where critical vendors may lack proper oversight, and where program improvements could yield meaningful results. These reviews also help surface patterns that are hard to spot when looking at vendors in isolation — such as dependencies across departments or recurring performance issues with similar vendors.
Schedule time — at least annually — to assess your vendor landscape at the portfolio level. Identify patterns and gaps that might otherwise go unnoticed when you’re managing vendors one by one.
Right-sizing tip: You don’t need a complex system to do this. A basic dashboard or spreadsheet showing vendor risk tier, contract status, business owner, and performance rating can provide enough visibility to start the right conversations.
5. Defined Escalation Paths and Decision Rights
Governance only works when people know what to escalate — and to whom. Without clarity, issues either get stuck at the wrong level or bypass appropriate review entirely.
Escalation protocols ensure that performance concerns, noncompliance, risk exceptions, or disputes get visibility at the right level and are resolved efficiently. Decision rights clarify who can approve what — whether it’s signing a contract with a high-risk vendor or approving a deviation from standard procedures.
Make sure your escalation paths and decision rights are documented and communicated. That way, everyone involved in vendor management knows when to raise a flag — and who’s accountable for the next step.
Right-sizing tip: A simple RACI chart or a brief section in your policy can go a long way. The goal isn’t complexity — it’s clarity and consistency in how decisions and issues are handled.
Build a Rhythm of Continuous Improvement
Strong governance gives your vendor management program structure. Continuous improvement gives it momentum. Without a regular cadence of review, reflection, and refinement, even the best-designed programs can become stale, misaligned, or ineffective.
Continuous improvement doesn’t have to mean large, resource-intensive overhauls. But it should be a structured rhythm that uses the tools of governance to keep your program aligned and responsive to the organization’s needs. The key is to right-size this cycle for your environment.
In smaller organizations, improvement may happen in quarterly check-ins and a once-a-year governance review. These conversations can focus on what’s working, what’s not, and what small adjustments are needed — whether it’s a template revision, a clarification to the policy, or an updated report to support decision-making. The goal is to create space to reflect, adjust, and keep the program moving forward in a manageable way.
Larger or more regulated entities may need a more structured roadmap with dedicated improvement initiatives tied to risk assessments, audit findings, or strategic planning cycles. In these cases, formal improvement plans — with assigned owners, timelines, and leadership reporting — can help ensure changes are prioritized and implemented consistently across departments and business units.
Regardless of the format, continuous improvement is about keeping your program active — not just compliant. When your governance structure becomes the engine for ongoing assessment and adjustment, your VMO stays not only relevant, but essential.
If you’re not sure where to start – or need a partner to help assess and improve your governance approach – contact us to explore how we can help.
