Get more than you paid for: how leadership style impacts supplier performance

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Author: Grosvenor Management Consulting 

Businesses engage suppliers for many different reasons. The question is, if you’re engaging experienced specialists, why are they so often underperforming?

The answer might lie in your leadership style. Inspired by the vast volume of research on the impact of leadership style on staff performance, Grosvenor surveyed 119 organisations in Australia to shine a light on the impact of supplier leadership on business outcomes.

The study results were quite astounding.

Read on to find out how changing the way you lead can result in suppliers that deliver even more than you paid for.

Transformational leaders receive 27% higher supplier performance

We decided to use the Multifactor Leadership Questionnaire (MLQ) framework developed by Bernard Bass and Bruce Avolio to analyse the relationship between supplier performance and leadership. We differentiate four different supplier leadership styles:

  • Laissez-faire
  • Management by Exception
  • Contingent Reward
  • Transformational Leadership

All four leadership styles were represented in our study. Figure 1 shows the spread of different leadership style across study participants.
fig-1-grosvenor

So, how do these leadership styles impact performance?

Figure 2 shows the difference in supplier performance between organisations which frequently use a particular leadership style versus those who don’t. Transformational Leadership has by far the biggest impact on supplier performance.[1] It lifts the average satisfaction with the supplier from 6.0 to 7.6 out of 10.
fig-2-grosvenorFigure 2

In fact, the 26 study participants who received the highest performance from their suppliers were 29% more likely to use Transformational Leadership and 33% more likely to use Contingent Reward than the 31 participants reporting the lowest supplier performance.

Why Transformational Leadership works

Transformational Leadership influences supplier performance in four key aspects. Figure 3 shows that keeping up a high level of motivation and spending time on developing suppliers based on their individual needs have the biggest impact on results.

 

fig-3-grosvenorFigure 3
What’s more, suppliers managed by transformational clients go beyond what is required in the contract. Inspired by their client’s leadership, they go out of their way to deliver the best possible results.

As you can see from the study outcomes, your leadership style has a significant impact on the results you can expect to receive from your suppliers. Luckily, changing the way you manage suppliers doesn’t have to be hard.

 

Download our complete study ‘Is your leadership impacting supplier performance?’ today to learn how you can drive better business outcomes.

 

[1] It is also the only style for which this impact is of statistical significance (at the 99% level). We have grouped Management by Exception and Laissez-faire due to the low number of respondents using them.

 

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About Author

Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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