Author: Tim Cummins
Some years ago, I was asked to speak at a meeting of the supplier management staff at a major bank.
Part way through the event, a senior manager asked the audience: ‘Hands up those who think all suppliers are evil.” Every hand was raised.
After the meeting, I contacted a few of their suppliers. It came as no great surprise when I was repeatedly told that this particular customer was among the most difficult to work with – “I try to avoid them”, was one of the more positive replies.
I was reminded of this experience when I recently read a report by Grosvenor Management Consulting, ‘Carrot or Stick? Keys to Boosting Supplier Performance Revealed’. Among the findings was the fact that buyers who achieve greater value from their suppliers treat them differently. Specifically:
- They motivate suppliers by providing meaning and challenge to the work at hand; they are enthusiastic and optimistic about the outcomes of the contract. This finding aligns with recent research from Stanford which identified the importance of autonomy as a motivator for suppliers.
- They lead by example and create trust by conducting business with underlying ethics, principles and values. They go beyond self-interest for the good of the outcomes. (I find this second sentence so frustrating – how can self-interest be different from achieving a good outcome? The answer, of course, is functional or personal measurements such as a savings target that distorts behavior).
- They pay attention to the individual supplier’s needs and growth potential; they develop and coach the supplier to reach their maximum potential. (IACCM’s findings point to the fact that buyers who empathize with suppliers also empathize with internal clients, creating a network of high-performing relationships).
- They challenge the status-quo and support innovative ideas and solutions proposed by the supplier. (This is of critical importance since it implies that the buyer is to a degree ready to operate as the supplier’s advocate, which mirrors the way supplier staff will then be the customer’s advocate in their business).
According to the report, the ‘average’ buyer does not appreciate the importance of most of these points in influencing the value they gain from their suppliers. As its title implies, most have been trained in the ‘stick’ school of procurement, founded on the belief that ‘all suppliers are evil’. It is the few who understand the power of trust, shared information and ‘carrots’ who are generating consistently positive results – and enjoying their work.
Tim Cummins will be a keynote speaker at the PASA CPO Summit in March. ‘Future Proofing You’ will be held on 13 & 14th March 2018 in Sydney.
Read more from Tim Cummins on the Committment Matters website.
Tim Cummins is CEO of the International Association for Contract & Commercial Management (IACCM), a non-profit organization that he founded in 1999. Read more here.