There is always more to everything than just best practices and tables and formulas. How else then would you explain the phenomenon, when company has a tool to define a category strategy in 77 slides (when still empty), spend two years analysing that category and eventually result is… no actions whatsoever? Do you think, having even more tables and tools guarantees the best deal in the world? Public procurement is very highly regulated, analysed, observed… Does it make it the most effective in the world? What is the ingredient, which unites previously mentioned and many other situations? It is there, everyone talks about it, but you cannot touch it. Everyone knows, that having all the certificates in the world does not guarantee full and complete success. Or lack of poor performance. It can as well mean nothing, if they are only put on the shelf to gather dust.
There may be many different names to it. Some call it motivation and in a way they might be right. I personally prefer calling that dark matter “an attitude”. Does it apply specifically to procurement? The answer is also very simple – of course, not. It applies everywhere. Everywhere and anywhere, where there are any people involved.
Meaning To The Buying Organization
Have you ever had to deal with corporate world giants, to whom, your business might not be interesting at all? Have you ever tried dealing with indifferent person? How about dealing with indifferent sales agent of uninterested company on Saturday morning, when your whole year’s contract might depend on whether the person picks up the phone? Such situations are real. More so, when creating your risk plan, these are situations you should be preparing for.
Another sample situation: you have checked potential supplier’s financial documents, legal documents, quality documents… They provided more than you asked for and they get a contract. But as soon as that happens, when it comes to serving your business on a routine day-to-day business, you start experiencing more and more unplanned costs:
- They start changing payment conditions.
- They start adjusting delivery conditions.
- They delay accepting and approving purchasing orders.
- They start changing Bills Of Materials (recipes, ingredients, technology) without informing you.
- They avoid business transparency and shift their profits to “added charges” (transportations, handling fees, delays, etc.).
These and many other can cause damage and costs to the business. To any side of the business: buying organization, which is not open about its intentions and / or plans, might end up causing losses to the seller. Selling company might waste time, resources (in shape of samples, travelling expenses, even capital investment) and end up not getting the business. The same is true to the buying organisation: poor quality, delayed deliveries, lost sales, lost market – you name it.
Signs of the phenomenon
Try drawing Ishikawa diagram for any of widely known not so “beautiful” stories. Take TESCO’s behaviour with its suppliers. Take modern world slavery. Take any corporate bullying situation. Is it possible, that those situations have a common denominator?
That dark matter is something that creates long-term equilibrium in any relationships. Take supply and demand model as an example. There might be various artificially created or constrained situations, when the common law does not apply, but in the long term, the market is self-regulating. The same applies to buy-sell situations: in a short term, the negotiator of any side might have achieved, presumably, good results. But only the attitude of everyone involved will define, whether or not these results will be sustainable in the long run. Some examples:
- Poor management / company culture resulting in high staff turnover. When your account manager changes every six months and the new person has to waste another three months of everyone’s time to at least start getting into the rhythm of proper cooperation, it always means costs and disruptions.
- Poor management / company culture resulting in double standards in quality systems. A lot of things can go wrong here.
- Poor communication (or unwillingness to even engage into the process, to listen) finishing with many misunderstandings and conflicts.
- Poor time management, starting another closed circuit – lengthy meetings, non-efficient time using, demotivated and de-focused staff.
A lot of the things might have different names. Many times you could try blaming “company culture” or “environmental culture”. That phenomenon does not create itself. It all starts with people. And there is always a reason – we might simply not know it. We can observe signs, indications, and symptoms. We can analyse and try to interpret what they might mean to the “us” side of the table. Most importantly, we have to acknowledge them and admit, that those things are not going away. We cannot base business decisions only on hope. Hope that things will work out or go away. At least not in the situations, where we can do something about it.
Identifying and evaluating the approach
Have you ever wondered, how can you put into numbers supplier’s unwillingness to work with you? Where, on the “supplier audit scorecard” do you put all “accidentally deleted e-mails”?
I heard about this for the first time while preparing for one of the supplier audits. The search on Google suggested Norman Black’s “5 minute rule”. Some of it, in a way, is described in Kraljic’s Buyer / Supplier perception model. I did not start using approach audit immediately. Some time has passed. Some experience crept in with time. Experience from many perspectives: buyer, seller, project manager. Now “approach audit” has become a part of any supplier relationship management system that I build.
How much is it important for you? Answering next question might help find the answer. How much of risk are you willing to take? Up to each and every one of us to decide. For me that one part of traditionally five parts of supplier evaluation usually takes from 10% anywhere to 30% of the overall score.
Who do I observe? I observe the company: company’s official claims and how do they apply in reality. I also separately observe key account person (if possible – key person in the business / factory: MD, CEO…) to analyse, where and what is the root cause. Is it possible to escalate, if needed? Or does it come from the very top and changing small parts would mean too much of a hassle to even start anything in the first place?
What do I observe while evaluating the approach?
- Ease of arranging meeting (Is there a feeling of avoiding the meeting? Rescheduling several times? Why? Was it availability of your account person? Was it because of other staff availability? Did you get any explanations?)
- Proactive preparation for the meeting (Approach to handling their own and your time: agenda / meeting information provided in advance? Materials for the meeting?)
- Capacity usage (personal availability for the key contact person). Does the company (factory) work round-the-clock? Two shifts? Do they have any capacity for you? Getting your business will bring benefits or cause problems? If your key person is already overloaded – who will make sure he/she will have time for your business’ needs?
- Loading / unloading bay’s conditions: real quality is when you do what you do at the same level no matter if anyone is watching or not. If “visitor routes” are vastly different from “staff only” areas – expect double standards in everything.
- Company’s backyard condition: questions to company: “does it look like a rule or exception?”; a question to the lead person: “does he/she seem surprised? Did he/she know?”
- How do company staff look like in general (saying hello’s, smiling, etc.). Money can’t buy happiness, right? Are the smiles on the staff faces fake? Did you hear anyone laughing during your visit? Did you meet anyone during your visit at all? Do they enjoy their jobs?
- Guest parking area. Does it exist? Are there any company staff company cars in those places? Approach and respect from company to its guests as well as staff’s respect to company’s values.
- Meeting material. Question one was “was it prepared”? Again, in addition to everything else: did they print 20 copies of 20 slide presentations? Single sided? Do they say they are “green”? Do you believe it?
- Customer awareness. Did key account person know your needs? At least assumptions? Was there any preparation for the meeting done? Did other participants have the same knowledge: were they briefed or were they genuinely interested?
- General business etiquette: behaviour with the phone during the meeting, for instance. Were everyone in their phones? Key account person?
- Use of special sales tricks, NLP and so on. Especially, poorly performed and thus identified.
- Avoiding decisions, situations, taking on responsibilities.
- Not reading instructions, trying to by-pass rules, applied to everyone in the game.
- Body language. If I can, I observe as many people as possible to understand how many of them are feeling uncomfortable with information being given. I ask questions while the other part is giving their pitch: they might know their story by heart, they might have practiced it many times in front of the mirror, but they will really be more vulnerable and will show their real reaction and emotions, when they are talking about unexpected things. Are they looking right or left? If they are looking right (your left) – they are more likely to be lying. Left – higher chances of telling the truth (reverse is for left-handed people).
There might be many other factors added to it. Business changes very fast these days. The company might not be able to get all the certificates required, but their willingness and determination to do so has value. Or maybe, their ability to meet and exceed all the required standards without any special external motivation factors is even better?
Thank you for reading! If you have any questions – please simply let me know. I am sharing a small template here to help you all have a small glimpse into the gap between reality and declarations. Approach evaluation