It feels like everyone is vying to be a customer of choice in crowded supply chains.

Buy-side supplier managers have budgets but often a limited choice of vendors.

The supplier managers are seeking proactive suppliers who are continuously improving and contributing cost and value proposals that improve the contract outcomes.

It can be a tricky balance between getting the attention of busy suppliers with asking too much of them.

On the one hand, vendors are bombarded with buy-side initiatives, and they need to consider the return on investment of their efforts.

Some buyers I work with say they feel deprioritized compared to the original opportunity that the supplier proposed during the selection process.

On the other hand, some vendors I work with say they feel their buyers don’t care about their business goals.

These vendors also feel disappointed compared to the original opportunity proposed during the selection process.

When the supplier manager is navigating these waters, it is useful to look at the behaviour on both the buy and sell side. Often responses are driven by the other party’s actions or we can draw incorrect conclusions by making assumptions.

These might be signs that you are asking your suppliers for too much:

These might be signs that you are not asking enough of your suppliers:

Ultimately, becoming a customer of choice is a team approach that requires the buy-in of a multi-functional team of business colleagues and one or more suppliers. The right strategy, relationship style, contractual terms and motivation can deliver positive outcomes for all parties.

But grating feelings about the relationship behaviours are an indication of poor quality that is already (or will soon start) leaking into the contractual performance and cost. Addressing the practices behind these feelings though regular, open and action-driving communication is the first step towards appropriately negotiating a beneficial relationship.

A customer of choice feels:

• Listened to and respected.
• Able to take appropriate actions as a response to listening to their suppliers.
• Proud to be part of a high-performing team.
• Like an effective champion of the end customer.
• Regardless of the balance of power, the current relationship was mutually agreed.

Many of us find it tough to get our suppliers’ attention.

Just like us, they are pushed for time and tend to prioritize the people that are most interesting to them.

Our job as Procurement professionals is to figure out what can be interesting about our business, our account and our personal style that will garner loyalty from the supply base. We tend to over-emphasise the importance of the value of spend as the main method of motivating vendors.

The author Dan Pink describes three areas we can focus in his book “Drive – The Surprising Truth About What Motivates Us”. His research said that people at work are motivated by autonomy, purpose and a sense of mastery much more than they are by money.

For example, you may be managing a contract with disappointing supplier performance and looking to introduce some form of incentive scheme, financial or otherwise. Or perhaps you have a supplier who is fulfilling their contractual obligations but is not contributing to continuous improvement.

How do we motivate our suppliers’ senior management, account managers and operational staff to improve performance? Let’s apply Pink’s three motivators.

Autonomy: the ability to design our own working priorities.

Asking our suppliers to tell us what we should be measuring seems like a radical concept. After all, performance metrics must be based on your organization’s business needs. But suppliers can propose innovative approaches to how our goals can be achieved.

For example, I worked with a supplier who had a target for telephone response time. They employed a flexible workforce so that at peak times, telephone calls that were beyond the capacity of their call centre could be routed to second tier sub-contractors trained in the customer’s needs.

Purpose: the feeling of making a difference.

It’s easy to think that suppliers must be motivated by money above anything else, so we often have financial incentives and disincentives in supply contracts for good or poor performance.

Pink, however, argues that instead of motivating people not to do something, fines tend to encourage people to treat the sanction as an acceptable “price” for a allowing a failure.

Effective supplier performance contracts that are most successful when the incentives are constantly updated and addresses areas of interest of both the buy and supply-side. For services, it is more powerful when those who benefit from any rewards are those executing the day-to-day contract, rather than account managers or senior managers.

Mastery: achieving personal improvement.

Too often contract managers are reluctant to praise suppliers for doing “what we are paying them to do anyway”. But recognition programmes have been proven to deliver better contract outcomes. These may be formal annual supplier award schemes or more informal acknowledgements like getting a mention in published content.

Understanding what motivates our suppliers is worth the effort. Use an opportunity like a supplier visit to gather the opinions of many different people in the organization, not just the account manager. And if you already have a supplier survey active in your organization, you can link your message to a wider narrative about listening to your suppliers.

Use of various forms of simulation can help to make training personalised to individual roles, and can recreate real working scenarios in a safe, virtual format. Walmart makes good use 360-degree video-based virtual reality to enhance store and management training, taking technology that was used for athletic programs and adapting it to involve human interactions.

Real-life face-to-face supplier meetings are not the place to “practise” the skill of influencing suppliers. Therefore, scenarios like supplier negotiation or a visit to a supplier factory work well in a simulated classroom environment.

The simulation involves pre-classroom eLearning to understand the tools and concepts, followed by a role-play based class event.

The training includes a mixture of visual prompts, role play and data analysis. Simulation is a safe test environment to try different behaviours and analysis activities and have a chance to reflect afterwards about which worked best.

Why does simulation work?

• It is “safe” – a chance to experiment with behavioural change without disturbing supplier relationships.
• It is challenging – using third parties to role play different scenarios takes learners out of their comfort zone.
• It is familiar – the concepts are like the learners’ daily activity, so they can easily apply the ways of working and behaviors they would normally.
• It uses “on the job” scenarios – the most effective learning is experimental. Using the 70:20:10 model, 70% of learning should be on the job and just 10% is formal. This style of learning brings real work examples that have been customised to fit a classroom event.
• It is low cost – individual coaching and mentoring is an expensive solution to promote behavioural change. Simulation uses eLearning to prepare the leaner for a group event in the classroom environment. These all have a low cost per learners.

Simulation is a valuable addition to a Procurement Academy. A blend of self-directed learning and instructor-led learning is an efficient approach to achieve world class procurement practice.

80% of many Procurement teams will be either Millennial or Generation Z by 2025

The existing competency gap is at risk of widening. A diminishing group of experienced professionals may fail to pass on skills and knowledge to early-career colleagues, due to their high work burden. The new dynamic has implications for CPOs in terms of how they develop their teams to deliver greater value to the organization.

Past:

• Expert Procurement professionals are considered “too experienced” for training
• Many Procurement professionals are “too busy to learn”
• 70:20:10 is a “training” formula. Training commitment is monitored through Learning Management Systems

Future:

• 70:20:10 will be a workplace model for everyone. Learning is perpetual, not allocated to “training time”
• The 70, the 20 and the 10 are integrated through:
• Self directed formal learning (10%)
• Planned and work specific informal learning through discussion and sharing (20%)
• Evidenced application of learning with line manager support (70%)

Conclusion

Those organizations that make a commitment to learning are attractive to professionals that drive the most positive change.

Self-directed learning sticks. Procurement professionals need a wider range of options to choose from.

eLearning is 50% faster and 40% cheaper than classroom formal learning modes. Pfizer, Micron and adidas are a few of the organizations that have benefited from ADR’s eLearning.

Each commercial negotiator has a natural negotiating style.

Sometimes this is driven by the business environment and commercial factors that are relevant to the agreement being discussed. Many times, it reflects the preferences, beliefs and values of the individual. This can be harnessed to each person’s advantage because a natural style will result in negotiations that reflect authentic views and true passions. However, everyone benefits from reflecting upon whether their negotiation personality is serving the best interests of the organization they represent and the agreement they seek to make.

Negotiation personalities are typically:

Competitive – Seeking to conquer, thriving in combative circumstances, prescriptive and direct

Collaborative – Problem-solving, protective of the relationship, consultative and open

Neither style is right or wrong, it is simply which is more appropriate and more likely to be effective in the negotiation scenario presented. When the natural style is known, it is then essential to recognize the pitfalls associated with failing to apply the style.

The most common pitfall with the identification and application of the appropriate style is misinterpreting competitive style with being “tough” and a collaborative style as being “soft”. Neither is true as both styles have common characteristics. They are both rigorous, ethical, professional and solutions-driven.

To improve your negotiation personality, identify the most common mistakes with misinterpretation of competitive and collaborative styles.

Instead of being too soft (treating the other party like a friend to get agreement) or too tough (treating the other party like an adversary to get a victory), seek an efficient solution.

Instead of being too soft (insisting on achieving agreement at any cost) or too tough (insisting on achieving your position at any cost), determine success based on facts.

6 top tips for successful online meetings

1. Online meetings are like bad knitwear- they can quickly become shapeless

Implement a structure for your meeting. It may be an agenda, a methodology, a negotiation plan. It leads us to an outcome or decision. It the structure was originally intended for a face to face discussion; you may need to tailor the timings and approach somewhat. Discipline is imposed through a framework.

2. Don’t fear the void

In a face to face discussion, people are silent as they think, make notes, get refreshments. It goes unnoticed. Online it is fiercely apparent. Don’t interpret online silence as dissent, disgruntlement or discomfort. Be comfortable with silence.

3. Manage your inner web-bore

People fatigue much more quickly in online meetings than face to face meetings. Brief is better. Use multiple micro sessions in place of each face to face meeting, to achieve the same outcomes.

In a face to face discussion, humans find each other fascinating. Brains are constantly processing the voices, expressions, choice of words and reactions. These are in full technicolour face to face. The flatness of onscreen images or teleconference removes those nuances. The lack of sensory input allows the brain to drift and the speaker to drone. A change of facilitator can help here.

4. Pick some props

People need a focus online. Give them images, share a whiteboard to make notes or to make a note of points agreed. Keep changing your props to make sure everyone is still in attendance and listening.

Even better, ask your audience to move around during the call. Sitting for long periods stagnates body and mind.

Use voting buttons for generic topics but don’t make key decisions that way. The transparency can make people feel exposed.

Voting also seems to encourage negotiators to use those “no-no” phrases like “meet you half way” or “let’s split the difference”. These phrases mean there is no concession strategy, which is poor planning.

5. Avoid the looks that kill

When one doesn’t have an audience, the body relaxes. But online, such body language can appear negative or disengaged.

If we are faced with a video audience, a speaker can start to “perform” for the camera in a way that is very unnatural for them.

If this is a concern, simply don’t use video. Allow everyone feel comfortable to think in peace with their thinking face on.

Alternatively, agree 10 minutes video time at the start of an online meeting. This way, everyone saves face and avoids having to say “I don’t want to look at you – or me!”

6. Celebrate your choices

You needed to have complex or difficult conversations which might have benefited from a face to face discussion. As this was not possible, you have chosen to use online communication tools. Don’t apologise for that, enjoy the benefits that this offers you such as collaboration tools and short discussions slots in your busy day.

Keep emphasising the positives at each stage of the discussion:

We are working, despite the challenges.

We are moving forward with our plans.

We are making a success of online meetings.

For organizations who are buying from non-competitive supply markets (for example, the supplier solution is the only viable option for reasons of specification, location or confidentiality), the most suitable negotiation route is a collaborative negotiation.

Given the fact that there is no credible alternative to this supplier, many such negotiations still fail to achieve any agreement. Or the agreement made is sub-optimal to one or both parties. Buyers cite the reasons for this, which often include: ▪ Lack of flexibility of the supplier ▪ Personality clash ▪ Inadequate or inappropriate concessions made on either side

It is essential to review such negotiations and to assess whether the necessary prerequisites for collaborative negotiation were in place. For example:

1 Mutual trust

The correct negotiation atmosphere must exist to negotiate in collaborative negotiations. Many commercial buyers and contract managers allow their ego to cloud their negotiation planning, often thinking “I will start off collaborative and see what the other party does – I may switch styles if I don’t like how things are going”. If collaboration is perceived as a bargaining technique then it will not work. The commercial manager must have the courage to select the appropriate style and the associated behaviors and commit to them, regardless of their ego or personal preferences.

2. A positive relationship

Where there is dependency, it is essential to treat the commercial relationship as if it has value in its own right and must be nurtured appropriately. It is not a matter of being “friendly”, which is often a misinterpretation of collaborative negotiation. The relationship must be underpinned by respect, with practices such as sharing of goals, continuous improvement activity and joint effort to identify and deliver mutual benefits.

3. Shared interests

In collaborative negotiation, all parties acknowledge that a negotiated settlement will always be superior to no agreement. Where it is accepted that agreement is in all parties’ interests, the focus of negotiation becomes how everyone can contribute to meeting the goals of all parties and not just maximizing their own spoils.

4. A zone of possible agreement (ZOPA)

A ZOPA is the negotiating area where agreement is feasible, regardless of which party appears to be achieving a greater “win” from negotiation. All negotiation parties must establish whether a ZOPA even exists early on to avoid wasted effort. This can be achieved through sharing organizational interests accurately and adequately.

Collaborative negotiations typically fail because one or more of these conditions was not in place, either because the negotiating parties were not aware of their importance, or due to a lack of skill on the negotiating parties’ part. Unfortunately, many commercial negotiators would rather treat negotiation like a game or a gamble than apply a tried and trusted effective negotiation framework to their efforts.

It is increasingly common for organizations to separate Sourcing from Supplier Management tasks, if not the entire function – it is clear why.

With effective cross-functional working and joint business objectives these concerns can be overcome to make a stronger supplier-facing unit, with a single voice and common message to the external parties that contribute to a high-performing team.

Buying organizations that are highly vulnerable to issues such as reputational damage, business continuity failure and security breaches often have dedicated Supplier Management functions.

Supplier Management encompasses a wide range of risk management, performance improvement and contract ownership activity. Most businesses find it is normal now to have fewer vendor relationships that house massive cost and risk.

Meanwhile, the Sourcing team has a huge responsibility to continually observe the supply market and look for emerging sources of capability and advantage. They run large, complex competitive bids, manage challenging contractual negotiations and enhance value through methods such as cost improvement and improving sustainability in their supply chains.

The advantages

Dedicated supplier performance managers, able to judiciously apply incentive programs. •Full time resource focused on supplier capability development, cost improvement and innovation.

Separation of roles protects the partnership from the relationship battering that competitive bidding can involve.

The disadvantages

Supplier Managers are sometimes inadequately involved in the process of business needs analysis and contracting, which hampers performance management later on.

Future visioning of the supply base can be a low priority when operational imperatives are the focus.

The needs of Supplier Management can overshadow commercial wisdom. Risk management, new product development or new projects mean that the Supplier Managers are not always monitoring whether the current relationship style suits the competitive landscape of the supply market.

With effective cross-functional working and joint business objectives these concerns can be overcome to make a stronger supplier-facing unit, with a single voice and common message to the external parties that contribute to a high-performing team.

One of the best things about being part of a small, global business is the frequent opportunity to learn how Procurement is evolving in other countries and cultures.

Here are some insights I gathered when speaking to my colleague Abed Sinan from ADR’s Middle East business. The team’s client base is typically in the Gulf Cooperation Council (GCC),a political and economic alliance of six Middle Eastern countries (Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, and Oman). The GCC has a population of around 45 million and GDP in excess of 1.4 Trillion USD.

A profile of procurement skills in the Middle East

Current state:

• Many procurement decisions are still largely stakeholder-led and procurement people are often perceived as an “after-the-fact” team to implement the plan.
• Many individuals have skills strengths in specific sourcing and supplier management activities, but often need training in the full category and supplier management process to make connections between the competencies and to leverage their combined knowledge. As Abed commented, “there is no one-stop shop buyer”.
• Procurement competence development is a low priority for too many organizations.

Opportunities:

• There is a high appetite for learning, and procurement competence is increasing rapidly in all GCC states.
• ADR coaches consistently report a “have a go” attitude from learners. They want to try all new tools and techniques.
• Procurement professionals in the GCC feel strongly that their learning activity should have an immediate impact on their sourcing activities. Our ADR tutors note that the “return on training” is very high when training is followed with category coaching. There is a strong will to demonstrate benefit through concentrated use of sourcing and supplier management techniques.

The key themes of Generation Z according to a McKinsey&Company article include:

• Fewer confrontations and more dialogue
• Inclusivity and multiple definitions of self
• Realistic and pragmatic perspective

The highly open and ethical mindset is conducive to effective collaborative negotiations.

These are typically difficult negotiation behaviours to master, with many Generation X and Y procurement negotiators falling back to competitive behaviour when pressured for savings or speed.

Most importantly, collaborative negotiations are increasingly the norm. Many procurement professionals are working on categories that involve strategic relationships with suppliers. This may be because the market is non-competitive, dependency or because there is a clear benefit from close long-term working.

It is often the case that strategic relationships are given to the more experienced or long-serving staff members. However, the portfolio matrix reminds us that resource allocation should be based on behavioural fit. Given this profile, Strategic categories fit Generation Z procurement professionals well.

Critical category: ideal buyer personalities

• Tenacious
• Problem-solving
• Dynamic

Strategic category: ideal buyer personalities:

• Creative
• Inclusive
• Discussion-leading

Acquisition category: ideal buyer personalities

• Organised
• Meticulous
• Data-driven decision-makers

Leverage category: ideal buyer personalities:

• Driven
• Motivated and motivators
• High expectation of self and others

At ADR International, we teach negotiation skills to Procurement professionals worldwide, both classroom and online. With a larger proportion of Generation Z buyers in our classes, the shift towards digital learning is apparent. In addition to providing more online learning, what should Procurement Leaders do to ensure their Generation Z procurement staff are developed to excel in collaborative negotiation?

• Generation Zers need to experiment and explore. Allocate them to strategic category teams to contribute.
• Empower Generation Zers. They will generate ideas and should be accountable for delivering them.
• Encourage them in supplier management and supplier meetings. Being attuned to the importance of mutual gains will add authenticity to their discussions.

Source: McKinsey&Company. “True Gen: Generation Z and its implications for companies”. Tracy Francis and Fernanda Hoefel