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.

Supplier management unlocks additional value once strategic sourcing is complete.  There are many routes to incremental benefits after the contract is signed:

• Savings through continuous adaptation of the statement of work
• Joint income growth by working with suppliers to identify better solutions for customers
• Higher customer satisfaction through root cause analysis and corrective action planning
• Continuous improvement through problem solving and setting stretch goals
• Innovation through supplier development to expand capability and capacity
• Sustainability improvement agenda in every aspect of supply

The main barrier to achieving these benefits is supplier management skills.  Post-contract activity is typically the responsibility of functional professionals where supplier management is only a small part of their job.

Business professionals need support to grow their supplier management expertise.

They need to know what are the conditions that allow their suppliers to excel.

A recent supplier management benchmarking study conducted by ADR International investigated how best practice organizations achieved higher value from vendor relationships.

These four principles were demonstrated by world class practitioners of supplier management.

Principle 1:  Sequence Category Management before Supplier Management

Before we start to tier / segment / classify suppliers, we must have a category strategy.  The category strategy is a long-term vision of how interventions in groups of spend will support the triple bottom line of people, profit and planet.  A category view assesses cost, market conditions and customer needs before deciding on the optimal sourcing, contracting and relationship strategies.

Principle 2:  Make listening to suppliers – individually and collectively – a good habit

Listening with intent is a good habit for any business professional.  Fostering this among Supplier Managers, Stakeholders and Procurement demonstrates to suppliers that we care about helping them meet their business goals.

Best in class supplier managers create opportunities to listen.  Regular calls, dedicated time to brainstorm improvement, collecting feedback, discussing trends and surveying the supply base.

Listening…

• is courteous, encourages contribution and problem solving
• ensures that the buy-side team adopts a common style towards a supplier
• helps us navigate the market to our advantage through supplier insight

Principle 3:  Use the customer’s needs as the basis for behavior and reward for suppliers

Organizations that start strategy planning with the end customer’s needs focus on what is important.  We demonstrate to the supplier what really matters through performance measures.  If we have the mechanisms, we can reinforce this through our approach to reward and compensation.

Reward must match the behavioral style chosen for the relationship.  Best practice supplier managers choose a relationship style (often in collaboration with suppliers) that matches their relationship objectives in terms of cost, quality, sustainability and customer value.

Principle 4:  Guarantee success – because everyone likes to win

You know the difficulty with putting Procurement people and Sales people in the same room?  They both like to win.  This can also be a benefit, when it is a cross-company team.  Allow, enable and encourage teams to win through small or major project initiatives.  Those organizations that recognize that people like being on the winning team are the best at finding joint wins.

To drive value from supplier management, best practice organizations apply these principles daily.  They succeed most when suppliers and stakeholders tell their peers the great outcomes they have experienced.  Supplier management is best driven by great role modelling and positive behaviors rather than a system-imposed solution.

Highlights from ADR’s Development Needs Analysis Skills Assessment

ADR’s online skills assessment tool has been in use for over 15 years. More than 30,000 assessments have helped professionals from around the world gain objective insight on their capability profile.

During that period, the challenges that the Procurement professional faces have shifted massively.

Compliance, cost reduction and supplier performance remain core themes. But most people are also striving to positively impact the “triple bottom line” of people, profit and planet. Procurement performance and continuous improvement is the first theme that emerges from our results.

The second topic that features relates to data analysis, use of analytics and insight. The broader aspirations of Procurement in the 21st century are set in the context of the opportunities presented by the digital age. Rich data, enablement of functions by machines and better visibility in supply chains give the procurement professional greater scope – and greater pressure – to drive bigger rewards.

The third area of note is sustainable procurement practices and supply chain analysis. Application of these techniques was not familiar to many professionals operating outside of the “critical few” strategic supplier relationships.

The following topics are the global highlights of ADR’s procurement skills assessment from 2015 to 2019.

Top Areas of Success

Managing adherence to policy
Stakeholder engagement
Negotiation planning
Negotiation execution

Top Areas for Development

Continuous improvement
Procurement data analysis, supply chain analysis and supplier financial analysis
Performance contracting
Sustainable sourcing practices

The other topic that appeared as a capability gap in some clusters of professional roles was best practice sharing. Feedback from our classroom learners tells us that this is partly explained by their leaders not recognizing the value of this and partly by a lack of facilitation skills.

About ADR’s Skills Assessment

ADR’s Development Needs Analysis is a skills survey that asks procurement professionals about their current approaches to day to day supply-related issues and challenges. Based on their responses, a profile is built of their skills strengths and areas for development. The survey is built uniquely for each organization, to suit their sourcing process, terminology and priorities. The core topics of the survey are used to compile anonymised results about global skills across more than 30 competency groups.

To find out more about how your organization can benefit, contact [email protected]

The scope of this white paper is supplier relationship management.

The aim of the white paper is to explore the negotiated collaborative supplier relationship. This description is suited to a subset of strategic suppliers where the relationship has been jointly created in an intentional, behaviours – driven manner.

Each organization may have its own terminology, but the relationship features are common.

The first element of the negotiated collaborative relationship is the “negotiated” part. The relationship has been designed by the relationship contributors in a formal, considered way. The contractual, performance, and behavioural parameters are aligned, agreed and documented.

Secondly, the negotiated collaborative relationship is characterized by its collaborative nature. Multi-functional team work, transparency of information and problem-solving activities are the norm between the buy-side and sell-side.

The white paper will explore the reasons why such a relationship may be considered, what is required to resource these relationships and what benefits they can offer the buying and supplying organizations.

1: Why choose a negotiated collaborative relationship?

A negotiated collaborative relationship is a model where buy-side and sell-side representatives agree to a team-working style. It is a resource intensive but high-reward approach that is only possible with a small number of relationships. Collaborative suppliers are typically formed with strategic vendors where:

• The supply market has little or no credible alternatives, and / or:
• Quality failure relating to purchase presents a significant risk to safety, security or reputation and the likelihood of detecting an incident before it occurs is low, and / or:
• There is greater benefit to both parties through a collaborative relationship compared to one that is characterised by leverage-type behaviours (a tactical relationship).

The relationship is chosen because it is evident to both supply side and buy-side parties that there is significantly more value available from this type of relationship than a traditional buyer-supplier relationship and it is therefore worth the additional effort.

Figure 1: How buy and sell-side expectations differ for supplier relationship types

Collaborative supplier relationships are typically borne out of commercial necessity rather than sentiment. They are not a soft option and will seldom present an easier management task than tactical suppliers.

2. How is the Negotiation Collaborative Relationship formed?

The relationship may be established at any time throughout the life of the total relationship. It could be at contracting stage for a new supplier, or mid contract for an established one. For incumbent suppliers, it is likely that a new commercial framework will need to be set up that reflects the new dynamics in terms of performance management, compensation and commercial outcomes.

Expert supplier managers never allow supplier relationships to elide from tactical to collaborative. It is always intentional and negotiated in the same way that a commercial agreement is discussed.  Such discussions look at three aspects of the relationship, all of which have commercial implications – thinking, practices and behaviors.

Thinking: the relationship strategy – why do both parties want this, what do they hope to achieve from it? Incremental financial reward, reputation, risk management, business development sustainability and quality improvement are all potential aspirations. This requires documenting and revisiting just as much as the legal agreement.

Practices: the relationship tasks – how will the outcomes be achieved and when? The tasks, responsibilities and approach should form the basis of regular discussions and meetings, rather than routine performance management.

Behaviors – this is both the style and the associated behaviors to be adopted. They will be applied consistently during contract management, performance challenges, solving problems and addressing reward and sanction.

Internal stakeholders must be part of agreeing these elements with the supplier because they will often be the main party who is implementing them on a day to day basis.

3: Brainstorming in strategic supplier relationships

Brainstorming ideas for improvement should be an expected, routine part of the negotiated collaborative relationship activities. This could occur during regular online meetings or face to face reviews.

The usual brainstorming rules apply – all suggestions are positive, worthy of compliment based on the effort made to devise them, and worth discussing. The more ideas, the better. Most importantly, the supplier should feel that the more input they have to the idea’s generation, evaluation and execution, the greater the chance of success. It is the buyer’s job to make that statement the truth by appropriately resourcing the selected ideas through senior sponsorship, motivation and appropriate commercial response, if appropriate.

Investment should:

• Be shared (or not) between the buy and sell side in whatever split matches the relationship goals
• Be proportionate to the return
• Allow enough emotional distance that if it fails, it does not damage the relationship or belief in the concept of continuous improvement.

If either party does not appear to be engaging with the problem-solving approach to the previously agreed extent, the reasons should be discussed. It may be an institutional issue (e.g. my boss won’t sanction this) or it could reflect an unwillingness to make personal change by the account manager (it inconveniences me). It is the buyer’s job to enable problem solving and tackle these challenges with the cross-organization team.

Whose job is it to generate ideas for improvement? Both parties, of course. But if the expectation is for the supplier to propose more ideas, then it is only fair that buyer should contribute a higher level of enthusiasm and personal commitment for attainment of the goals. As long as everyone on the team is inputting something – expertise, resource, insight, or excitement. It all has value for relationship quality.

4: Managing power imbalance

Many strategic relationships take a vested relationship model, where negotiation is left behind as “old-style” thinking. However, the main difference in a negotiated collaborative relationship is that that it doesn’t matter if there is relationship imbalance between the parties.

Negotiated collaborative relationship are not equal relationships.

Problem solving and creative thinking are required by all parties, but not necessarily in the same proportions.

In fact, it is may be a healthy thing to acknowledge it and to build a relationship that uses that imbalance as a source of strength. It is not so much a “partnership” as a “dynamic”.

Many elements could contribute to a sense of imbalance. It can be a cause of frustration in strategic relationships that our partners are not “treating us well”. This can be driven by many issues, for example:

• Capacity or capability gaps
• Fit of relationship to business goals
• Friction between personalities
• Company culture or application of leverage behaviours

The negotiated relationship occurs when the parties agree that it will help the relationship and its outcomes better if one of them is the “driving” party and the other is the “supportive” party. This power dynamic might be temporary, or it could mark the entire character of the partnership.

This does not reflect a sense of precedence, superiority or intellectual dominance. It is just an acknowledgement of what will be effective for everyone. Once it is negotiated, a framework of practices and behaviors can be established that match the agreed style.

This example shows how a negotiated collaborative relationship might operate with an imbalanced approach:

When the team is balanced in terms of complementary skills, motivations and commitment, the source of these elements is irrelevant. The teamwork model of supplier relationships means that both parties accept that a negotiated relationship is appropriate. They then establish a suitable relationship style that helps to maintain the momentum towards the agreed relationship goals. That style needs considerable exploration to set up, experiment with and freeze.

5: Setting up a performance management framework

Negotiated collaborative relationships typically represent high risk, high spend suppliers. It makes sense that they would have a robust performance framework so that supplier managers can target and track outcomes. Yet performance frameworks are often not collaborative, by virtue of being:

• Based on buy-side business needs, not things that are important to the supplier’s business.
• Imposed, with first sight being at the competitive bidding, negotiation or contracting stages.
• Associated with sanctions (at the extreme, termination for breach of contract)

This is not in keeping with the interest-based negotiation that should accompany the launch of a strategic relationship. Realistically, negotiating the performance framework together with suppliers can sometimes drive the sort of defensive, cautious behaviours that are not collaborative at all.

Not having a performance framework is hardly an option: the business (and sometimes regulators) expect that relationships that could involve catastrophic consequences to safety or security must be monitored carefully. This often drives the use of performance motivators such as financial sanctions, growth limitations or some form of relegation in the buyer’s organization. Minor infractions that do not cause jeopardy may incur smaller negative consequences.

The thing is, suppliers have a choice about performance: either commit fully to excellence or decide whether the punishment for non-performance is worth it.

And it might be worth accepting the buyer’s sanction if

• A more valued customer needs the resource that is required to address the performance issue
• A new prospect or sale is diverting the supplier.
• The supplier deems the account not worthy of the investment, or nearing its end of life

Buyers get quite insulted by these sorts of excuses, but instead of foot-stamping, the buyer can remind the supplier that letting the team down damages the agreed relationship infrastructure. Buyers must also take responsibility for performance management and its associated behaviours. “Managing the KPIs” is not enough. Suppliers need

• Personal attention to issues that concern them such as payment
• An open channel to share feedback
• Reward for behaving within the agreed relationship style

Regular meetings, checking in to see how the agreement and the people are and deciding how to celebrate successes are all team activities that support relationship-building.

Performance frameworks usually involve punishment. Punishment of any kind can encourage “hiding the truth” in an effort to avoid the consequences. This secrecy does not suit collaborative relationships, and it can be a bold choice to avoid rigid performance measurement with strategic suppliers. If suppliers demonstrate that they need sanction (due to repeated breach of performance conditions), the relationship should be demoted in style back to the tactical model (e.g. you are not mature enough to work in the teamwork way, so we’ll have to build back up to it through practice).

6. Managing suppliers using behaviour modification

Most buyer are familiar with the concept of conditioning. It is about the use of messages and behaviour to create a desired perception in a current or prospective supplier.

It Is applied frequently during competitive bidding to enhance the motivation of suppliers to win or keep business and magnify their concerns about losing out on opportunities. This is a tactical use of conditioning because it is short-term in its focus and it is best suited to suppliers in competitive markets.

Conditioning is a form of behaviour modification that is just as important – maybe even more so – for strategic suppliers.

Behaviour modification of suppliers through buyer-driven initiative suits negotiated collaborative relationships, where a team work model supports strategic supplier partnerships.

For example, maintaining an upbeat, energetic tone underpins joint problem solving and continuous improvement. It demonstrates optimism that the team will find solutions together and overcome obstacles. It is the buyer’s job to drive this positive tone and monitor if it is being effective in contributing to the mutually agreed outcomes.

Where the supplier does not appear to be as proactive as the buyer would expect of a partner, the buyer will also use behaviour modification techniques, perhaps ignoring supplier behaviour that is unwelcome (where it is not damaging to do so) and praising any contribution made.

Just as the buyer needs to examine what motivates the supplier, the smart supplier will do the same of the buyer. Suppliers will consider whether behaviour modification would benefit the relationship and in what ways suppliers should seek direction from the buyer about how to challenge and change this.

For example, the supplier could be encouraged to ask the question “how does that meet the milestone set?” if the buyer reverts to a price-focused discussion during a review meeting. The total cost implication could be relevant, but price-talk tends to be tactical in its intent. Nagging to remind us of how we agreed to behave is 2-way.

7. How to set up the negotiated collaborative relationship

If you have decided that a teamwork model is correct, it is useful to start the meetings with a session dedicated to documenting the reasons for that assessment. Brainstorm why you feel this relationship is superior to alternatives or the other party offers more value than their peers. These are your relationship strengths, and they are what you can come back to in difficult times. They are also the foundations of your first initiatives. If you feel that the team has great cost analysis skills to customer service focus, use these themes as the basis of your first projects. This is also a good way of practising the skill of “letting someone else drive the bus” because you may need to hand over the wheel temporarily while the person who is most suited to take the lead at that time takes over. Resources are complementary in a team. Stick to your knitting.

Blame is not useful in buyer / supplier discussions. It is better to be effective than “correct”.

When a supplier is immature (but you have no choice but to use them), it is not useful to point out their deficiencies repeatedly. Instead, remind the supplier that they must prepare for the events where their gaps are likely to cause performance problems and get on top of that through regular self-assessment of capability and performance output. It gives the supplier time to review, risk-assess and respond.

Conclusion

The negotiated collaborative relationship is visible in many modern Procurement teams, often with other titles. When it is working well, it is a showcase relationship that demonstrates the value of team working. Power imbalances are not a cause of concern. It is the contribution of many different personalities and capabilities that is the source of strength, if they are utilized in a coordinated way in the relationship.

The style is a potential template for a greater number of suppliers, where the return on investment if evident for all parties.