What motivates suppliers?

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.