Establishing a culture where you can begin to move towards collaborative supplier relationships and start to fully realise the value that lies within your commercial partners is no mean feat.
More often than not, it will require a pivot in the way that you engage with your internal business partners and suppliers. Perhaps most vital is the need to leave deeply ingrained short term performance metrics behind and to start thinking about longer term business sustainability.
If delivering strategic business outcomes is the new Valhalla for the modern procurement department, how exactly do we move from our current practices into a position where we are capable of executing on these promises?
You’ll never get where you’re going unless you know where you’ve been.
The process of moving towards more collaborative business relationships begins with looking internally. Identifying how your business is currently orientated in relation to both its internal and external business partners is a critical first step in moving towards delivering value and realising a return on your relationships.
Do you hear the following remarks within your business?
“We want procurement to work more closely with the business”
“Beyond cost savings what else does procurement offer us?”
“What’s happening at our suppliers? Have they got ideas that could improve our business?”
“How can procurement help future proof this business?”
If you are having or at least hearing these discussions in your business, the chances are your organisation is well positioned to leave short term metrics behind and start moving towards getting a real return from collaborative relationships. If these conversations are not happening in your business, perhaps it’s time to get that dialogue happening?
Who is your Master?
When looking to understand your organisation’s maturity regarding its ability to deliver value beyond savings you need to spend some time understanding your internal reporting structures.
The way your business is structured will determine the way the people within your business will act and this is critical to achieving a return on your relationships.
Your reporting lines and their supporting metrics and bonus structure could
be hindering your potential for truly collaborative relationships. Indeed, the hierarchical structure that supports your business has a direct impact on your ability to deliver a broader return from your relationships.
If your procurement organisation reports into Finance, the rules of the game
are naturally driven by the current financial agenda and its subsequent ‘terms & conditions’. A reporting line into Operations and other service-driven or customer- focused functions will facilitate the understanding and internal alignment around business outcomes. Lastly, having a seat at the Executive Board is an entry ticket to sell ideas that will provide long term value to the business and the opportunity to convince the whole C-Suite (and not just the CFO) of your extended value contribution across the enterprise.
As such, your approach to value is strongly correlated with your procurement function’s position within your organisation. Very logically, the successful delivery of business outcomes starts with increased proximity and a trusted connection with those in charge.
Once you understand ‘who your master is’ and how that will impact the future of your relationships you can start to do some self-analysis of your business’s relationship style.
What Game do you Want to Play?
Once you have a firm understanding of the way your business is setup to address the generation of long term business value, you are faced with a question. What game are you playing? Are you working together with your business partners and suppliers to build value or are you working against one another and eroding value? If you fall into the later category, can you open up discussions that might change this course?
Gerard Chick, of the Skanor Group, gives a great analogy of value building vs value eroding by likening executives to either hunters or farmers. Hunters go out into the world and capture and kill what they can when they can. It’s a feast and famine model. Once the hunter is finished, his belly is full and he is satisfied, but the animal stocks have been depleted. This means the hunter needs to wait a few years (or savings cycles) before can venture out for another kill. Farmers are more interested in the longer term position. They care for their soil, irrigation and for their crops. They look to understand the conditions under which certain crops will thrive and then replicate those conditions so that there is always something in production. It’s more work but ultimately it’s more fruitful and certainly more reliable.
Sadly, procurement people all too often land in the first column. Rather than caring for suppliers, business partners and the environment in which they exist, the procurement executives make a big kill (large cost saving) and then lay dormant, waiting for the population to recover before launching another hunt.
If you want to start driving a real return from your relationships, it is critical that you’re brutally honest about the current state of the relationships your business holds and their potential for improvements. At that stage, you might realise that you will have to deal with the consequences of years of short-term thinking, chronic pressure tactics and muscular behaviours.
For example, if you’re still using one-way surveys to capture your strategic suppliers’ performance, chances are you might not be ready to hear what they have to say.
If your supplier relationships have degraded to a level that they are destructive for both of you, value building is most likely an unreasonable and unattainable goal for the time being. While it might sell well with your boss, your potential to deliver on this promise is severely hampered.
If you feel like you business is engaged in value eroding relationships and wants to turn this around the following tips might help you on your road to recovery.
It might take time to rebuild your ‘trustworthiness credit score’. A great way to achieve this is to put your most trusted associates at the frontline (regardless of political or hierarchical considerations), considering that integrity and authenticity will best support your journey.
Don’t jump into relationship redesign if you’re unclear about what you want to achieve internally first. Failure to clearly align with your internal stakeholders might have side effects that will further damage your credibility in the eyes of your strategic suppliers.
Use the help of collaboration experts to ‘realign’ your most strategic partnerships in a way that sets the scene right for future success. The ‘business of business relationships’ is a unique discipline that requires a radically different approach than the one you might have used so far.
The journey towards value is about being realistic, understanding where you are today and where you want to go, but more than anything it’s about being prepared to make the required changes to make that journey a reality.
To learn more about how you can transform your relationships to deliver business value rather than cost savings, download our Return on Relationships white paper.