Leadership drives better results & negotiations with suppliers

Team leader

As some of you know, from the last blog that I have just returned from an executive workshop at the Harvard Law School, Boston, USA. One main message from the “Negotiation and Leadership” workshop was ensuring the critical framework of negotiations was in place for dealing with strategic and key suppliers.

During the workshop we examined key research around why leaders needed to look at the framework that they have created for developing corporate competence around negotiation.

As part of my trip to Harvard, I was required to be part of a number of difficult and strategic negotiation role plays. We had just finished the teaching part of leadership, negotiation and working with key and strategic suppliers.

As luck had it, I was paired off with the head of procurement for a global brand with a turnover in excess of US$ 60Billon, for this story I will call her Elizabeth. Our discussion before the exercise was pleasant and she was clear that her company did everything with their key suppliers that Harvard said were globally best in practice.

Tension was building, here I was about to negotiate with a star performer whose company could have been used as the case study discussed at Harvard. The bell went and we started negotiating. It was like a scene from the movie The Matrix, everything went into slow motion, her face and body language changed from let’s work on a better outcome to where is my big stick as you are just a supplier.

It was Mrs Jekyll meets the Terminator, it was brutal and we did not reach a result. After the debrief I inquired about her sudden change of behaviour and her remarks did not surprise me. She was clear her leadership team talked the good talk about negotiating differently with key and strategic suppliers, they wanted value and innovation, but she was measured on how much she saved this year, compared to last with her key categories.

Whether you are negotiating on the sell side with your best accounts or negotiating with key and strategic suppliers, the leadership team needs to be clear on how value can be created by suppliers that flow through to your best accounts. Elizabeth could recite the strategic mantra like a hymn sheet, but her behaviour reflected on how she was rewarded, it was a great insight for me.

However, people are changing and changing for the best. Companies like P&G, 3M, Cisco and Westpac to name a few are rethinking the business model with key suppliers.

In December 2011, the International Association of Outsourcing Professionals (IAOP) released their list of ‘Top Outsourcing Trends to Watch for in 2012’.  In the press release, an IAOP spokesperson gave this summary, “While the uncertain economy and the elections will impact the industry, the winners will be: locations in the U.S. and near shore as well as BRIC countries; collaborative delivery models; and companies using converging technologies and corporate social responsibility.” 

As one observer noted, of the seven predictions, one matches a growing procurement (or buy-side) interest in building truly strategic relationships with a small number of appropriately chosen outsourcing suppliers: “Models where customers and service providers work collaboratively to develop performance-based partnership will be increasingly used. Customers will move outsourcing out of the back-office and into more customer-facing processes and strategic opportunities.” 

Whilst I agree, the potential benefits of a collaborative outsourcing arrangement are attractive to any industry or vertical to produce better results. Creating the right environment to foster such a relationship, and to put the right operational or governance model in place to maintain it, is a leadership issue and not an operational issue.

We can’t change the turbulence occurring this year and next, however we can change how we approach that turbulence. Leadership and negotiating better results with strategic and key suppliers requires that you rethink your whole business model and approach.

If your thinking, that is nice, but we just use the big stick approach and it works, at your next executive meeting, ask this question, “When was the last time a key supplier came to us with an innovative idea that we could use with our customers?” If you get blank stares and a deathly silence, call me!

If you need to increase your skills then the business school at MGSM have an excellent programcontaining some of the learning’s from Harvard and a broader approach to leadership.