Q: I am a national chief procurement officer within an international group. We have delivered great results but I have not been able to convince the group chief finance officer to replicate in other countries what we have achieved locally. How can I overcome this resistance?
A: From your question, I understand that you made a proposal to the CFO that was not accepted. One reason why “full-frontal” logic does not persuade the recipient is that it gives them a problem.
If they agree with your ideas, it implies that, to date, they have been getting it wrong. However, they are unlikely to admit this fear and respond with “cover statements” such as: “Yes, it’s a good idea but the time isn’t yet right to implement it.” One answer is to make the recipient believe it is their idea.
Moving forward requires a mixture of more information and psychology. Analyse the key players and understand what their needs and “hot buttons” are. For example, if the CFO is nearing retirement or hoping for promotion, they might not want to rock the boat.
So, portray your change as necessary to keep the boat afloat or, more positively, assert that the changes will enhance the CFO’s reputation.
Establish what potential events would make them lose sleep and show how your proposal ensures their peace of mind
or provides the means whereby a passionately held ambition or strategy becomes reality.
The philosophy underpinning these comments is expressed in a Chinese proverb: “If you understand your enemy you will always win!”
Q: The economy has returned to growth but it’s marginal. How should we manage our suppliers at a time like this? There is still the threat of a double-dip recession.
A: Although the global economy has started to grow again, your question about how to treat suppliers when GDP is falling is always relevant. This is because smart companies do not treat suppliers differently in a recession. They always regard them as allies of the business (albeit sometimes treated with great caution), and focus buyers’ efforts on defences, detective work and development.
Defending the company against events when suppliers hit tough times is the first priority. Watch out for emerging quality or performance problems and potential fraud, such as full payment invoiced for jobs that haven’t been completed. Also ensure that your commercial procurement radar is tuned to detect incoming missiles such as stealth price increases and premature termination of key contracts.
Detective work follows. One concern is that sources might disappear through M&As or bankruptcy. A sole supplier entering insolvency would be difficult, but you would be just as concerned if competitive sources dried up and left only one or two suppliers that behave monopolistically.
Potential basket cases among suppliers exhibit early warning signs: exceeding overdraft facilities; deferring major purchases; concentrating on short-term activities to raise cash; not paying wages and delaying filing company accounts.
Do you know how your key suppliers rate against these indicators? If you do, you can help them to improve. Hallmarks of survivor companies are that they check potential customers’ soundness and payment performance; keep a close track of invoices and payment; have tight contract terms; update business plans; and regularly review business projections and cash-flow forecasts.
This may seem basic stuff to you, but the business disciplines that you take for granted may be just what your suppliers need to survive or improve.
The third strand of activity develops relationships with those suppliers chosen for close collaboration. The things you do to stimulate their participation will only work if they value them. These are “satisfiers” – what it is that you, a customer, could do that will satisfy a need that the supplier has.
To some purchasers, this a no-brainer: just place an order. But there are other things that suppliers value. Help them to improve their performance rather than just telling them to do so; provide certainty of payment; help cash flow by rescheduling it; allow them to use your supply agreements; let them see your business plan so that they can schedule their capacity, and help them to smarten up their procurement effort.
The latter provides a great opportunity to learn more about their supply chains and how they manage them, potentially allowing them to operate more cost-effectively. By discovering suppliers’ satisfiers and responding to them, you will be first to be satisfied when more demands are placed on key sources as the economy improves.
Dr Richard Russill (www.russill.com) is a business adviser and writer, specialising in supply, cost and relationship management
