Supplier Relationship Management:The Human Element - (Part 2)

This blog - the second in a series of four - comes to us from Jim Baehr.

A lot of time and resources are devoted to optimizing the processes and technologies of Supplier Relationship Management, but people are undoubtedly SRM's most critical element. Saying anything less would be an understatement. Without people there are no relationships. The knowledge, skills and attitudes that machines can't replicate determine the quality and usefulness of an SRM program. As noted in the first installment of this series, relationship management is the difference between an effective agreement and an ineffective one. What's more, it can make the difference between a relationship that's merely effective and a relationship that provides long-term strategic value.  Suppliers know this.  End users knows this.  Procurement is still working on understanding this.

For too many Procurement Professionals buying is monochrome.  This thinking is certainly pragmatic, but it’s also shortsighted and naïve.  Procurement tends to neglect the human side of business relationships. Concerned that purchases will be made on emotion alone, they dismiss humanity as detrimental and focus on numbers alone. Both the end user and seller expect this from Procurement. They assume that Procurement will drive the buying process with little in mind but the lowest price possible.

These issues are compounded when Procurement jumps into the buyer/seller relationship shouting, “We’ll take it from here, ” or “We know how to buy better than you," or "We know how to negotiate better than you.”  All of these statements could be true, but end users never enjoy the command and control method.  Suppliers endure it in hope’s of winning the business. What happens from this point forward will impact the end user’s perception of Procurement as well as the outcomes.

For sellers, it’s all about relationship management.  They recognize that creating and sustaining a comfortable atmosphere for business is their responsibility.  Most are very good at building relationships and they’re well trained in the discipline.  They view relationship management as a multi-step process where the objective is to reach a “yes” or “no” decision.  If “yes”, it’s on to the next step.  If “no,” it's not time to give up. Rather, it's time to understand why the answer was "no," convert the “no” to a “yes,” and then move on.  It’s fair to ask – how many Procurement professionals are trained to think and behave in this way? How many take the time to understand what’s motivating the seller? It doesn't seem like many do. 

What do senior executives think about relationship management?  This is where things get interesting.  CPO surveys suggest that leaders' top two priorities are savings and collaboration (a.k.a. relationship management – internal and external). To be sure, senior executives embrace and support relationship management.  That makes sense. Chief Operating Officers, leading Sales executive, and the other senior managers are directly affected by Procurement’s performance. Additionally, senior managers are often engaged in selling when it comes to securing contracts, especially large ones.  When they’re engaged, they’re demonstrating their commitment to the relationship with the buyer.  Logically, they expect their Procurement groups to do what it takes to build relationships.

Let’s acknowledge that Procurement professionals are very good at analytics and contracting. To be good negotiators, it’s necessary to understand there’s a human element to negotiating, and this human element goes a long way in achieving a desirable outcome.  It's time for Procurement to accept that relationships are as much about people as they are about facts and figures.  They need to exit their comfort zone and accept that telling isn't selling. Procurement can’t simply tell the internal customer what the details of an agreement are or demand that a supplier deliver. The objectives of the buyer and supplier must be compatible.  Success comes through communicating and following a process that encourages everybody to understand the purpose and value of the agreement.

Moreover, Procurement needs to work on its soft skills.  Relationship management is about people and is soft skills driven.  It’s supported by process and technology, but - at it’s core - it’s about people. Hard skills are learned.  Soft skills are all about changing behaviors and interpersonal predispositions.

Strategic Sourcing works best when its done through cross-functional teams.  The same cross functional approach works for SRM.  The ideal is to follow a sourcing process that accounts for relationship management from the outset to the relaunch.  Different personalities, different skills, different points of view, and different attitudes are brought together. If done right, the process will deliver results that are mutually beneficial to buyer and supplier. Successful initiatives are capable of changing behaviors and dispositions. 

At the very least, Procurement should watch and grasp how suppliers handle relationship management.  While the supplier’s ways may not resonate with a Procurement professional, much can be learned through observation.  Sellers understand that relationship management is as much art as it is science. Asking questions about why the seller does things and trying to understand their needs is a great way for Procurement to start expressing interest and practicing empathetic business.  It could be the beginning of a meaningful relationship.

Next week, the process . . .