I recently came across a quote from Fabian Ziegler, the CPO for Shell, at this year’s World Procurement Congress in London who said, “Procurement is a relationship business.” An article by Steve Kiefer, GM’s purchasing chief, called “Relationships Matter” echoes this sentiment.
Fabian’s quote is especially resonant because building business relationships – both internally and externally – is so critical to procurement’s business success, today and in the future. Sure, other functions also require strong relationship-building skills, but as procurement’s definition of value is changing from “savings only” to “value beyond savings,” these (soft) skills are paramount in order for procurement to deliver on this new promise.
Given the relevance of this topic, I wanted to explore further and reached out to my fellow CPO friends to see how they improve relationships with their business partners – here is the output.
#1: Jean-Yves Rotté-Geoffroy – CPO, GlaxoSmithKline
Know your business. Live and breathe your business, strive to know and understand the strategy. Spend time understanding the long-term ambition and the current priorities. Ask, be curious, be interested: Understand your company’s profit targets and how much you can impact financially, the growth targets and how much supplier innovation can grow your organic sales by, the employee satisfaction targets and how suppliers can help simplify user experience, the budgets and how much of them is external spend. There are very few areas in any business where external resources cannot be used more effectively for competitive advantage, intelligence, cost management, capability building and innovation.
Know your suppliers. When I was a young buyer, I complained about a supplier I found difficult and my boss told me off. He was right. If procurement does not love suppliers, who will? They are your company’s external resource. Most people in procurement are curious, externally focused, they find externally an infinite pool of outstanding capabilities, talent, solutions and they want to bring them in. Through an intimate knowledge of suppliers and external markets, procurement helps identify, select, develop and manage the best ones with a view to maximizing their contribution to the strategy. Not a procurement strategy, but the business strategy, the only one that matters.
Why is it hard? External focus can suffer from the temptation to prioritize internal matters. And yet, what would we think of a sales executive who spends 15% of their time with clients? How much time does procurement spend with suppliers? How well do we know their facilities, their culture, their talented people, their innovation pipeline, their connections? It is harder to visit your suppliers than to ask them to visit you, but how well do you know them then? External focus is part of procurement’s unique selling proposition, it is a non-negotiable one. Business intimacy is hard too, but why? Do we invest the right on-boarding time for procurement professionals to understand the businesses they support? Are we bold enough in asking the candid questions and do we have the humility to admit when we don’t know? When we have done our homework and live the business agenda then we change the conversation – and relationships thrive.
#2: Gene Tabor – Former GM Purchasing, Toyota
Build a foundation of respect. The entire company is built on a firm foundation, not just a culture for purchasing. Purchasing has a leadership role for the supply team, but it is critical that the entire company shares the responsibility for the health and welfare of the supplier relationships. The key cultural focus at Toyota was the commitment of respect: Respect for each other; respect for our supply team; respect for our customers. The success of one is the success of the team.
Build trust at the core of your relationships. Trust rolls off the tongue easily but requires more than lip service. Building trust requires time, patience, and commitment of resources. Trust cannot be a “program” or flavor of the month. It doesn’t come by reading books and articles and mandating a culture of trust from the executive level. It requires leading by example from the very top of the company and leading by example at every level of the company. Key performance indicators must be aligned with the objective of trust in focus. Executives preaching long term relationships and a culture of trust must assure that the buyers and other parts of the team are measured on skills and objectives that are consistent with building trust. Trust requires long-term performance and it can easily be lost with the wrong reaction to a problem, situation or negotiation. “Shock and Awe” have no place in the effort to build a trust based relationship.
Communicate openly and set expectations. Establishing clear expectations and relentlessly pursuing a communication strategy to review and solve problems collaboratively are requirements. I was taught “Bad News First”, even if it is 5 PM on a Friday afternoon. Every day and all the time, we must be vigilant against self interest, arrogance and selfish motivation.
My takeaway: I spent my entire career in pursuit of organizational structure; communication strategies; educational and mentoring opportunities; sharing ownership of problem solving and discouraging blame and finger pointing, to promote strong internal and external relationships. This is not a weak or soft approach to business requirements. It still demands tough negotiations based on facts, data and shared responsibilities to assure that strong relationships and competitiveness coexist. Act as you speak based on a long-term relationship commitment. Relentlessly pursue strong relationships and they will pay long term dividends.
#3: Remko van Hoek – Former CPO, The Walt Disney Company
Ask the business for their delivery needs. In my experience, even the most challenging stakeholders will tell you how they would like you to help. So, just ask and they will be vested in your start.
Under promise and over deliver. Next, if you don’t go promising the world but offer realistic support, it will likely be more appreciated. It also gives you a chance to Wow the business because you know you can do more and better than the base-level expectations they agreed to.
Find small delivery options to win early and surprise with a bit of extra service. Everybody likes a surprise delivery and if you can find an early win you are off to a strong start in getting to the good side of your peers.
Consistently deliver and place yourself in a position to become a truly credible business partner.
Deliver in innovative new areas. Granted, you may have been eying these at stage 1 and may have been disappointed that the business didn’t recognize your possible contributions in these areas, but now you have earned your license to play, and not based upon your push but based upon the business’ pull!
Remko is currently a visiting professor at the Cranfield School of Management and an advisor to Old Street Labs (OSL).
#4: Bart Reekmans – CPO, Suez North America
Cooperate & communicate. You always need to be able to bring and receive a message. Both good and bad news are opportunities to strengthen the relationship. Strive for open communication.
Grow together. When you grow, let your strategic suppliers grow with you. It might require mimicking footprints and opening up your books to these suppliers allowing for consolidation of spend. Any sales organization knows it is easier to increase sales within the same customer base, so helping your suppliers increase marketshare within your business will allow for more support towards achieving your cost out goals and their growth goals. It’s a win-win.
Become a customer of choice. Ask yourself, how can I become the customer of choice and benefit from receiving the best access to ideas, resources, and innovations from my suppliers?
#5: Don Klock – Former CPO, Colgate-Palmolive
Know your stakeholders before you go to talk with them. Show your stakeholders that you have done homework about their spend category. Have 2-3 insights or examples ready to show them that you have something of value to offer. For example in talking to your marketing stakeholder, you point out they have used 61 print suppliers last year, and ask them which were the “best suppliers”. And how many suppliers do you think you need to service your business?
Never talk about saving money first. Most stakeholders think that all you care is about saving money and when you save money, they will get their budget cut. For example, ask your stakeholders, what is important to them? Have they had any quality or delivery problems last year? Once you gain their trust and partner with them on strategic sourcing initiatives, my experience is that you will improve quality, improve delivery performance, reduce lead time – and reduce costs! You might even find some new more innovative suppliers.
Don is currently Professor of Professor of Supply Chain Management at Rutgers Business School. He is also the recipient of the prestigious Lifetime Achievement Award at the 2014 Procurement Leaders Awards.
#6: Patrick Mitchell – Former CPO, Mars
A mindset shift is needed. Category management/strategic sourcing requires a ‘mindset shift’ for companies to get it right. I think moving from a value proposition underpinned with driving cost benefits to one of mutuality with suppliers in strategic categories requires another ‘mind shift change’, and a more significant one across the business.
Build a solid gain share program. I’m always struck by the fact that the supplier in these relationships ‘gains’ by having a real or implied business pipeline over time, and the client has some efficiency ‘gains’ they can articulate. It would be interesting if someone could come up with a solid ‘gain share’ program for strategic buyers and sellers that would fit the bill and help drive a more visibly mutual relationship.
Increase adoption of a full “end-to-end” category management program with a focus on supplier relationships. I continue to run across companies who say they are doing category management/strategic sourcing, but all they are really doing is P2P at best. I’ve had some dialogue with folks that even the S2P model they are employing isn’t brilliant category management, albeit it is a step up (from P2P). In order to get a growing number of companies on the journey to brilliant SRM, we need to have a solid, fundamental understanding of what real end-to-end category management is meant to be.
Patrick is currently Senior Advisor Consumer Operations-Procurement at McKinsey & Company.
#7: Angus McIntosh – Former CPO, Beiersdorf
Make sure your functional story takes second place to your business story when it comes to building powerful relationships with your board and other internal stakeholders.
Focus the majority of your CEO face time on your super-strategic categories, the issues and opportunities they present, how you plan to handle them and the decisions you need. Every business has some categories that have such strategic importance and that deserve an eye-level discussion at the most senior level.
Keep your functional KPIs and the engineering of procurement´s processes in the background unless asked. The board trusts you to run your function, otherwise you wouldn’t be in your post. Tell them what matters to help them steer the business, don’t just brag about how leading-edge your functional processes are.
Create positive tension: In terms of suppliers, what I don’t hear enough is that even the best and most innovative supplier partnerships can withstand some tension and in fact they need it. Don’t accept the false choice between creating value with your supplier and negotiating hard to share it out. In fact, it’s when the total value is greatest that it’s most important to be tough and smart in getting your share. That doesn’t mean that you can’t invest in the relationship or look to the long term. Just make sure you don’t give away more than you should. Getting this balance right is critical to building mutual respect and lasting value.
Angus is currently a private investor and an Associate Director at Total Negotiation.
#8: Steve Hrubala – CPO, The Carlyle Group
Foster transparency and open communication: The best way to explore real value-creating progression and partnerships in procurement is to foster, encourage, and display transparency with constituents internally as well as with external partners. This should be in the regular course of business, but the quality of business reviews can also foster these exchanges: Partners should feel free to suggest improvements or innovative approaches beyond sales, though they are less likely to do so if they feel that open communication is not valued or welcomed.
Have fact-based, objective discussions: All too often, the art of the possible in terms of strategic partnering gets mired in the machinery of assessments, polls, and “anonymous” 360-degree feedback – all of which may miss the point that there are big-picture opportunities for value creation. From my perspective, it is invaluable to be able to discuss wins and misses face-to-face and hear directly what isn’t happening and why. To my mind, it comes down to trust and respect among the parties, but also, a recognition that relationship governance has a part to play here. If the top-to-top alignment is absent, then no amount of box-checking as to the right activities is going to make a difference: executive buy-in is key!
#9: Greg Tennyson – Former CPO, salesforce.com & Oracle Corporation
Engage with true intent. Know your audience – their motivations, objectives and engage them in a manner where your intent aligns with their business needs and then ‘wow them’. Collaborative relationships are formed when the parties understand each other’s intent and meet/exceed those expectations.
Enhance your brand. Your brand is at the core of the relationship. The who, what, when, where and why (the five W’s) of how you engage, commit & deliver, collaborate, et al is formed by the perceptions the business partner has of your value offering. To enhance your brand you need to invest in your team to ensure they deliver (and have the capability and capacity to ‘wow’ the customer). Your solutions should be user friendly, self-service and customer-centric. And finally, your processes should be balanced – moderated so as to not be complex or overly administratively burdensome.
Matthias Gutzmann is VP at Old Street Labs – creators of Vizibl