This week’s trip to The Flip Side is based on a post written by Reed Holden on his blog Pricing With Confidence: ‘Procurement: Kings or Jokers’. Holden has written a number of books on pricing and negotiation. His primary focus is helping Fortune 1000 B2B companies in a number of industries maximize their growth through setting optimal go-to-market strategies.
In January 2012, he wrote about a scenario between procurement and business development. A procurement professional and a sales person are on the phone. Although the internal business owner has been ready to make a decision for some time, the procurement lead has been slow to respond, and when he finally gets on the phone with the supplier, he says ‘you guys are going to have to sharpen your pencil.’ I don’t have to know Reed Holden or be in sales to visualize the steam coming out of his ears.
Unfortunately, Holden seems to have had too much contact with the ‘wrong sort’ of procurement person, and this has left no room for benefit of the doubt. Incompetent procurement people exist, and they give the rest of us a very bad name when they beat up suppliers on price without actively making suggestions about what they are seeing elsewhere in the market or working to identify opportunities for operational efficiency. Both sides in a negotiation should expect challenges from the other, but the challenges should be based on something. For instance, a concrete REASON to sharpen one’s pencil…
That all being said (and not knowing the full story myself), here are some other possible explanations for the procurement person’s behavior:
- Procurement and the business owner are ‘in cahoots’ to get this supplier to lower their pricing and procurement pulled the ‘bad cop’ card so they get to take the blame for being slow to respond.
- The delay in procurement’s response has been due to an ‘RFx blackout’ where no one from the buying company will have phone contact with participating suppliers in order to avoid giving an unintentional advantage to one company.
- This particular procurement person dreads negotiating, especially over the phone, and because they are nervous about starting the conversation, they have (unfortunately) chosen a cliché that offends this sales person
Since our goal on the Flip Side is to keep an open mind to what we can learn from our sales counterparts, let’s look back at this situation to see how we can improve our rapport with suppliers.
- While tough negotiating skills are applauded in procurement, we need to leave the door open to the positive working relationship that will follow – one of those ‘prospects’ is hopefully going to become a supplier for three or more years.
- Sales people may have preconceived notions of procurement that we need to face whether we personally deserve them or not. Identifying them early in the process will allow us to tailor our negotiating style to get the best possible results.
- We don’t always know what our internal stakeholders are saying to suppliers about the procurement process. Even though it is common practice to instruct internal teams not to discuss the process with suppliers, they don’t always listen (gasp!) and may even cave under pressure and offer something up without intending to.
Holden presents two possible roles for procurement in his post: king or joker. Since it seems reasonable to assume none of us gets up in the morning and heads to the office with the goal of being a joker, the next question is how to avoid being one. Remembering that we represent our organization to the outside world as much as anyone else, and behaving accordingly, is the first step. Misunderstandings happen, but anything we can do to avoid them – such as not using tired clichés in an attempt to lighten the mood – will benefit us in the long run. When in doubt, take the conservative approach. These lessons apply even more to phone interactions where you can’t see the reactions and receptivity of the other party. To procurement – LONG LIVE THE KING!