Earlier this week, while locked in some pretty intense negotiations with a stubborn telecom supplier, I found myself reverting to some old ways. Not necessarily good ways, but sometimes effective ways, of getting a supplier off of high center.
Let me step back and explain.
I started my procurement career with zero background or education in the profession, but a small government entity liked the cut of my jib, and gave me a chance.
My years in that job are still among my favorite career related memories. I had incredibly strong and talented management, an excellent mentor and an environment where a young procurement professional could thrive.
I thrived so well that I started to eye bigger and better things. Inevitably I moved from my fairly small town to a very large urban area and took on a job with a then medium sized (and now gigantic) tech company.
This is where my career accelerated. I went from a “nice but firm” negotiating environment to “take no prisoners” style. The leadership at that company was brutal, brilliant and showed no mercy.
For a decade, I lived and worked in that environment and I learned how to cut and cut deep when it came to negotiating procurement contracts. I supported something of a firebrand of an IT director and a mercurial CIO. I worked hard for them, was very loyal and got results. They were loyal to me in return, giving me bonuses and gifts and making sure I felt well taken care of. And I did.
Eventually, over time, the company I worked for had grown and changed so much that it wasn’t fun to work there anymore, so I decided to move along.
My next role was for a profoundly large multinational tech company with a reputation for brutal negotiations. I fit right in.
At at the end of almost three years of traveling the world and learning to temper my style for a variety of cultures, I found myself burned out. I was tired of the aggressive style, the relentless pace, and the constant beating up on suppliers.
So I moved again. This time to a small non-profit doing scientific research. Since we receive a lot of funding from the government, we have to keep things like small business goals and supplier partnerships in mind.
The style here is quite different from anywhere I’ve ever worked. We do seemingly insane things like give way IP rights which makes sense in the environment, but is a bit shocking to me still. We allow higher prices for the sake of completing a deal. We aim to end each negotiation in as positive light as possible, meaning we’ll give up a lot to get the deal done.
It’s a mindbender, to be sure. In the two years here, I’ve had to learn to step back, to filter the brain, to be clever more often than using brute force.
Until earlier this week. This recalcitrant telecom company is hung up on one last fairly minor item in a substantial contract. I have been ready to award for a week and they have hemmed and hawed and whined. Negotiations are at a standstill.
Meanwhile, the underlying project that their service will support is slipping schedule. Never fun to mention to the federal government that you couldn’t deliver because Procurement couldn’t finish their work.
At the end of one long day earlier this week, I called the supplier’s sales rep to try to talk through their problems and get them moving forward again.
As the sales rep talked and whined, I became exasperated. I know she’s at the mercy of her unreasonable Legal counsel, but we had given and given until we’d hit the point that we couldn’t give away anything more.
Something slipped inside of me. Due to my own exasperation, mixed with exhaustion I suppose, the switch flipped and I went back to my old ways.
I very clearly, concisely and brutally sliced that sales person to shreds. When she protested, I did it again. When she raised an argument and got a little snotty, I went in harder.
And that’s when she started crying.
It’s been a long time since I made a salesperson cry. A really long time. And while I’m not especially proud of it, there is some vestigial Procurement beast inside of me from the old days that is at least a little bit pleased.
Of course, I immediately worked to make amends. I didn’t apologize but I said soothing things, said that I understand she is working hard but that we need to get this deal done. That she needs to stay focused and come back with ideas and compromises and not demands.
We’ve healed our rift and things are fine again. The deal still isn’t done, but they are at least making progress.
In the wake of this event, I’ve been pretty introspective. Back in the day, the “I win, you lose” method of negotiations was the way to go. That’s not how things work in the business world anymore and it’s definitely not the culture where I am now.
Even though this old dog has learned some new tricks, the old habits are still hard to break.
Image found here.
After over two decades working in this profession we call procurement, I have seen a lot of change.
And the more things change, the more they stay the same.
Today I found a very read-worthy article. Here it is:
As I read the very on-point piece from the Harvard Business Review, I also had to sigh heavily.
This issue of recognizing the importance of procurement to the overall health of any business, both for profit and not for profit, is a real struggle and it’s still an uphill battle.
Sarbanes Oxley did much to force some recognition of the value of Procurement’s rigor. The recent recession did much to help executive leadership understand how Procurement can stretch budget dollars.
So the needle has moved on the dial a little bit. This article dated last month shows me that there is still much work to do.
This sentence hit me particularly hard (emphasis added):
Today’s corporations are directing more and more of their budgets toward a complex web of global specialist providers and suppliers to help deliver on their businesses’ core strategies. A recently released global study of nearly 2,000 publicly traded companies found that 69.9% of corporate revenue is directed toward externalized, supplier-driven costs.
69%! Wow. In my own company the Procurement organization runs just over 50% of the total institution budget. That is an eye-opening amount. And yet we are still working on our newest customer outreach program and still battling with rogue procurements and still begging our largest spenders to talk to us before they talk to any supplier.
Some get it. Some don’t.
We’re all still pushing that rock up a hill.
Don’t lose faith, fellow Procurement Heroes.
Image found here.
It’s been over twenty years that I have been knocking around this profession of Procurement. I have done pretty much every job that one can hold in the area of procurement, including a two-year stint where I worked in a project organization and was the requester.
I am by no means an expert, but I know my way around a set of T’s&C’s and I’ve learned a thing or two about negotiations. Heck, I’ve even taught classes to other procurement professionals.
I say all of this by way of letting you know that I’m not a rookie in this game by any means, but that doesn’t mean I’m not still prone to making big ol’ rookie mistakes.
Last week one of my most senior Procurement Heroes on my team was out on vacation, and his main backup was struck down with strep throat. My small team is very busy, so I had to get back into the game and be a backfill for these two.
This means I had to pick up a really big and fairly urgent procurement I was well familiar with, and keep pushing it along. It’s a software development deal with a small and extraordinarily finicky supplier.
Finicky is the nice way of describing them. Usually I have to refer to a certain pain in a particular part of the body.
This supplier makes great product but man are they a pain in the…finicky.
The lead tech guy and I work very well together, shoulder to shoulder, and we negotiated, squeezed, cajoled and beat down this supplier until we got them to a good place.
On Monday I sent out all of the documents reflecting the understanding. Contract, Statement of Work, tech specs, etc. All of it.
By end of Tuesday the supplier had given us back three very reasonable comments. On Wednesday after having a meeting with the client team, I made corrections for those comments, signed the contract form and sent out the full package with contract and attachments.
Boom. Done. Rock on.
But that is where I made my rookie mistake. I’m still beating my head on the desk about it several days later.
When I sent those final documents, I signed and made the contract a .pdf but I left the attachments in Word and Excel formats.
The, ahem, finicky supplier signed the contract then sent back brand new redlines on the attachments. Fairly substantial revisions. As in, shaved scope off in a lot of places.
See what they did there? The supplier made it look like they were being agreeable, but really what they did was make a counteroffer.
What I *should* have done was put every single one of the documents in .pdf format so no further changes could be made.
But I didn’t.
So after the lead tech guy blew his stack and hit the roof and a lot of other euphemisms, we walked through the changes and accepted the few that were reasonable and fired back on the many that were not.
This is still under negotiation, while the clock keeps ticking away. When this finally gets resolved, the entire document will go into .pdf for signature. No more clever tricks, please.
As of today my most senior Procurement Hero has returned from vacation and is bewildered by the fact that this contract still isn’t done. I told him the story and then I gladly handed the file back over.
Ten will get you twenty my Procurement Hero employee wouldn’t have made that rookie mistake. That’s why he’s my go to guy for the big and complicated deals.
Meanwhile I’ll go back to managering and running reports and being strategic. Thank goodness for my team of rock stars who every single day make me look good.
Image found here.
When negotiating the terms and conditions of any contract, there are always a few areas where you as the Procurement Hero just know the supplier is going to balk.
Never fails. Like clockwork.
The “always going to flinch” area most on my mind today is the acceptance clause.
I don’t mean acceptance in the spiritual sense, like “yeah man, I receive and I accept…”
No, I mean acceptance as in determining if a deliverable from a supplier is in line with engineering specifications and the terms of the contract.
Oh what a sticky wicket acceptance is. So critical for the buyer, so troublesome for the seller.
Here at The Company, we are in the process of buying some software from a fairly small supplier with a lot of expertise.
They have been developing some small bits of code for us and The Company’s engineering team works closely with the supplier. So far the supplier has hit the mark on all of their deliverables and we’re very happy with the work.
Because they have done this small work so well, we’re giving them a crack at a much larger chunk of business. The kind of large chunk that might fund a little company for a full year. Obviously, they are quite on board to get this work.
In this turn of the contract, however, we are adding an acceptance clause. What the supplier will deliver is a full software package from the ground up. It is pretty extensive and has high visibility for The Company as well. So to that end, we’ve asked for a pretty standard thirty-day acceptance term.
To a small company with cash flow concerns, thirty days seems like an eternity. They get small chunks as milestones along the way, but they can’t invoice for that last big payment until acceptance is received. While not yet a publicly traded company, they still keep a close eye on Sarbanes Oxley requirements. SOX means they can’t book the revenue until acceptance happens.
So about an hour after the Procurement Hero sent out the new documents, we got an earful from the small company’s CEO.
He took the acceptance clause as an affront. He reminded us of every time his team has hit their milestones and how closely his software developers work with The Company’s engineers. He said that the contract clause was “unpleasant” and that he didn’t think they would be able to agree to the contract if that were included.
I gently reminded the CEO that thirty days is a maximum time frame. If their code really is good and really is on time and they really do work closely with The Company’s team then why is this even a concern? Turn in good code, get it quickly accepted and send the invoice.
To the supplier, I said bluntly, “If you are sure of your work, then acceptance should be quite…well…acceptable.”
Things got pretty quiet after that. Our lead engineer is fully onboard with having acceptance in the contract and made sure to back my play. Right now there is silence on the email and phone lines, and we wait.
If pushed, we might agree to reduce the time frame a little, but not much. For us acceptance really matters, and we’re not going to back down.
Acceptance must be acceptable. The time frames and how it works can be negotiated.
Side note: Is there ever any better Procurement Hero experience than sitting at the negotiation table with an end user who not only “gets it” from a business perspective, but also backs procurement’s play?
The supplier loses a lot of leverage simply by not being able to divide and conquer. Magic!
Image found here.
My terms, your terms, our negotiated terms, some other terms, this country’s law, that countries law, and who in the heck owns all of the intellectual property?
Gah! The life of a procurement professional writing contracts is a winding labyrinth of contractual issues.
Obviously at the core of any Procurement Hero’s life is negotiating the terms of a contract and hammering out some sort of agreement that both sides of the table can live with.
Sometimes this is easy as pie. Sometimes it is as difficult as pi to the ten billionth digit.
A lot of how the process goes depends a lot on the culture of each of the parties involved. Do the lawyers want to make a deal or do they want to mitigate every tiny bit of risk?
Does the company have several “no go, no way, no how” terms or are there fall back positions?
At the end of the day, both the sales person and the procurement person really just want to close to deal. Both always have plenty of other work piling up on their respective desks while they argue ad nauseum about the merits of shipping an item FOB destination or FOB origin.
This whole contract negotiation process and the many puts and takes involved has been on my mind a lot lately because one of the rock star buyers on my team has encountered the immovable force. The rock wall. The supplier that simply won’t budge.
And I mean vehemently won’t budge on what I would classify as a medium important item for them and an utter show stopper for us.
Discretion prevents me from stating the whole story and all of the dirty details aren’t really the point.
The point is, how does a procurement professional overcome these kinds of obstacles? And when do we scoot our chairs back from the table and walk away?
I am proud to say that in over twenty years of working in the procurement function, there have been only three times where I have advised my client that the supplier was absolutely not the kind of supplier we wanted to work with, and we couldn’t even if we tried. Three times I just couldn’t close the deal.
Considering the sheer number of contracts I have completed in my time, three is a statically insignificant number.
But this one deal really has me boggled. I have no idea how we are going to get past this hurdle.
Anyhow, talks continue. Lawyers are being prepped. Executive ecalations have begun.
Wish us luck, fellow Procurement Heroes. I know you have been there too.
Feel free to share any stories about meeting the supplier’s brick wall in the comments section. I’d love to hear from you.
At the end of a competitive (or sometimes not so competitive) procurement action, many unsuccessful bidders will ask for a debrief.
While many Procurement Heroes dislike doing debriefs because they feel like they are walking on eggshells, I actually like them. I consider a quality debrief to be an investment in the future.
By giving suppliers the opportunity to know what they could have done better, they can (hopefully) listen to and apply the feedback they received to the next proposal.
Competition is good. Competition among many well-qualified suppliers is even better. Getting quality proposals is key. Any supplier worth their salt wants to get better and they want to know how to get your business the next time around.
But what about the reverse? Have you as a procurement professional ever asked an unsuccessful bidder what you could have done better?
You might be surprised at the answers you get.
This morning I had such a chance. A well-known and much valued supplier decided to no-bid a quite hotly contested RFx. Here in the procurement team, we had thought they would be a front-runner before the RFx ever hit the street.
It was our utter surprise to receive a notice of no bid the day before proposals were due.
We could easily have let this go. Whatever will be will be.
Instead I set up a call with the main players at the supplier, just a half hour of their time, to dig into the details of why they chose to no-bid valuable work that was right in their wheelhouse.
Their response was measured but thoughtful. They talked us through their thought process and I took a lot of notes. They had very good business reasons and in short order, I understood their point of view perfectly.
When they were done explaining, I asked, “And was there anything we at The Company could have done better?”
There was a long pause on the call. The supplier seemed rather taken aback by this question.
There was a long exhale and then, “That is a really good question.”
Then they told us. They gave us some very useful feedback on how some of the actions of the Procurement and Technical teams were perceived. What we had thought was simple and concise turned out to have been anything but when viewed from the eyes of the supplier.
It set me back in my chair a little. I expressed much gratitude to the supplier for being candid and said I would take their feedback to heart. The feedback was applicable not just to this, but to all procurements we do as continue down the road.
As a long time manager but fairly new to this organization, I’m always looking at ways to improve our work.
This no-bid bidder just gave me an extraordinarily large key to understanding how we are viewed from the outside, how we are viewed from the supplier community, and how we can better run future procurements.
That kind of feedback and be hard to hear, but is impossible to place a value upon.
So give it a try. Procurement Heroes everywhere, next time you do a debrief with your suppliers, ask them to debrief your side of the house too.
And be willing to listen to the response.
Image found here.
I don’t often give the Sales People and Sales Weasels of this world much help. It’s my view that it is up to them to figure out how to earn my business.
But every once in a while the sun and the moon align just perfectly, I get some much needed rest while on holiday, and I find a place in my cold dark Procurement heart to feel benevolence toward the other side of the table.
Yes, I am here today to provide aid and assistance to the Sales Folk of the world looking to do business with The Company.
This advice is so easy, simple to follow, and really works.
It comes in two parts:
1) Don’t be smarmy
2) Don’t embed documents in your RFP response
Step one should be pretty self evident, but in case it’s not, here is what I mean: be genuine, be responsive, tell me there is a problem before it becomes a problem, talk to me like a person not an account, and avoid business speak.
If you don’t know what I mean by business speak, here’s a good place to start.
Laminate the list and tape it to your little traveling wheelie laptop bag.
Common sense, right?
Now the second item on the list may not be as widely understood and appreciated.
I know that bid and proposal teams love to send across a total bid package that has all the logos and looks shiny and neat in one perfect document.
And to that end, it’s become popular for supplier to choose to not send across each individual document, but to embed the files into either a single Word document or a single Excel spreadsheet.
Here’s the real deal: It never works. Never.
Your Procurement Hero who is jumping and running and working on parsing and distributing incoming RFP responses does not want to stop, open an email, and ping you to say “could you send the individual documents please? I couldn’t get them to open.”
This wastes time. Wasting time makes Procurement unhappy.
You wouldn’t like Procurement when they are unhappy.
I am not even exaggerating how important this can be.
Just a few days ago, one of the Procurement Heroes on my team received several bids for a quite hotly contested RFP. Great, we love good competition!
As the responses came in, the Procurement Hero began sending out sections to the right people on the buying team to begin evaluations. We’re on a tight project schedule.
Except, oops! About 75% of the proposals had embedded files. Full stop. The Procurement Hero had to go back to several of the bidders and ask for the individual files because in most cases, some or all of the embedded files didn’t work.
The proposals that didn’t have embedded files were sent out to the evaluation team poste haste.
That means those proposals were read first.
That means they set the bar for every proposal that comes after.
No embedded files means your proposal ends up toward the top of the stack and not the bottom.
Also, when it takes a day or two for the sales person to respond with each individual document, the evaluation team begins to wonder about the efficiency and responsiveness of your company.
They begin to wonder if your attention to detail is top notch.
They begin to wonder…
This isn’t good.
Look, I want the best supplier to win the award, always, every time.
That means that if the best supplier stumbles over something so minor as broken links and embeds that don’t work…well…then that is a loss to both sides of the RFP process.
Just something to think about.
Now back to my regularly scheduled Procurement crankiness. You are on your own from here.
Image found here.