Is it possible to be the darling of your customers, yet the opposite to your suppliers? Does it make sense to want your customers to love you and at the same time have no intention of letting your suppliers earn the same privilege? Whether you sell to consumers or businesses, think about the logic and the consequences. If every company has no intention of loving their suppliers, then what’s the point of B2B companies trying to be loved their customers? Maybe “love” is not the right word, but customer experience professionals should know what I mean: be a fan of, be engaged with, show a predisposition toward camaraderie that leads to co-innovation and co-promotion, inclined to look at the relationship with a long-term perspective for mutual value and growth.
Customer-centric culture means your entire company conducts their work with your customers’ well-being in mind. And that means supplier management and procurement also conduct their work within the context of customer experience intelligence, not just within a financial frame of reference.
What happens with finance-centric supplier management?
Somehow procurement and accounts payable managers feel it’s their duty to seek (or demand) discounts beyond what was stipulated and agreed upon in the proposal, and delay payment as long as possible. There’s often a lot of red-tape paperwork and one-size-fits-all demands that go beyond the common sense factor for the size of the supplier, nature of work being done, and speediness needed by the user within the company. In fact, your procurement, supplier management, and accounts payable departments are probably rewarded for all this.
The consequence to your company is that your suppliers have to invest in resources to deal with it all, and don’t fool yourself that the costs aren’t passed on to your company one way or another. You might think that a supplier in a certain line of work has similar types of information required of them by all their customers in order to become a supplier of record, but that’s not the case.
It’s not uncommon for even a sole proprietor providing intellectual property transfer in a project less than USD $15K to be asked to provide an insurance certificate specifying your company’s name on it, ISO 9000 documentation, safety training and performance records, and/or several years of financial statements, among other things. Does that make sense? Who is supposed to spend time complying with all this or having conversations with your company to get these things waived so that the work you want can begin quickly and be done with bandwidth required for stellar performance?
Small suppliers, in particular, are wearing more hats than you want them to wear, and being stressed beyond what you want them to feel in order to deliver top quality to you. Before you dismiss the following as “whining”, consider the extensive scientific research that proves people are motivated best when the rewards have close timing proximity to the deeds.
When you became an employee at your company, did they ask you to work for 90 days (or 45 or 30 or 20 — the point is, does it make sense?) before receiving your first paycheck? Or more accurately, did you work for 30 days before your company started their 90-day countdown to your first paycheck? How about the idea of requiring you to give them a discount for expediting your paycheck to 20-day turnaround with the option at their sole discretion of declining that offer in favor of the full waiting time without giving you advance notice of that decision? What about a typo in your paperwork that might cause your case to go into a pile only to be retrieved much later on because you were wondering why the promised timing was not honored? How about if they then inform you that all checks will be cut next Tuesday . . . but the mailroom handily manages to finally get those checks in the mail on Friday, making it the following Tuesday for you to finally receive it? If you’re not saying “wow” by now, I’d be interested in why. That’s just a glimpse of the joy of having customers.
It’s par for the course, to be sure. But just because everyone’s doing that, is it a wise path for your company? Is finance-centric smarter than customer-centric? What’s really odd is that the customer company’s attitude is one-sided, making all the rules. Isn’t that backward, to some extent? Imagine loading up your cart at the grocery store and announcing as you walk out the door that you’ll pay them in 30 days, but only if they give you a discount for your benevolence. Or consider telling your credit card company that your policy for everyone you buy from is to cut checks only on the second and fourth weeks of the month, as long as the invoice was submitted before a specified cutoff date. I suppose payment terms long long ago in a faraway galaxy were specified by suppliers, not customers, who granted grace periods to the buying company in deference to their cash flow quandary in getting ingredients into their products, shipping to the distributor, and waiting for the retailer to receive payment from the consumer. Some odd twist of power has warped what used to be a gracious arrangement, and one that really has no bearing at all on suppliers of intellectual property rather than ingredients.
Why do we make it hard for customers to do business with us, and even harder for suppliers to do business with us? I think there’s a tremendous lesson about customer experience ROI goals that can be learned by your answers to those two questions. Ease-of-doing-business all the way around makes pure sense as well as cents.
What happens with customer-centric supplier management?
Customer-centric supplier management means that your procurement and accounts payable managers are aware of your external customers’ realities, and places those implications at the center of their thinking and doing. Further, it means they’re aware of your realities (time, quality, value), as their internal customer, and place that secondarily at the center of their thinking and doing. Financial goals they’re seeking come third.
As a customer-centered company you hope your customers will entertain the idea of nurturing a long-term relationship with you. And you hope your suppliers will do the same. You want your suppliers’ capabilities to grow, and you’re far more interested in increasing mutual value than nickeling and diming them to death. You streamline your processes and right-fit your policies to help them want (and have the wherewithal!) to give you special value.
Is such a utopia possible? It would sure be nice to find out. In the book Firms of Endearment the best-loved companies “actively align the interests of all stakeholder groups, not just balance them . . . and can do seemingly contradictory things such as pay high wages, charge low prices, and get higher profitability.” Indeed, the financials seal the deal: “the public FoEs (firms of endearment) returned 1,026 percent for investors over the 10 years ending June 30, 2006, compared to 122 percent for the S&P 500; that’s more than a 8-to-1 ratio! Over a 10-year horizon, FoEs outperformed the Good to Great companies by a 3.1-to-1 ratio.” A worthwhile read, and certainly food for thought in re-thinking your customer experience strategy.
How can value from suppliers be maximized?
It’s not in the payment terms or pricing that you derive the most value from suppliers. It’s in the way you scope the work to be done, and in the ways you treat your suppliers. In the article Customer Experience Capabilities, Not Projects!, Carol Borghesi explained the wisdom of keeping long-term goals and relationships in mind. Customer experience professionals — and any other managers — can get more from consultants in particular by shifting your thinking: “For best results, think bigger than knowledge transfer. Think capability-building. At its core, capability-building is like knowledge transfer, but it’s much broader and resource-impacting than that.”
The old adage “Do unto others as you would have done unto you” also comes into play in your pursuit for greatest value. When you begin discussions with a supplier you probably come across as someone keenly interested in the work at-hand and in a win-win relationship. Once a supplier begins the proposal process they are giving serious consideration to dedicating their time and resources to give you the very best. Yet, once you receive a proposal you may be backing off, thinking of all the reasons why you shouldn’t accept it, or should delay a decision on it, or otherwise, rejecting it without any intent to provide constructive feedback (or any feedback at all) to the supplier. To the supplier it seems like the height of rudeness, akin to be asked over for a lunch date but being kept at the door indefinitely while hearing someone surely on the other side of it ignoring you. Again, costs of all this get passed on to customers one way or another. What other income source is there to offset it? Remember, small suppliers are not working on salary. They’re not receiving paid time off or medical coverage from some magic fairy. Every moment is precious.
Once work begins, you may feel inclined to delegate day-to-day management of it to an underling, which may undermine the value you could be getting by at least checking in on a strategic level with the supplier, thinking about synergies across the various projects and suppliers that might be gained through continuity and collaboration. Likewise, once the deliverables are at completion, you may be moving on to other things without so much as a fare-thee-well, not to mention continuity of promises made or implied for further mutual value. An odd situation like an abrupt end to a one-night stand.
In the article Small Business Day is Everyday, Janice Cuban observes:
I can’t speak for all small businesses, but as a rule, if you want an article turned around ASAP, a substitute in that gift basket, or an extra rounds on that consult for free — we will do it. Why? Because we have a relationship with you, appreciate your business, and can “make up our own rules” (otherwise known as flexibility). This can’t always be said for a corporation. . . . . When you have a full-time job you know you’re going to get paid on a schedule. For those of us who have a small business it is not an assumed. We put our trust in you to be our source of income. We give you our all and expect that we’ll be compensated fairly and on time. . . . There’s a reason reviews on Yelp, Trip Advisor, and LinkedIn carry such weight in the online world: they make up the referral world that we all live in, and we rely on it heavily. Then there’s offline — the real world — which has been around since business has: an introduction through a colleague or a neighbor that steps into your store after hearing a glowing recommendation. These help add up to business sustenance. They also drive us to do better and strive to be the best for you.
Today is Valentine’s day, and I just wrote an article about McDonald’s mixed bag in their “Payin’ with lovin'” campaign (Loving Customers for Customer Experience Excellence). My hope is that everyday is a day to feel prized by customers, and ensure they feel prized by you. Loyalty is a two-way street, best described in the book Why Loyalty Matters. Let’s center our businesses on customers and focus on ease-of-doing-business as the key to being lovable. It’s the enduring route to demonstrating and reaping the value we see in all of our business relationships.
Image purchased under license from Shutterstock.