Celebrating Cynics – managing and avoiding conflicts of interest

Continuing our series “Celebrating Cynics”, looking at those areas where a touch of cynicism can be positively beneficial for the procurement processional.

As the procurement world and indeed the business world has got more and more complex, the potential for conflicts of interest has grown and grown. Yet business folk, including procurement executives, often seem oblivious to what is really driving many of the people they work with as suppliers, partners, advisers or even colleagues.

Let's take a few examples.

1. The Prime Contractor who manages a supply chain or network on your behalf. That might be a Systems Integrator in the IT world; a Managed Services provider in contingent labour; or a 3PL firm acting as a logistics prime contractor. So how do these firms choose the sub-contractors in the supply chain? And what are the commercial arrangements between them and the sub-contractors? Are they really making those decisions with your best interests at heart - or because they are getting kickbacks, bonuses, rebates or other benefits from certain players in the supply chain?

2. The website or hard copy media source that recommends certain products. These days, you have to be careful as to the independence of what you are reading. Even publications as reputable as the Guardian or Forbes offer firms the ability to publish material that to the casual observer can look like genuine objective copy. Be careful. And that includes research firms or analysts too - even bloggers! Understand on what basis they are working and who is paying them. (I believe and hope we're pretty transparent - and our core principle is that we never say or write anything we don't believe, independent of who is paying us or indeed not paying us)!

3. Outsourcing - really a variant of point one but perhaps even more noteworthy. Where a function has been outsourced, such as IT, then the temptation for the service provider to manage suppliers in their own interest may be even greater. And of course, the growth in procurement outsourcing has thrown up other potential conflicts of interest. Now firms such as IBM, Cap Gemini, Infosys or Accenture are well aware of the risks here, in situations where they might be both buyer and supplier. I’m sure the firms work hard to ensure any procurement decisions are made fairly and transparently. But as the ultimate buyer, it is worth bringing just a touch of that cynicism when you look at how to manage this situation.

4. Conflicts of interest in tendering or similar situations. This can apply to anyone involved – from internal staff to advisers, lawyers, and interims. Again, the big advisory firms these days are pretty switched on to the dangers, but I’ve seen some huge procurement exercises where no-one thought to ask internal staff – up to CEO level – whether they has any conflict of interest with bidding firms. (In one case, the MD still held shares worth a small fortune in one of the bidding firms, that he had worked for some years previously!)

So, my cynical procurement friends, just keep those jaundiced eyes open and always be aware of what else might be motivating anyone you work with, other than your own best interests. We need to be aware of any potential internal monologues amongst our suppliers or advisers that might be saying “what would really benefit ME is if this happened...”

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