Supplier Selection: Five Questions to Ask to Make Sure Your Adviser is as Objective as Possible

Last week, I shared the details surrounding Infor's anonymous paid referral program that was introduced and subsequently cancelled in less than 24 hours. One of the scarier things about this incident isn't that the initiative made its way through the Infor commercial organization and out to potential "influencers," but that many such programs are happening today, and without much knowledge of the fact. Whether it's technology, services, office products, IT equipment or other spend categories, vendor-paid channel referral fees -- some of which are certainly below the surface -- have been around for decades. And some, such as those captured by group purchasing organizations (GPOs), are even part of the core business model for intermediaries.

Regardless of category and intermediary relationship, I believe the onus should be on procurement organizations to ensure that they are representing their organization's best spending interests by investing any potential conflicts of interest among those influencing -- or facilitating -- a decision on their behalf. This may include industry analysts, bloggers, consultants, GPOs and others. To help with this effort, I think, as a start, there are five questions that every procurement organization should ask of potential advisers and channels:

  1. Do you (or does your organization) receive any direct or indirect compensation from the supplier for referring business based on product, solution or service recommendations and/or referrals?
  2. Is this information disclosed (or not) through any public means?
  3. If "yes," is the compensation tied directly to volume and revenue generated for the vendor or is there an incentive based on another mechanism?
  4. Do you currently have any other type of commercial relationship with the supplier that you are recommending, or do you hold any type of equity or other financial upside in this vendor? If so, what is the extent of the relationship and do you work with other competitors to the vendor in question?
  5. Are there any suppliers that you do not work with commercially that you have referred business to in the past in this supply market? If so, who?

These questions are obviously just a start. But hopefully they'll serve to help as a discovery process to better understand whether your informal or formal adviser is as objective as they might claim or seem or the surface.

- Jason Busch

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