Give Your Company a Personality Test Before Contracting for Services

Spend Matters welcomes this guest post from Gary Weiss, Flash Global’s vice president of pricing, procurement and inventory management. 

If your company were a human who could sit down and take a personality test, how would it score? Every company is like a person, with an individual temperament, strengths, weaknesses and quirks. Instead of “personality,” though, we call it “corporate culture.”

Company culture affects every aspect of business operations, including employee recruitment, retention, development, business practices and vendor relationships. For instance, if your company brand stresses quality and has a tolerance for making investments, but your service vendor is very focused on cost containment, you may well experience a clash of cultures if you perceive the vendor to be cutting corners or reluctant to apply manpower in order to keep their costs down.

These five questions will help you define your corporate culture and find a service vendor who is a good fit.

1. What is Your Company Really Looking For?

Poor choices lead to poor service. In a 2014 Deloitte survey, 48% of respondents said they experienced poor service quality even though the vendor had “achieved service levels.” If that’s true, then something went wrong during the procurement process. Often, this is the result of a misalignment between the procurement team and the business unit that it’s buying the service for.

As a procurement professional, ask yourself and other stakeholders these important questions:

• What does the company want from this supplier relationship?
• What does the company actually need?
• What is the reality of the situation?
• Are you buying for today or the future?

Think about this apt analogy: If you plan to lose weight but need a new pair of pants today, do you buy ones that comfortably fit or ones that are a big snug? This conundrum forces you to consider the reality of today and whether you are buying for today’s needs or tomorrow’s wants.

2. How Much Change Can the Company Tolerate?

Purchasing a service is more complex than buying commodities from the lowest cost supplier. It’s more than dollars and cents; you also have to deal with personalities and expectations. Plans on paper rarely play out as planned, so the value of change management must not be underestimated. Introspectively, question whether the organization will tolerate the changes required, in order to realize the service model envisioned.

Two examples:

• Resistance to change: Some departments may be slow to embrace change (or completely opposed to it) because access to those on the “inside” is lost when new processes are implemented. Others may have entrenched, long-serving employees who don’t see the need to change.
• Outsourcing a current internal function: Expect automatic institutional resistance from the affected department and possibly even from management who have a fundamental opposition to this move.

3. Do You Need a Facilitator or Innovator?

A services vendor can serve as a facilitator or innovator. A facilitator basically takes direction from you. They act as an add-on to your organization but rarely drive significant change. An innovator helps a company change in scope or challenges it to perform particular tasks better. Business practices are typically impacted by innovators, and they require a higher degree of adaptation.

4. Do You Really Need What You’re Buying?

Just because a company can offer you more doesn’t mean that you need it or that your company can leverage “more.”

For example, a software supplier may offer remote diagnostics as part of their service, but your company may have significant data security restrictions and no intention of changing them. That’s the reality, so there’s no reason to heavily weight the potential benefit of remote diagnostics, as it’s unlikely that you’ll ever be able to realize it.

Validate your company’s ability and willingness to use everything included in the contract. Often, we’re tempted to overbuy because we can see the benefits of these extra services. But overbuying saps value from the company because there’s no way to recoup the extra costs from an oversold service contract. While no one wants a contract that may limit growth, the timeline over which you expect to evolve your capabilities needs to be a factor when entering into a multi-year engagement.

5. Are You Cost-focused or Value-focused?

“Price is what you pay. Value is what you get.” —Warren Buffett

Always consider how price factors into the decision-making process. It’s always tempting to grab the lowest price, but that can’t be the deciding factor when purchasing a service. With services, the decision often hinges on a specific vendor’s ability to provide “other services” that will help the company realize future benefits and capabilities.

Always consider company culture, goals and power dynamics. Those factors determine what sort of service vendor you need, specific services that you require and, ultimately, the success of the service contract.  Benefits not realized are worthless.