Supplier relationships and executive influence
In recent weeks I have had a number of confidential discussions with senior Supply Management staff in which they have expressed concern over executive influence in the bid and selection process.
Although the details differ, each of them has been describing an environment in which selection decisions are often not made in accordance with objective criteria, but are driven by favored relationships between senior executives. “There are some situations where you know it is not worth others bidding; and there are also some companies that are simply not in favor – they just cannot win, even if there is no good business reason for their exclusion,” commented one Director of IT Procurement.
Executive involvement in significant procurements is important and desirable. A senior sponsor is critical to generating appropriate review, prioritization of funding and speed of decision-making. On-going engagement assists in performance management, handling change and timely escalation. But there is a big difference between executive sponsorship and executive influence. The latter can be – and often is – unhealthy. It not only undermines competition, it also tends to undermine successful outcomes.
While the evidence is anecdotal, there are many who perceive a close connection between executive influence and failed projects. ICCPM highlighted this in a paper entitled ‘The Culture of Optimism’, in which they observed the tendency for customer and provider executives to mutually agree on unrealistic goals and objectives. I think the problem goes deeper. Executives simply do not have the time to allocate to detail and in my experience, they are frequently impatient with those who want to be sure that everyone knows what they are doing. Executive-led procurements often lead to a lack of clarity regarding what is to be done; they often lead to a disconnect between the high-level vision and the on-the-ground reality.
Personal relationships are important, but they are also temporary. Executives move on, they change job, they retire. And this means that supply relationships are frequently disrupted. Overall, it is of great importance that executives understand the difference between objective sponsorship and biased influence in the supply management process.