Strategic Supplier Relationship Difficulties? 3 steps to a resolution by identifying everyone’s underlying interests

By Allan Watton on March 13, 2019

Successful strategic (complex) client / supplier relationships tend to have one thing in common – a collaborative mindset. This is one where parties not only work extensively together to achieve big, bold goals, but also where they overcome seriously challenging issues. To get to this mindset and achieve desired outcomes, parties must often pull in the same direction while being respectful of the other’s interests and expectations.

In some relationships, however, this type of positive and forward-looking behaviour seems to be the aspiration rather than the reality.

You may already have a process and method that regularly achieves great outcomes from your more strategic supplier relationships. However, for those of you who have some occasional, but stubborn challenges, or if you simply want to check whether your process covers the primary bases, this article looks to highlight some of the key tools you’ll need to pinpoint the best course of action to take to (a) keep the relationship working well and (b) identify whether your supplier is still on track to achieve your agreed outcomes.

Have Supplier Motivators Changed?

If your supplier’s performance or attitude towards your relationship has started to slip, there are two fundamental checks we find work well to help you in your diagnosis in finding a way forward:

  1. Gain a more detailed understanding of your supplier’s interests. Their underlying motivators both inside and outside of the relationship may have changed. These are more than likely to be driving their actions and reactions. Where possible, try to have some informal ‘over a coffee’ type conversations with your supplier’s senior executives and their team members to identify any key interests that may be misaligned to your own.
  2. Stay calm and consider all the options. We’ve said before that when your relationship seems like it may be at an all-time low, you will likely have already tried many tactics to make it work better. You may be thinking there is little alternative but to consider coming out of the relationship early. Sanity checking on this, in most circumstances, often helps people to realise that thoughts of exiting the relationships should always be considered an act of last resort. It’s complicated, messy and, in some circumstances, you and your own team can sometimes miss certain aspects of your own actions that could be contributing to the issues you are experiencing without realising it.

Extract the Emotion – Good Evidence Keeps Matters Objective

Having dealt with over 500 complex supplier relationships, it is our experience that there are often (though not always) ways to repair a relationship that would negate the reason for exiting in the first place. Extracting the emotion from the situation and going with cold hard facts to evidence reasons for your supplier to change is often the best way forward to get back on track to achieving your business objectives.

It is also helpful to acknowledge that there are times when issues in a relationship just cannot be solved. When you perceive you have exhausted every possible reasonable means to get a relationship back on track, but lack of progress is damaging your organisation, you’ll know that you need the contractual knowledge and fortitude to (a) assess the operational and commercial risk profile and (b) identify another supplier to replace your incumbent.

But first, although you’ve probably been down the route of trying many different tactics to get matters resolved, it’s always worth a final sanity check to see whether there is any real prospect of bringing the relationship back on track.

1. Identifying your supplier’s true underling interests

Understanding the interests that guide your supplier’s decisions and approach to their work is essential if you hope to realign their project aspirations with your own. However, this sort of information is often not freely shared. This, therefore, once again highlights the importance of the establishment of an Intelligent Client Function (ICF) team at the outset of every major complex service delivery relationship.

This multi-skilled team’s remit is to develop stronger relationships with their counterparts on the supplier side in order to explore below the surface to gain a deeper understanding and knowledge of what directs the supplier’s actions. The advantage of this is that issues can be more clearly and rapidly identified and actions or reactions explained so that you can tailor a solution to the individual situation in order to find an adequate resolution or way forward to negotiate. Most importantly, a good ICF team will usually have identified potential issues well in advance, and will probably have already put in steps to avoid issues manifesting, so it’s important to give the ICF team a seat at the senior executive table so you can benefit from their insights.

It is also important to set out your reasoning for believing there is an issue in the first place. What has the supplier done or not done, and what do you see as the path to resolution? It is inevitable that there will be differences of opinion on the facts you present as they may well see things very differently to you. And that’s why it’s so important to approach this situation from an informed position of having the right evidence. The more subjective your evidence is without investing the time to be clear about the facts, the more you are likely to inflame a situation. If you have clear evidence of problems in service provision, it’s much easier to be objective and remove the emotion out of any potential situation that arises.

2. Are you really clear on what outcome you want from the supplier?

Once you have identified evidence to show that an issue exists with your supplier’s productivity or attitude, a decision must be made as to whether the best way forward is through negotiation/mediation or the more formal route of arbitration/litigation. Key considerations here include:

  • Are you looking for your supplier to fix issues and put the project back on track or has so much trust been lost by this stage that you perceive this simply is not going to be possible and, therefore, a more formal (legal) recourse is required?
  • Is it possible for the service provider to transform what has been delivered into something that is ‘fit for purpose’, and is fit for purpose good enough in the eyes of all stakeholders, given that you may be paying for more than this?
  • What time frame for resolution is both achievable for the service provider and acceptable to the client?
  • Or are you looking to find a win-win – a solution that, through an understanding of your service provider’s interests, looks to realign the deal around a way forward that achieves your goals while also taking into account a hitherto undefined aspiration of your supplier’s?

Whatever the way forward you choose – via contract, arbitration, remedial or negotiation – it’s important to recognise the relational and financial impact they will have and the potential each option has of moving everyone closer to the outcomes you were aiming for at the outset.

3. Aligning both client and supplier interests

As stated earlier, some organisations may initially seek solutions through a more formal (arbitration type) process. However, if after having had extensive informal dialogue with your supplier you determine that the service provider is unlikely to be persuaded to turn things around to your satisfaction, you might consider an interest-based process.

In other words, is there anything that you know, through your deeper understanding of their organisation and the individuals you deal with in it, what the service provider wants that you could give them to encourage them to get on-board with your expectations? In the absence of a mutually beneficial solution being clearly and quickly recognised, then you may wish to consider both party’s Best Alternative to a Negotiated Agreement (BATNA).

Brief Examples of Questions to be Considered

The table below is not a fully articulated end-to-end analysis in the context of a BATNA, but merely a list of some key inputs to a BATNA to demonstrate the types of questions/thoughts that it is often helpful to have on your own and the supplier’s radar:

Conclusion

There is no one-size-fits-all solution to strategic supplier performance issues. It’s often a case of assessing the risks and rewards of all key options available to you. The starting point is always knowledge and understanding, and a well-resourced and well-positioned ICF team with management’s ear is usually your best asset in such a situation. They will have a closer connection with your service provider than almost anyone else, they can often ask the tough questions and the supplier may trust them enough to tell them the honest, if sometimes painful, truths.

With this knowledge of your stakeholder’s expectations, and your service provider’s capacities, desires and interests/motivators, you can make an informed decision as to the best way forward, the one with the highest likelihood of helping you to achieve the outcomes you need to achieve.

Photo credit: i-Stock, EtiAmmos

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