Vendor Entertainment a No-No?

CIO — When it comes to vendor relationships, there seem to be two perennially taboo subjects: vendor entertainment and vendor press releases. These days, most companies feel uncomfortable allowing their employees to be entertained by vendors and shrink from the idea of allowing vendors to issue customer-related press releases. Unfortunately, in both cases, customers are leaving concessions and value on the table by being narrow-minded.

More and more, companies have a "zero tolerance" policy when it comes to accepting entertainment from vendors. The rationale for such a policy is understandable—minimize a vendor's influence on staff, remove the sense of obligation that the staff may have to a vendor and eliminate any appearance of impropriety or favoritism. Clearly, gifts and excessive entertainment offered by vendors go beyond an ethical relationship, and should be prohibited as a matter of policy. Further, there are points in a business relationship, such as during a competitive bidding process, where vendor entertainment should not be accepted. However, a zero tolerance policy employs a broad-brush approach that has the effect of eliminating the opportunity for vendor and customer to have a more personal relationship in which trust can be established and cultivated.

An entertainment setting, such as a lunch or a dinner, is an ideal venue for a vendor and a customer to temporarily remove themselves from the workplace and get beyond the formalities and, in some cases, the "politeness" of the business relationship. Certainly, a vendor and a customer can meet outside of a social setting, but such meetings are usually more formal and agenda-driven, thereby constraining the conversation from going too far off-topic.

A customer shouldn't be naïve enough to believe that a vendor is interested in entertaining for the sheer reason that the sales representative finds the customer to be personally fascinating; rather, customers should recognize that a primary objective of the sales representative is to retain or expand business with the customer. In terms of an entertainment setting, this means that the vendor wants to ingratiate himself with the customer and to extract as much information as possible. This presents some exposure to a company, but having a zero tolerance policy is a draconian measure when training would suffice. Such training would not only make the customer aware of the vendor's likely intent but can also prepare the customer to make strategic use of the interaction with the vendor. For example, customers can easily be instructed on basic vendor ploys and customer-oriented tactics, such as the use of extended pauses in conversation and silence, to level the playing field or even turn the tables such that the interaction with the vendor actually gives the advantage to the customer and not to the vendor.

Accepting vendor entertainment should be a strong consideration when a vendor's senior management is "in town." Not many customers are aware of this fact, but vendor sales representatives are frequently performance-rated on their management of customer accounts. If a customer is invited to dinner with a sales representative's management but the customer declines, that sends two messages. One message is that the sales representative doesn't have much stature with the customer account, and the other message is that the customer doesn't have a significant interest in the vendor-customer relationship beyond the day-to-day. Beyond the possibility of obtaining some privileged information communicated by the vendor's senior management—that may not have otherwise been made available to the customer—the real advantage of such a meeting is the executive connection that is established between customer and vendor. That connection signals the real potential of increased future commitment of the vendor to the customer.

Similarly, allowing the vendor to issue customer-related press releases associated with some significant event is a sign of commitment by the customer. Not only does this consent by the customer promote goodwill, the vendor understands that an element of quid pro quo is introduced. Meaning that a customer has an expectation of something from a vendor, whether enhanced customer focus or some other concession of substantial value, in exchange for the press release. However, in many cases under the guise of brand management, companies are extremely reluctant to allow such press releases. Other questionable excuses include a concern from a company's legal staff that a press release somehow endorses a vendor's products and services or somehow dilutes a later claim made by a customer for vendor nonperformance.

Clearly, a company should be judicious in allowing press releases, but as a zero tolerance policy for vendor entertainment is considered draconian, so is such a policy for vendor press releases. Instead, companies should carefully consider such requests from vendors. The harm, regardless of what marketing and legal staff may say, is negligible, with the worst outcome being some bruised feelings from vendors for which press releases weren't allowed. All things considered, most press releases are quickly forgotten after their release, but the positive effect on the vendor-customer relationship is enduring.

Stephen Guth is the executive director of the National Rural Electric Cooperative Association's Vendor Management Office. He is a Certified Commercial Contract Manager (CCCM), Certified Purchasing Manager (C.P.M.) and a Certified Technology Procurement Executive (CTPE). He is the author of The Contract Negotiation Handbook: An Indispensable Guide for Contract Professionals and The Vendor Management Office: Unleashing the Power of Strategic Sourcing.