The top 10 internal issues impacting vendor relations

Len Riley

Have you ever completed a major negotiation and wondered why it was so difficult?  Your instinct may be to direct the blame toward your partner.  I suggest starting with self-reflection.

Self-reflection is not natural.  It is a learned behavior requiring time and honesty.  You may find your company spends little time reflecting on its partnership approach due to negotiation fatigue or competing priorities and politics associated with a ‘post-mortem.’

Successful companies take a step back to analyze internal issues, reflecting on their challenges.  These top 10 considerations can serve as a starting point to enable you to improve future negotiations and partner relationships.

1. Understand past relationships

It is rare that a single executive has managed a relationship from inception, so it is important to understand the complete historical context.  Successful companies invest the time required to understand the past to inform the future.  Failure to put your expectations into a historical context will lead to missed opportunity, and a loss of credibility with your supplier.  Be sure to understand the historical context to leverage and avoid certain topics accordingly.

2. Appreciate your predecessors

It’s easy to step into a role, evaluate a vendor relationship, and “blame the dead guy” – the past owner of the vendor relationship – for a situation you find yourself in today.  Many current relationship owners are still working with those who have managed or influenced the past relationship.  Experienced executives understand the risk these colleagues may feel as a result of reevaluating a relationship. Their opinions can provide an opportunity to influence today’s relationship, your process and your success, either positively or negatively. 

3. Recognize existing stakeholder expectations

Most strategic relationships include various internal stakeholders, whose success is dependent on the ability of the vendor to deliver.  If you are the lead negotiator and you lack an appreciation of their priorities, rest assured your internal stakeholders will certainly address their requirements directly with the vendor, resulting in a loss of internal continuity.

4. Treat your relationship as a journey, not an event

Targeting a quarter-end deal is not a strategy.  Strong management understands that a relationship and negotiation strategy must be stage-crafted around a series of carefully sequenced internal events and subsequent vendor interactions.  They understand real leverage is either achieved or diminished, based on their ability to strategically plan and navigate a collective series of interactions at the right time and in the right manner.  This is the level of strategic thinking your vendor partner is executing, too.

5. Know your company’s reciprocal relationships

Have you ever heard the adage, “We like to do business with people who do business with us?”  Certain vendors operate in industries with significant buy-side and sell-side relationships.  Those experienced managing these types of relationships are not naïve to the implications, and they understand the importance of internal alignment and aligning to holistic relationship objectives.  Ensure you’re aware of how any new vendor relationships will impact any existing reciprocal relationships.

6. Consider any IT and procurement disconnect

The disconnect between procurement and IT is often evident.  The introduction of IT Vendor Management Organizations (VMOs), in many cases, has driven procurement to become more defensive and controlling in nature.  But procurement and IT would be well served to support the positioning of each other as partners in the process.  Left unresolved, the vendor may expose this division and executive leadership will be underserved.

7. Focus on managing a dynamic strategy

We all wish for the day corporate, line of business, and information technology strategies will be in harmonious alignment.  In the meantime, we must deal with the challenge of aligning evolving strategies with vendor capabilities.  Knowing what to buy, when to buy it, and who to buy it from requires a thoughtful process.  Without a clear point of view and commercial construct to grow your relationship as your strategy evolves, you can bet the vendor will oversell your organization.    

8. Know what good looks like

Many have learned that beauty is in the eye of the beholder.  A “good deal” from the perspective of an executive, application leader, infrastructure leader, procurement leader, legal, etc., might be entirely different.  Ideally, your organization will agree on what good looks like (on big ticket items) long before the negotiation commences.  Alternatively, you would be “selling” the deal internally in parallel with the vendor negotiation — been there, done that — good luck!

9. Don’t neglect communication 

Communication, communication, communication.  In the context of strategic partner relationships, communication is a challenge given executive level relationships, multiple internal stakeholders, cross-functional teams, and the influence a vendor exerts on an organization to drive the process. It’s essential to establish a formal and informal cadence that will keep pace with the negotiation to ensure all parties are in alignment.  Lack thereof will certainly lead to unproductive misunderstandings.  

10. Select a ‘Consigliere’

It’s not realistic to have an executive manage a strategic vendor relationship or negotiation at a detailed level.  He or she must designate an individual to lead their team and manage the vendor – someone with a high degree of internal and external credibility.  This role is essential to the relationship and negotiation and ensures the executive has an underlying confidence in the team.  Without this role, you can bet your process will lack velocity, the relationship will be challenged, and the executive will be compelled to question the team and to protect their credibility.

Self-awareness is always an advantage

Many will point to vendor capabilities, sales strategies, negotiation tactics, pricing and business practices as relationship obstacles, which all have merit.  However, I would venture to guess that most find their “internal negotiation” to be more difficult than the actual external vendor negotiation.  In the end, leading from within is the first step to successfully managing a vendor relationship and negotiation.