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What Motivate Suppliers

In the second of a two-part series, Rebecca Howard applies the ideas of an expert on motivation to ask how procurement people can get the best results from suppliers

In my recent article on how procurement professionals can learn from the thinking of Dan Pink, I looked at the three areas he defined in his book Drive - The Surprising Truth About What Motivates Us. His research said that people at work are motivated by autonomy, purpose and a sense of mastery much more than they are by money.

Now it’s time to look at the implications of this thinking on how we as procurement professionals can use Pink’s ideas to motivate our suppliers to achieve great performance.

For example, you may be managing a contract with disappointing supplier performance and looking to introduce some form of incentive scheme, financial or otherwise. Or perhaps you have a supplier who is fulfilling all of their obligations but not aspiring to continuous improvement.

How do we motivate our suppliers’ senior management, account managers and operational staff to improve performance? Let’s apply Pink’s three motivators.

Autonomy: designing your own working priorities. Asking our suppliers to tell us what we should be measuring could be a radical concept in contract management. Ultimately performance metrics must be based on what matters to you in your organisation’s category plan. But suppliers can provide innovative approaches to how our goals can be achieved.

For example, I worked with a supplier who had a target for telephone response time. They employed a flexible workforce so that at peak times, telephone calls that were beyond the capacity of their call centre could be routed to second tier sub-contractors trained in the customer’s needs.

Purpose: making a difference. It’s easy to think that suppliers must be motivated by money above anything else, so we often have financial incentives and disincentives in supply contracts for good or poor performance.

Pink, however, argues that instead of motivating people not to do something, fines actually drive people to do it. In the case of suppliers, they may expect some level of performance failure, so they build the expected resulting fine into their pricing model. At best, the article says, the incentive becomes defunct: if the severity of the punishment is left unchanged, its effectiveness decreases over time.

I have also found performance contracts succeed when those who benefit from any bonus are those actually executing the day-to-day contract, rather than account managers or senior managers.

Mastery: achieving personal improvement. Too often contract managers are reluctant to praise suppliers for doing “what we are paying them to do anyway”. But recognition programmes have been proven to deliver better contract outcomes. These may be formal annual supplier award schemes or more informal programmes where the contract manager gives an “employee of the month” nominal prize to a staff member in a delivery role.

Understanding what motivates our suppliers can help us target our purchasing practices and behaviours and achieve better contract performance. If you are not sure what their real motivation is, you could ask the account managers, operational staff and senior managers next time you see them. It may give you some invaluable new insights into how to get the best out of your suppliers.

Rebecca Howard is Director of ADR Learning, the training and development division of ADR International

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"Understanding what motivates our suppliers can help us target our purchasing practices and behaviours and achieve better contract performance."