Client-supplier disputes are expensive and painful. Many client-supplier disputes find their origin in a poor vendor selection process. Vendor selection itself is often time consuming and frustrating. One of my clients recently issued an open tender, and received more than 60 vendor responses. After spending considerable time evaluating, more than 40 responses seemed to offer a suitable solution. Where did their selection process go wrong? How to choose?
Many organisations and managers spend a great deal of time interacting with a range of prospective suppliers in order to select one of them, only to find that they cannot make a rational decision. Some managers choose to rely on an intuitive preference that later doesn’t work out. Vendor sales people are often perceived to be either too good, or not good enough. It is easy to get wrapped up in the vendors’ sales pitch, or not get the information you know you need.
For low value transactional deals you can afford a few mistakes. It is different when the relationship is high value, long-term, and will involve ongoing interactions. Getting it wrong can be very expensive in many ways.
As it turns out, vendor selection is a bit of an art but there is science involved too. Trusting your gut is important. Complementing it with a clear selection rationale will allow you to verify and communicate your intuition.
Approaching vendor selection professionally as a formal process will save you sweat, dollars and perhaps tears.
We have repeatedly found that the following 5 steps offer a rational guide to ensure vendor selection is smooth and effective for both parties in the relationship:
1. Identify your stakeholders
Consider the entire lifecycle of your upcoming purchase from the new vendor, from defining your requirements to future decommissioning of the new products or services. Everyone in your organisation (and beyond) who will be impacted by your purchase at any phase is a stakeholder. Name them, find them, and talk to them prior to meeting potential vendors. Identify stakeholders’ wishes, requirements, and concerns from the inside-out, before anyone is influenced by vendor ‘education’. Incorporating all stakeholders’ business needs in your vendor selection process will ensure you avoid predictable and expensive issues later.
2. Ensure your requirements are complete
It is fairly easy and straightforward for most organisations to analyse and draft their own requirements. It is far more difficult to ensure all the relevant requirements are fully documented. The issue is that by working in your business, you and your subject matter experts have developed an unconscious competence: you don’t always recognise the key information a vendor needs to know to help you effectively. It can be very hard to put yourself in the mindset of someone who does not know what you know. What may be obvious to you will not always be obvious to someone else. We often find that vendors are not told key information and that they don’t know what to ask for. That proves costly down the track. You may end up selecting a vendor who cannot deliver some important functionality. Involving a vendor-neutral partner in analysing your requirements can help.
3. Research prospective vendors
Research the vendor market and qualify vendors based on publicly available information about their organisation and people, their products and their services, without sharing your requirements with them. If your policies and regulation allow, this will enable you to pre-select a limited number of vendors and invite only them to respond to your requirements. Sending specific requirements will result in detailed responses. You will need to interpret and evaluate them all. You save precious time and resources if all responses received are from pre-qualified potential winners.
4. Manage expectations in your tendering process
Your selection process might include a formal tender process, or be based on more informal interactions with prospective suppliers. Either way, be explicit and frank with vendors about your expectations on process and outcome. Avoid assumptions. Ask what you want to know. Open questions will elicit answers that communicate much more about the vendor’s offering than closed questions that receive a ‘yes’ or ‘no’ answer. A bit of extra thinking and writing early in the process will save you much time, frustration, and dollars later.
5. Create consensus in your team
A consensus selection decision is crucial for the implementation to be supported by all your stakeholders. Disagreement with the selection decision can easily result in stakeholders becoming passive, difficult, or actively undermining the initiative. Consensus requires firstly that your team members understand the relative positioning and importance of their focus area to your overall goals. Secondly, consensus requires a consistent way for your team members to evaluate vendors’ input so individual evaluation results can be compared and discussed. And thirdly, consensus requires sufficient time to discuss your team members’ concerns, so that their intuitions and emotions can be heard, articulated and rationalised.
A vendor selection process following these five steps will allow you to keep your head cool and be in control throughout. It will give you mind space to perceive human elements that cannot easily be captured by the scientific part of your decision making process. That’s where the art comes in. When you share your humanity you allow trust to develop and a relationship to grow; find common ground and negotiate differences in order to adapt to each other without compromising your interests.
Combining science and art will allow you to select the product or service that best matches your needs, and to interact effectively with your selected supplier. This will form a healthy start for practical contract negotiations and a fruitful partnership for years to come.
Victor Konijn
July 2011
Victor Konijn is Managing Director of Plutonic Zoo Pty Ltd. Plutonic Zoo provides vendor-neutral requirement analysis, tender management, vendor-selection, negotiation, and dispute resolution services. Plutonic Zoo has also captured insights and practical tips in eGuides available from the Plutonic Zoo website. Victor can be contacted on followup@plutoniczoo.com.au.
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