What was Tesco thinking?

Alan Day
26 January 2016

What were the Tesco employees thinking when they were allegedly treating their suppliers poorly and as revenue streams?

What were the Tesco employees thinking when they were allegedly treating their suppliers poorly and as revenue streams? In recent press Tesco’s suppliers shared some of their questionable procurement practices and charges. It got us thinking about the individuals making these decisions.  What were they thinking at the time, and what could you do as an individual to ensure you’re not put in the same situation.
After more than15 years of consulting across some the world’s largest and well known organisations, we have noticed over time individuals often take on the persona of the organisation they are working for. No two SRM programmes are the same, even if they have the same processes, systems and governance models, the people and culture are always different and each approach will be different. It will take on the ‘personality’ of the organisation and to some degree it’s the same with the individuals.
But despite this, it is important as an individual not to lose sight of what is right or wrong at all times. The executives at Tesco must have known that what they were doing was wrong and have ultimately paid the price with the loss of their jobs and press scrutiny.  
So why didn’t the Tesco supplier(s) speak up sooner if they knew it was wrong? It’s easy to forget the impact procurement decisions have on the lives and livelihoods of individuals working at suppliers’. The numbers can be so big that we can become desensitised and forget the impact our decisions have on individuals but the decision of a large company to cancel or renew a contract can have a massive impact on a small supplier’s revenue or cash flow. 
Organisations or procurement departments usually have rules or guidelines on the percentage of revenue your business represents to the suppliers business. Despite this, even if you are a small percentage of a supplier’s total business; just imagine what would happen if your organisation lost 5, 10 or even 20% of your revenue. Clearly it has major repercussions and it’s no different for suppliers, in fact the smaller they are the worse the personal impact for the individuals in the supplier organisation. So the pressure to comply with our demands is enormous and they know that if they speak up, there is the risk of lost trust in the relationship and potentially loss of business.
But this is wrong; we need them to speak up. We need suppliers to be playing an active part in the relationship; to help us improve our business, bring us innovations, help us delight our customers … and we need them to tell us when things aren’t right. Suppliers may know our business as well or even better than we do. They are often working across multiple parts of the organisation and are able to see how we could improve. They may work with our competitors and therefore are well positioned to see what we could improve to stay competitive. They are most likely experts in their field. 
So what guidelines should you put in place to ensure you are doing the right thing and helping suppliers to do the right thing for your organisation? There is often a fine line between questionable practices and making a good decision so here are three simple things that organisations and individuals could think about:
1. Ensure your moral compass is aligned to the businesses
We once asked a previous employee of Enron, did you know what was going on was wrong? The answer was”of course we did, but everyone was doing it – it was just the way we worked”. 
There is pressure to fit in to an organisation and follow ‘standard’ practices, but you also have a duty to yourself to ensure what you are doing is right. Your gut is usually right and if something looks or feel’s questionable then it probably is. We all have a responsibility to the organisation and ourselves to raise and document questionable practices, but if that’s not possible, then it’s time to ask yourself if this organisation is the right one for you.
2. Be a good businesswoman/man
For years procurement have talked about the need for procurement to get to board-level. However it’s less about our position in the organisation, and more about being a good businesswomen / man. This is making the right decisions to support the businesses strategy and future direction. It requires strategically evaluating the business needs, drivers and inputs to make an informed buying decision.  
In today’s process driven environment procurement can be so focused on following processes that we often forget to ask if what we are doing is best for the business? Process is important to drive standardisation in approach and dealings with stakeholders (internal and external), but equally it’s important not to become a slave to the process, blindly following it as a tick-box exercise. Constantly challenge the process to ensure what you are doing is adding value and is best for the business.
Pure price based decision making is a lazy approach and does not take into account the long term needs of the business. It’s the holistic value of the relationship; the ability to collaborate with suppliers that is best for the business in the long term. Specifications and business needs change, relationships have problems, what is needed is a supplier that you can trust to do a good job no matter how the environment changes.
Finally being a good businesswoman/man means having a quest for excellence. We often talk about the ‘humble perfectionist’. Your talent got you a great role, hopefully for a good organisation. But it’s not talent alone that will keep you there or help you progress your career. Hard work and attitude are the differentiators, ask yourself:
Do you continually strive for excellence in what you are doing, and learn from your mistakes? 
Are you humble enough to be challenged and take on new ideas from others (no matter where or who they come from)?
Do you challenge the status quo or question practices that don’t feel or look right to you? 
3. Create the right environment for the supplier to flourish
We have to be open enough to challenge our own or the organisations approach to supplier management, ensuring we are operating for the benefit of both businesses. This is not altruistic in approach; if you ask suppliers to do something questionable or put them in a difficult position, you will end up paying for it eventually, either through quality as they try and re-coup lost margin or worst case they may go out of business causing havoc in your supply chain. 
The ideal relationship is where your organisation is a customer of choice for your suppliers; where they send you the latest innovations, you work with their most talented or ‘A-team’, and you get access to resource in times of scarcity. Being a customer of choice takes hard work and time to nurture the relationship. Often it is about changing behaviour and culture within your organisation to build trust that enables an open and honest relationship. 
We can learn how to be a customer of choice by taking notes from the sales side of the organisation, where they focus on the customer experience. Procurement should be focused on the supplier experience - what we are like to work with, and how we build supplier loyalty to us as an individual and our organisation.
Remember suppliers are human too, mistakes happen; in fact you want to make a few mistakes as it shows that you are pushing boundaries and trying new things. However it’s what you do afterwards to rectify mistakes, how you learn from them and importantly avoid repeating them. 
Tesco are said to have changed their practices to treat suppliers more fairly. We’ll be interested to see how they implement changes in behaviour and culture to ensure this doesn’t happen again.
Alan Day is founder and chairman of State of Flux, a global procurement consultancy and SRM software company. He can be reached at enquiries@stateofflux.co.uk or +44 207 8420600.  www.stateofflux.co.uk
Download the 2015 SRM report 

In recent press Tesco’s suppliers shared some of their questionable procurement practices and charges. It got us thinking about the individuals making these decisions. What were they thinking at the time, and what could you do as an individual to ensure you’re not put in the same situation?

After more than 15 years of consulting across some the world’s largest and well known organisations, we have noticed over time individuals often take on the persona of the organisation they are working for. No two SRM programmes are the same, even if they have the same processes, systems and governance models, the people and culture are always different and each approach will be different. It will take on the ‘personality’ of the organisation and to some degree it’s the same with the individuals.

But despite this, it is important as an individual not to lose sight of what is right or wrong at all times. The executives at Tesco must have known that what they were doing was wrong and have ultimately paid the price with the loss of their jobs and press scrutiny.

So why didn’t the Tesco supplier(s) speak up sooner if they knew it was wrong? It’s easy to forget the impact procurement decisions have on the lives and livelihoods of individuals working at the suppliers. The numbers can be so big that we can become desensitised and forget the impact our decisions have on individuals but the decision of a large company to cancel or renew a contract can have a massive impact on a small supplier’s revenue or cash flow. 

Organisations or procurement departments usually have rules or guidelines on the percentage of revenue your business represents to the suppliers business. Despite this, even if you are a small percentage of a supplier’s total business; just imagine what would happen if your organisation lost five, 10 or even 20% of your revenue. Clearly it has major repercussions and it’s no different for suppliers, in fact the smaller they are the worse the personal impact for the individuals in the supplier organisation. So the pressure to comply with our demands is enormous and they know that if they speak up, there is the risk of lost trust in the relationship and potentially loss of business.

But this is wrong; we need them to speak up. We need suppliers to be playing an active part in the relationship; to help us improve our business, bring us innovations, help us delight our customers… and we need them to tell us when things aren’t right. Suppliers may know our business as well or even better than we do. They are often working across multiple parts of the organisation and are able to see how we could improve. They may work with our competitors and therefore are well positioned to see what we could improve to stay competitive. They are most likely experts in their field.

So what guidelines should you put in place to ensure you are doing the right thing and helping suppliers to do the right thing for your organisation? There is often a fine line between questionable practices and making a good decision so here are three simple things that organisations and individuals could think about:

1. Ensure your moral compass is aligned to the businesses
We once asked a previous employee of Enron, did you know what was going on was wrong? The answer was”of course we did, but everyone was doing it – it was just the way we worked”.

There is pressure to fit in to an organisation and follow ‘standard’ practices, but you also have a duty to yourself to ensure what you are doing is right. Your gut is usually right and if something looks or feel’s questionable then it probably is. We all have a responsibility to the organisation and ourselves to raise and document questionable practices, but if that’s not possible, then it’s time to ask yourself if this organisation is the right one for you.

2. Be a good businessperson
For years procurement have talked about the need for procurement to get to board-level. But it’s less about our position in the organisation, and more about being a good businessperson. This is making the right decisions to support the businesses strategy and future direction. It requires strategically evaluating the business needs, drivers and inputs to make an informed buying decision.

In today’s process driven environment procurement can be so focused on following processes that we often forget to ask if what we are doing is best for the business? Process is important to drive standardisation in approach and dealings with stakeholders (internal and external), but equally it’s important not to become a slave to the process, blindly following it as a tick-box exercise. Constantly challenge the process to ensure what you are doing is adding value and is best for the business.

Pure price based decision making is a lazy approach and does not take into account the long term needs of the business. It’s the holistic value of the relationship; the ability to collaborate with suppliers that is best for the business in the long term. Specifications and business needs change, relationships have problems, what is needed is a supplier that you can trust to do a good job no matter how the environment changes.

Finally, being a good businessperson means having a quest for excellence. We often talk about the ‘humble perfectionist’. Your talent got you a great role, hopefully for a good organisation. But it’s not talent alone that will keep you there or help you progress your career. Hard work and attitude are the differentiators, ask yourself:

 

  • Do you continually strive for excellence in what you are doing, and learn from your mistakes?
  • Are you humble enough to be challenged and take on new ideas from others (no matter where or who they come from)?
  • Do you challenge the status quo or question practices that don’t feel or look right to you? 

3. Create the right environment for the supplier to flourish
We have to be open enough to challenge our own or the organisations approach to supplier management, ensuring we are operating for the benefit of both businesses. This is not altruistic in approach; if you ask suppliers to do something questionable or put them in a difficult position, you will end up paying for it eventually, either through quality as they try and re-coup lost margin or worst case they may go out of business causing havoc in your supply chain.

The ideal relationship is where your organisation is a customer of choice for your suppliers; where they send you the latest innovations, you work with their most talented or ‘A-team’, and you get access to resource in times of scarcity. Being a customer of choice takes hard work and time to nurture the relationship. Often it is about changing behaviour and culture within your organisation to build trust that enables an open and honest relationship.

We can learn how to be a customer of choice by taking notes from the sales side of the organisation, where they focus on the customer experience.

Procurement should be focused on the supplier experience - what we are like to work with, and how we build supplier loyalty to us as an individual and our organisation.

Remember suppliers are human too, mistakes happen; in fact you want to make a few mistakes as it shows that you are pushing boundaries and trying new things. However it’s what you do afterwards to rectify mistakes, how you learn from them and importantly avoid repeating them.

Tesco are said to have changed their practices to treat suppliers more fairly. We’ll be interested to see how they implement changes in behaviour and culture to ensure this doesn’t happen again.

Alan Day is founder and chairman of global procurement consultancy and SRM software company State of Flux. He can be reached at enquiries@stateofflux.co.uk or +44 207 8420600. Download the 2015 State of Flux SRM report

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