Gut feelings and hard data

We have a gut feeling about plenty of things and maybe we think we know what works when it comes to incentivising behaviour. That’s because we know how we respond to sticks and carrots. But maybe not everyone responds as we do. Maybe different situations call for different approaches. We’ve all seen what happens when we get a trophy just for turning up – that’s all we were going to do – turn up. And we know how we respond when, at every turn, we cop flak. We stop turning.

Big questions and fluttery tummies

Is our gut feeling enough? Can we make business decisions and base our management strategies on gut feelings? When should we use sticks and when are carrots called for?

Of course, we’re not going to make those kinds of decisions based on how we ‘feel’ about our suppliers. We’d be crazy to do that. We need data to give us the support to either go with our gut feeling or discard or modify it. We need the evidence behind us to be able to say: this is how I will manage my suppliers, this is where the results will come from.

Big questions, big data

This is where Grosvenor can help. Each year we conduct research into how to improve procurement functions and supplier outcomes. We know what best practice looks like. We have the data to back up what we say. That data gives us the confidence, and it will give you the confidence, to be able to make the right decisions when it comes to considering, ‘which one, the carrot or the stick?’

But first, why do we need to incentivise?

This is easy. The suppliers gave us this answer. They told our researchers that they could do better, that they weren’t necessarily giving 100 percent performance. In fact, the average supplier was only delivering at 74 percent performance level.

We want more than that, right? We want our suppliers to like us enough, be engaged enough, respect us enough, respect their product/services enough, to want to give everything, to perform at their top level.

But most of them are not. They told us they weren’t trying as much as we wanted them to try. That we could get more from them.

How can we get better performance from our suppliers?

Suppliers told us how they could better their own performance. They asked for respect, clear expectations and good communication.

Sounds easy but what does that look like in a practical sense?

Suppliers want you:

• To answer the phone and respond to emails; To give regular feedback;
• To agree on a timeline for deliverables;
• To involve them in important discussions;
• To focus on outcomes;
• To be transparent;
• To communicate early and clearly; To show some respect.

About our research:

Our research is part of our commitment to the improvement of the procurement profession in Australia and New Zealand. We spoke in-depth to 252 participants representing a combined spend of $5.6bn.

We’ve got more practical takeaways for you from that extensive research and we’ll be delivering that to you soon.