July 11, 2024

Engage your Vendors and Service Providers to Build Peak Performance Cultures (TPL Insights #230)

By Rob Andrews

Your vendors and service providers, whom I’ll simply refer to as providers, could very well represent your most underutilized resource group. I began to understand this concept when, as an 18-year-old second assistant manager at a Safeway Store in Houston, I was befriended by a wine salesman named John Feely. I’m not sure if John thought strategically about customer relationships, or whether he was just a good guy. His intentions notwithstanding, John was always trying to help, and as a result, he became one of my most important advisors.

Fifteen years later, as a division president for National Convenience Stores, with responsibility for 516 stores spread across three time zones, John was still one of my closest and most valuable resources. John had remained with the largest wine and spirits distributor in Houston and had risen to the position of senior vice president and general manager. Our professional relationship lasted five more years until John left to start his own retail store.

Another unlikely advisor came my way shortly after I assumed the division head role at NCS. Bernie Lynch, the owner of a beer distributorship called GLI Distributing, dropped by my office, introduced himself, welcomed me to San Antonio, and asked if he could help me assimilate into the San Antonio business and cultural scene. Like John, Bernie became one of my closest confidants and helped me with a myriad of business challenges, most of which had nothing to do with beer. He helped me understand the competitive landscape in San Antonio, who the power players were, and how to think about segmenting the diverse local customer base.

For twenty years, these two service providers were two of my most valuable assets. I ran merchandising ideas past them. I brainstormed with both around marketing concepts, competitive strategy, vendor negotiations, and distribution challenges. I came to trust them so much that I sought their advice around leadership and management issues, site selection, conflict resolution, employee engagement, and countless other issues. I even sought their counsel on personal issues from time to time. These relationships were incredibly valuable to me and to my organizations. They were mutually beneficial to all parties as John and Bernie were often rewarded with more display, shelf, and door space, which led to increased revenues for their distributorships. That’s the way great relationships work; both parties win.

Today, my trusted advisors include a half dozen long term clients, my staffing firm partner, my technology provider, my shirt maker, my car dealer, and three business colleagues outside my firm with whom I meet regularly for mutual benefit. No longer do I look for providers from whom I can extract the lowest price. I look for a total value proposition and a synergistic relationship in which both parties win. Providers and buyers don’t always have the best relationship beyond the transaction. Typically, buyers are focused on getting the lowest price and reliable delivery. While this makes sense on paper, it inevitably creates a zero-sum game, as providers often feel expendable. Providers who know they might be replaced at any time have no incentive or interest in being proactive, flexible, responsive, or working in the purchaser’s best interest. While some buyers have rethought their Draconian approach and have realized some value beyond the transaction, most have stopped short of a true partnership. Companies that have fully realized the benefits of treating providers like partners have leveraged these important and previously untapped resources, often enabling a transformation into becoming a more focused, nimble, and cost-effective enterprise.

Transparency, synergy, and collaboration with key providers result from having an open dialogue with them around their capabilities and being clear about the kinds of relationships you seek. Savvy leaders always have their antennae up in search of that rare, trusted advisor. Leaders who do this well focus on the provider’s cultural fit, values alignment, commitment, collaboration, responsiveness, and trustworthiness. They are not overly enamored with big brands or impressive resumes. They are flexible about where they come from and allow for imperfections.

Whether your main goal is to leverage provider relationships, prevent disruptions, or protect your bottom line, the key comes down to transparency. Trusting that your providers will be able to meet your business demands requires a shifting mindset – it defies the traditional transactional exchanges and works towards building a strategic partnership. Through transparency and effective communication of goals and concerns, you can have a stronger partner by your side, which will only enhance your business and its overall effectiveness.

Engaging service providers is an important aspect of stakeholder engagement, one of the nine principles at work in organizations that outperform their peers. Firms of endearment, the peak performing companies often written about by Conscious Capitalism co-founders John Mackey and Raj Sisodia, align all stakeholder interests with company purpose, vision, values, and strategy. Leaders who have figured out that providers are important stakeholders and valuable resources and are not to be abused or overlooked have a step up. Today I look for providers of all varieties who are seeking relationships rather than transactions. While they are not easy to find, these relationships are well worth the search. Let’s have a conversation about how you can leverage your provider relationships.

Warmest Regards,