Selling in a Time of Corona – S1E6 – Brown Cardigans, Procurement and COVID-19

Billy Connolly - intro: "We want this! And that! We demand a share in that, and most of that. Some of this, and f@%#$kn all of that. Less of that, and more of this and f@%#$kn plenty of this! And another thing, we want it now! I want it yesterday, and I'll want f@%#$kn more tomorrow! And the demands will all be changed then, so f@%#$kn stay awake!"

Elliot Epstein - intro: So, someone ate a bat apparently and the world turned upside down. Hi, I'm Elliot Epstein. And I’ve spent the last 20 years of my life coaching, consulting, training, and speaking about all facets of sales development, pitching, presentations, negotiation, the C-suite sales calls and all of the various components in the sales cycle in between. And now we find ourselves in a world that's very foreign. Welcome to Selling in a Time of Corona.

Elliot Epstein:             That opening clip was either the masterful Billy Connolly or the head of procurement presenting at a tender briefing. Hard to tell, really. In this week's episode, we peer into the Twilight Zone that is the wonderful world of procurement with none other than the master of procurement himself. Paul Rogers. I first met Paul many years ago when I was contacted by a procurement consultancy to train their consultants to present at conferences.

Elliot Epstein:             I had no idea these people existed. I thought a procurement consultant sounded like someone who was an advisor to inexperienced sex workers. After the training, Paul and I kept in touch. We actually became friends. We became a bit like the odd couple of business. He's a Liverpool fan. I'm Leeds United. I'm 193 centimetres tall. He's …  not. And he's coached procurement to negotiate the best deals with suppliers and I've coached sales teams to win profitable deals and often to get around procurement. Ultimately though, we ended up writing a book together, Sales versus Procurement - The Secrets Unveiled at the Negotiation Table, giving both sides of the story in all of its raw, argumentative tactical glory. It's been bought in Spain, Brazil, US, UK, India, Germany, as well as Australia, of course, in Asia Pac. And it was described by a global account manager of DuPont as “The only book of its kind I've found in all my 26 years’ experience selling.” So, Paul and I jumped on a conference recently to discuss how Corona is affecting procurement. Well, naturally, how that in turn affects how you sell to procurement. Here is the smug Liverpool fam himself and I, discussing Brown cardigans procurement and COVID-19.

Hello, Paul. I hope you're well in lockdown wherever you are.

Paul Rogers               Very well, and yourself?

Elliot Epstein:             Yes, very good. And, I’m just thinking, do you have a different brown cardigan for each day?

Paul Rogers:              Well, I have a different pair of white socks for each day, but I tend to reuse the cardigan, minimizing its total cost of ownership and extending its operational life.

Elliot Epstein:             The procurement gene is strong and working well! So, what do you think procurement people are doing right now in lockdown after they've walked the dog and pulled wings off flies?

Paul Rogers:              There are two answers to that because the economy, at least currently, has both the public and private sectors. I think the impact is a little different in each sector, Elliot. So, let's focus on the public sector. In the war time, there was a Ministry of Supply and the task of acquiring goods in particular became critical. And that's what's happening now for many public sector procurement people. They are front and centre in trying to secure things like ventilators and face masks and protective equipment and, means to keep people safe.

So, for those public sector colleagues, there is a crisis mode and they are important. I think in the state that I live in, which is the state of Victoria in Australia, there is actually five streams of the public sector that have been temporarily created. One of which is about supply. So even Andrew Forrest in the private sector, the chairman I think of Fortescue has highlighted the role of procurement in terms of securing goods. I think it was particularly face masks.

Elliot Epstein:             So, he’s been a strong advocate of procurement for some time. So that's a critical, and that's a great role of procurement is performing in public. What about private sector?

Paul Rogers:              I think it depends on the industry, but obviously if you're in travel entertainment, leisure, hotels, you're almost certainly either stood down, possibly with little prospect of being reinstated. But for people who have been stood down, they’re experiencing an uptick in demand for online training and online webinars. So, I think there's no question that some people are using this and forced downtime in order to upskill and develop their capability.

Elliot Epstein:             It's the same for me on the sales front too, with sales training.

Paul Rogers:              Yes. Then the second thing to mention for all procurement people is that, some suppliers are seeking to use the COVID 19 crisis as a means to escape from the contractual obligations using force majeure clauses. And so, dealing with poor performance or not meeting KPIs is an issue because there's a contractual question to be asked, which is, can poor performance be excluded from contractual liability due to a force majeure clause? Is that something you've come across, Elliot?

Elliot Epstein:             Well, I'm hearing the opposite. I'm hearing really lovely people in procurement as saying, “I know we've got a contract to pay you thousands of dollars a month and we agreed to buy 1000 of them, but we can't do that anymore because of COVID and so, stick the contract where the sun doesn't shine, and we'll talk to you again in a few months’ time”, leaving a lot of suppliers who thought they had good relationships, scratching their heads going. “Well, so you're not going to pay me with what we've delivered or you’re going to pay me half because you've got a cashflow problem. And then you're not going to stick to the contract that we signed in January?” And so, they're telling me that they're facing the exact same issue, which is procurement saying, “We're not paying and we're not buying.”

Paul Rogers:              And the interesting thing about those, let's call them disputes. So differences is that they're having to be resolved through indirect communication, whether it's email, phone, or video. And in my professional life, I'm involved in an ongoing negotiation where we're having to use video and it's clearly more effective than email, but, much, much less effective than, face-to-face. So, have you been involved in video negotiations, Elliot?

Elliot Epstein:             Yes. So a lot of the issues that are arising because, and you know, we’ve spoken about this in our book and we've spoken about this in previous videos where a negotiation without face to face, and that is almost touching each other in an appropriate way is a real downer to getting agreement on so many of these factors.

And there's nothing we can do about it other than we need to get on video conferences, at a minimum and we need to do it constantly. The one thing I will say is that the frequency of video conferencing still needs to go up. I know everyone's on it. Some people are even sick of it, talking about it with their own teams, but with clients, you know, if you would make with a client three times a week, then there's nothing wrong with having a video conference three times a week. And that needs to be maintained. On the negotiation front, I think it's important that both sides understand each other a little better. I think sales don't understand the pressure procurement is under, and I don't think procurement understands if they have an obligation to move heaven and earth to try and keep that supply chain happy. What are your thoughts?

Paul Rogers:              Well, I think given what you've said, that procurement has trying to avoid their contractual obligations. And I've said that suppliers are trying to avoid their contractual negotiations. The use of indirect communication does not help rebuild trust. And one of the benefits of face to face contact is that as human beings, trust is built by eye contact. It's built by understanding all of the verbal and nonverbal cues, and it simply cannot be, you cannot build trust by email, or it's much harder by phone. And even with video, it's not as easy. So we're in a situation where parties are breaking their contractual obligations, which clearly undermines trust. And then the means of communication that could rebuild trust face to face contact is being explicitly stopped. So, I think one of the short-term consequences of COVID-19 will be, where relationships have been strong and pre-existing, they will be tested. But it will be very, very difficult to recover from the behaviour of parties during this time.

Elliot Epstein:             Yes, that's a very good point. How you behave now, is going to live in the memory of both salespeople and/or procurement for quite some time. So, when we all come out of the Batcave and start to see each other again, if you've behaved poorly during this period, look out! Because there'll be suppliers that will take procurement to task and say, right, you denied us the opportunity of a fair go and we'll go and find someone else. If you're going to behave like that or put the price up, we'll stop giving you the privileges that we've been giving you. And equally procurement will be very harsh on suppliers that are not moving heaven and earth, or at least perceived to be moving heaven and earth to deliver as much as they can. So that's a really good learning, I think for everyone on both sides. What do you think in the short term and the long term, Paul, what do you think the impact will be on the types of people in procurement and how they will behave going forward?

Paul Rogers:              Well, first of all, I think there will be significant reductions in the number of full-time procurement people, Elliot. Especially in the public sector. So, you talked about the downsizing of some procurement departments. If the public sector in particular has a much-reduced revenue base, which it will, and there is more obligation on them to support the broader community because unemployment is high. I would expect the number of full-time staff in the public sector to fall. And procurement is an area that is easily …. as a red line through it because obviously, everybody can do procurement because it's easy, isn't it? I would expect there would be an increase in part-time participants in the procurement process.  And a lot of budget holders will be asked to manage their own procurement processes. And the skill base will become a broader business one, I think unless full time specialist procurement people in the public sector in particular.

Elliot Epstein:             So does that mean if we move to a more decentralized model, if I’m in sales, it's even more important to go and contact all the various stakeholders and  decision makers,  which you and I have spoken about for a while, you know, how I love to get around procurement. And is it now a time where with fewer procurement on the horizon, we're going to be going directly to departments and divisions and decision makers and saying, “Hey, we can help you out.”

Paul Rogers:              I think if you look at some of the supply chains that, that are causing problems right now, it’s, well, that originate, a lot from China. And so if you helicopter up, by optimizing price or low cost and sourcing in a country, which is a totalitarian dictatorship, people have turned a blind eye to, non-price factors and sure to optimize price. So, one of the things that, I think three things will happen in terms of whoever is managing the procurement process. The first is localization or onshoring if you prefer that phrase. So, more and more people will look at their supply chains and say, how much of the value is produced locally. And how much is produced overseas.

And if it is produced overseas, in which countries, does the supply chain originate? So localization is the first issue. The second one is a strengthening of business continuity plans. So, I think salespeople will encounter requests to strengthen force majeure clauses and to provide details of their business continuity plans.  Some procurement people call this supply chain resilience, which is how robust or resilient are their supply chains to exogenous traps, which could be pandemic or,  whether it's tsunami or volcanoes or whatever, how robust is the supply chain. And the last one is I think it's been a wakeup call for many organizations that they have simply no idea how dependent they are on external suppliers. So, most buyers, as you and I have spoken, have grown up in a buyer's market and they've become complacent about the fact that they have more suppliers than demand.  After we emerge from the restructuring of the economy, I've read today that in quarter two in the UK, GDP will fall by more than 30%. Now, if that's the case, merely getting supply is going to be an issue. So in summary, whoever is involved on the client side, their preoccupations will become,  first of all, localization, secondly, strengthening  their contractual safeguards, thirdly, understanding the resilience of the supply chain and fourthly, trying to ensure continuity of supply and support of local suppliers.

Elliot Epstein:             So that's an interesting message for salespeople because there are many opportunities become larger still. The key question, or the sceptic in me would suggest that if a bid is being evaluated based on business continuity and resilience and they are 15% dearer, what will procurement do then?

Paul Rogers:              Well your question presupposes that procurement are the key decision maker and clearly that's just not the case. It's very rarely so. I think to go back to the question that I pose to you,  if you optimize price and you end up sourcing   materials, which are originating in countries that are subject to a higher level of risk,  and suddenly continuity is your primary goal.  Then yes, you would pay a price premium, Elliot. There isn't a simplistic, you know, “we pay 20% more” because it depends on the risk profile of the category. But I think any procurement person who tried to argue that a 10% price premium was worth running a risk on an elevated risk and to continuity performance would soon find that in the current zeitgeist, they were told no in the short term, continuity is important and we'll worry about cost later.

Elliot Epstein:             Yes. And given that there's going to be fewer numbers, they're going to want to hold on to their jobs. So, the last thing that they want to do is not provide quality and reliable solutions to the business and then be seen under threat. Again, I think it's an opportunity to move both parties forward here, where maybe our ultimate goal, which is since we wrote the book to get sales and procurement to understand each other better, maybe one of the unintended consequences of COVID-19 is that could actually happen, because we kind of need each other more. The question is whether people step up to the plate or not, which I guess is my last question, which is, where do you see procurement behaviours with sales in terms of budget management, planning, forecasting collaboration, do you see it changing in the light of what you've just mentioned or do you see there being a lot of resistance still because of old behaviours?

Paul Rogers:              Well you hinted at reciprocity, so I'll tell you a little anecdote. I'm old enough to have been around after 9/11….

Elliot Epstein:             …. was that World War 1?

Both:                           <laughter>

Paul Rogers:              … and I was working with a large airline who had 20, I think it was 28 days cash left in the business. My job was to contact suppliers and say, can you please not insist upon cash with order because yes, we are in trouble because we're not flying anymore. But we actually want you to extend payment terms. And one of the suppliers said, we will give you a discount on price and extension of payment terms, but we wanted 25% discount on our airline tickets!

Paul Rogers:              A quid pro quo! And the fact that I've remembered that from probably October 2001 will tell you that procurement people do remember like elephants, Elliot. They do remember. But it highlights that if you behave poorly, you can't be surprised if the other party remembers that. So I think the things that I would expect procurement people to do is to have a heightened appreciation of suppliers who do provide continuity of performance and I've written down “Better the devil you know”, so  whenever I see a sales training, it always seems to involve a combination of Maslow's hierarchy of needs and Dale Carnegie. So, I think the second tier is security, isn't it?

Elliot Epstein:             I think it's coffee now. I think there's WIFI. Wi-Fi is down the bottom, and then above that is coffee. And now above that is video conferencing.

Paul Rogers:              Well, I'll ignore that and say that continuity of supply is a new set of needs for procurement people. And so that is what is going to take priority for them. And so, procurement was trying to do lots of good things, engaging disadvantaged groups in the supply chain, trying to ensure that they behaved in a socially responsible way. And there's actually an international standard for sustainable procurement ISO 20400. One of the things I'd encourage your sales colleagues to do is perhaps look at that ISO 20400. And it's about, what is the agenda of procurement in terms of sustainability and looking forward, that's what procurement people are going to be driven by, which is making their supply chain and their relationships more sustainable. So, the opportunity for incumbent suppliers is to leverage the “Better the devil you know”, and the continuity of support and relationship that they have. And for challengers or those who are not an incumbent supplier, I think the opportunity is to recognize that buyers are going to be desensitized to price. And some of their key criteria will become supply chain resilience to proportion of value that is added domestically, or locally, and the ability to provide a continuity of performance. That's your business continuity management. So if you're not aware of uptime or the proportion of your value, that's added onshore, I would suggest that you looked at those figures in terms of features, and then leverage them as benefits to your clients in terms of reliable, trustworthy, onshore provider who can offer a high level of business continuity.

Elliot Epstein:             They're great points, Paul. And the bottom line of that for me is that safety has just moved up the rung of benefit statements from something that was almost nice to have in the past, to right near the top. Safety of supply chain, safety of performance, safety of handling, safety in security and the knowledge that your data, your systems are kept intact and safety that there is knowledge within the supplier's company that can protect the client both in good times, and in difficult times.

They've been great insights. Paul, maybe our dream of sales and procurement collaborating, as we've become friends, maybe they can become friends. It's still a possibility out there. I know you need to go pick up your dark green cardigan from your dry cleaners now. So, I will let you go. Suffice to say, it's always a pleasure catching up with you. And I, I hope the insights that you shared resonate with my listeners and all sales teams, and there are some great ideas there of where you can start to make a real difference both now, and when we come out of this COVID-19 cover to maximize our relationships with procurement and with the wider business. So, thanks again, Paul. See you soon.

Paul Rogers:             Tara!

Elliot Epstein:           Signing off with “Tara” was Paul's way of saying it's 6:30 already, time to slip into my pyjamas, read a good spreadsheet and get to bed. You can connect with Paul on LinkedIn or email Paul@paulrogers.pro, to share your thoughts or ask him a procurement question. And you can book both of us on your screen to guide your sales team through the negotiation maze of sales and procurement.

Stay safe, stay positive. Remember your ears are safe. Paul and I were nine kilometres apart during this entire podcast.

Take care of yourselves, till next time.