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Are They Your Employees or Your Supplier’s? | Print |  E-mail
As we consult with our clients, it never ceases to surprise us that organizations do not put restrictions on suppliers’ sales practices with their employees. Some of the policies we’ve observed at our clients (recognize your company?):
  1. “Employees are not to accept any gratuities from suppliers, including meals, entertainment, gift items or anything of value”
  2. “Associates may accept gift items or other gratuities from suppliers including meals and entertainment, as long as they are not excessive”
  3. “We have a zero tolerance policy toward supplier inducements to skew sourcing and selection decisions through direct interaction with our employees”
  4. “Employees that are not part of the Global Procurement group are not authorized to speak to suppliers or accept any form of gratuity”
All of these policies are flawed, but guess which one of these four organizations had the greatest savings after we introduced competitive sourcing, thus implying they had the weakest sourcing processes and the worst prices from suppliers. If you guessed the second company, then you are correct. Suppliers ran the selection process and employees frequently went to sporting events, expensive dinners, concerts, you name it. Everyone’s definition of “excessive” is different. Most of the suppliers made comparable high quality products, so the employee could easily rationalize the selection of their “friends”. Supplier account team representatives actually had offices with full security access. A revolving door between suppliers and our client company made it even more difficult to achieve price reductions and savings.
The first policy is too restrictive and really is overkill with “anything of value”. Employees of this client were constantly in fear of accidentally picking up a cheap pen while making site visits. This inhibited the gathering of information from suppliers.
The third policy is too general. What does “direct interaction” mean? If the employee talks to a supplier, can the employee be fired?
The fourth policy is also too restrictive and inhibits the flow of information, especially on technical products or services.
The best policy we’ve written and had a client implement, is as follows:

“Associates may accept gift items or other gratuities from suppliers including meals and entertainment if the total value of the gratuity does not exceed $30.00 or $300.00 annually. Associates that meet directly with the supplier sales and account team will not have input or access to the supplier selection process.”
“Global Procurement associates cannot accept any gratuities from suppliers, including meals, entertainment, gift items of a value over $5.00.”

We recommended that Global Procurement employees have an expense account, so that they can still work with suppliers over meals or other events and that they were authorized to pay for the supplier’s meal or entertainment. This approach redefined the relationships between employees and suppliers and provided a higher level of governance to the sourcing process.

Good Sourcing!