Last week I was running a workshop for Strategic Sourcing professionals and the subject matter was supplier selection and relationship management. One of the topics we discussed was the loss review. Some of the questions I received were:
- Should we be doing loss reviews?
- When do you let a supplier know that you do not want to do business with them?
- How do you let them know? What do you / don’t you tell them?
- How do you let an incumbent know that they have been displaced by a new supplier?
- What do you tell the incumbent? How?
These questions were all very good. I like to compare loss reviews for suppliers to the hiring / firing process of employees. You should spend more time with applicants that invested heavily in the recruiting process (multiple rounds of interviews) and / or those candidates that you may want to hire in the future. You want to provide feedback that will enable the applicant to do better next time without revealing the specific reasons you hired someone else. You should think of hiring (or not) suppliers in a very similar way.
For those employees that you are letting go, your message should be carefully crafted to help them understand why they are no longer a good fit and to avoid any language that may open you up to any legal issues. Letting go of incumbent suppliers should be handled in a similar way. For both employees or suppliers, you also need to have a Plan B to ensure that if they walk out the door immediately, you are not leaving yourself open to any operational risk.
As I was thinking about the whole loss review process I reflected on an article I recently read in HBR entitled, “Why you should interview people who turn down a Job with your company”. This is very much like an exit interview when you quit a job (I often wonder if that feedback ever gets back to the appropriate manager OR sparks any change?)? I bet many companies don’t do it BUT it can provide VERY valuable information to the hiring manager. Were there messages that were delivered by either HR or one of the other interviewees that you were unaware of? Did you lose a very good candidate as a result? If a candidate walks away with a very negative feeling, that could end up on social media – like Glassdoor and cause other top candidates to opt out before even walking in the door.
Now let’s take this loss review process one step further and talk about suppliers that may walk away from responding to an RFP, withdraw during a negotiation or refuse to continue to do business with you (in the case of an unhappy incumbent). I realize that some of you are reading this and saying “NEVER” – what supplier in their right mind would walk away from business? It happens – more than you think! Do you take the time to ask your supplier for a loss review on you? Do you know why they are walking away – could it be that you expect THEM to live up to contract terms BUT you don’t? Could it be that getting paid on a timely basis is painful, like pulling teeth? It could be a number of things BUT you won’t know until you ask. By the way, just like unhappy employees / recruits can turn to social media so can suppliers. It does not take much to develop a bad reputation in the supplier community which can end up costing you real dollars.
The next time you run into a situation where you have an unhappy supplier, take the time to ask for a loss review. It could end up saving your reputation in the marketplace.
Let us know what you think and join in the conversation . . . . . . . .