Fair Treatment Or Supplier Abuse?

 

This is going to annoy some people.  But it will annoy them because they will sort of know it’s true.  It will annoy them because they know to change will be painful and hard to sell in their organizations. 

 

There is a dirty little secret that is not-so-secret in the world of buying creative services and in doing RFP’s, (otherwise known as Requests for Proposals) that is common and unquestioned, but when considered thoughtfully, can only be said to be quite unethical.

 

Yes, it is efficient for the buyer.  Yes, it saves them money.  Yes, it has been done this way for a long time.

 

But it’s wrong.  Morally wrong.  While the otherwise good people engaged in it probably don’t think of it as such, it’s an abuse of power. 

 

If you walk into a grocery store, can you grab a loaf of bread and say you’ll pay for the next one if you’re satisfied with this loaf?

 

Can you go to three lawyers, asking each to draw up a draft agreement and only pay the one who drafted the agreement you like?

 

Of course not. 

 

Yet this happens all the time.  And it costs businesses…and the economy…millions of dollars every year. 

 

There are 2 general ways in which this happens. 

 

Do The Work To Get The Work

 

The first is where the hiring company only selects a supplier after the supplier has done a ton of the work on the project.  In some circles, it’s so common, it’s been given a name: Spec work.  It goes something like this:

 

“Hi Ms. Creative Person.  We are looking to develop a new web site/advertising campaign/special event/product design/packaging design. 

 

We’re looking at different suppliers.  So, we’d like you to provide us with your best creative ideas for this project, along with your pricing to fully execute on your design.”

 

In this first example, there are two levels of abuse that happen.  The first is just the ask itself.  The buyer is requiring, as a condition of being considered to do the work, that the various suppliers actually do work – unpaid work – on the very project their bidding to work on.  This is NOT the same as an actor auditioning.  This is actually producing the very thing that the supplier’s business is set up to produce and be paid for.

 

It’s taking the bread out of the package without paying for the bread.   

 

The retort from hiring companies is that the supplier need not submit.  Which is of course, nonsense.  If an entire industry is set up in a way that you don’t get work if you don’t agree to be abused, then you can’t work in the industry if you don’t play along. 

 

The supplier who doesn’t submit, soon goes out of business and everyone who works for them is out of a job.  Those who work for that supplier will then just wind up working for someone else who does accept this treatment. 

 

The second level in this example is especially egregious.  The “buyer” reviews the submissions and selects the supplier who will execute for the lowest dollar.  However, they give that supplier the creative work done by one of the other potential suppliers.  Of course, it will evolve and modify a bit through the execution process.  But the fact remains; they’ve taken another company’s work product and creative ideas without paying for it.

 

That’s called theft.  And it’s wrong.  You simply cannot call yourself an ethical organization if you play this game.

 

Price Testing

 

This one is very popular.  The “buyer” has a great relationship with their current supplier.  They have absolutely no intention of changing suppliers.  But either the manager has to justify the cost or the “buyer” simply wants to keep the supplier on their toes. 

 

So, they do an RFP.  A whole bunch of companies see the RFP. And, because the RFP says they are bidding out a job that is attractive and valuable, these companies invest hundreds of people hours into responding to the RFP.  Often these RFP’s have very particular requirements so they take a great deal of time to complete.  This is time that could be spent on other marketing or sales activities, so there is a huge opportunity cost in participating.  But,  they have no idea they have no chance of winning. So, they feel responding is exactly where they should be investing time. 

 

In the end, the incumbent gets the work.  The “buyer” gets to say they have discovered their current supplier’s fees are within the market range and all the other companies chalk it up to yet another failed RFP. 

 

The problem with this is that, through an RFP, you are telling the market you are willing to changing suppliers when you’re not. 

 

That’s called a lie.  And it’s wrong. 

 

Now, right about now is when people jump up and say “I didn’t lie.  If someone really came in with something spectacular, we would have changed.”  That’s a poor rationalization.  Of course, if someone offered you a new Porsche for the price of the used Hyundai, you’d take it.  But if you’re at all tapped into the market, you know that isn’t going to happen.  You know that you are using the RFP as an exercise in free market research. 

 

What Should We Do? Pay For Value

 

We theoretically live and work in a market economy.  In a market economy, there is to be an exchange of value.  When you receive something of value, you are to provide something of value.  In the examples above, one party is taking something of value and is giving nothing of value in return.  That is a betrayal of the principles of a market economy and is, instead, a demonstration of abuse of market power. 

 

It’s also a betrayal of a universal principle that we are all taught as children; although we do not all learn.  Treat others as you want to be treated.  Pretty simple, really.  If you don’t want someone to take your work product without paying for it, then don’t do it to someone else. 

 

How would this play out in practice?  If you don’t feel comfortable selecting a candidate firm on the basis of credentials and demonstrated skills and you feel that you have to see them do work on your project, then pay for it.   This will actually drive efficiencies within your organization and within the economy generally.  It will force your people to pre-screen candidates so you are only considering the most suitable ones.  This will lead to a higher degree of success in selection. 

 

Those that are invited will see the integrity of your organization by being told that they will be paid for their time, that they are one of the final 2 or 3 firms and that they may not be selected.  If they choose to participate, they are motivated to do their best work as efficiently as possible.  Firms that weren’t invited can then spend their time on productive work. 

 

If the work you like best is not that of the candidate you want to work with, you must negotiate with the creator of the work.  They may be willing to sell it to you as they still get something for the work itself.  As long as the total cost of the winning candidate and the price of the work is less than the cost of going with the creatively superior candidate, you are financially ahead.  If they don’t want to sell it, then you have to choose between the higher quality/higher price option or the lower quality/lower price option.  While that isn’t your ideal outcome, it is the fair one.   My preferred outcome would be to get the new Tesla for the price of a used Pontiac.  But that doesn’t mean it’s the right outcome. 

 

As for price checking a current supplier with no intention of changing, the buyer is being extraordinarily unfair to other suppliers. If you do this, you are misrepresenting your intentions, which induces people to spend time, money and energy on something they have no chance of winning.  Please see the reference to the Golden Rule above. 

 

The right thing to do here is to approach a couple of suppliers and pay them to do a price quote on the project.  It will be above board.  Some will be willing to do it in the hopes that you will see them as a quality alternative supplier in case you have other work that your incumbent can’t or won’t do.  They will feel they’re being treated with respect; you’ll receive the value that you want; and you’ll have a good relationship in the future should you need it. 

 

I can almost hear the eyes of the buyers in large organizations rolling their eyes.  After all, this will cost more money, right?  Well, there are two responses to this.  Given that “lowest dollar” purchases often result in substandard work that requires redo’s, corrections or extensions, it may very well be false economy to engage in these practices. 

 

Second, even if the unethical thing is cheaper, so what?  My grocery bill would be much less if I simply stole half the food.  But, somehow I don’t think I’d have a whole lot of supporters when I use the, “but it saves money that way” justification.

 

Small and medium sized business owners suffer this kind of treatment constantly.  I hear about it all the time.  But none of them will challenge it for fear of losing work in the future.  So, if you are one of the larger organizations that engage in this kind of practice, just know that you aren’t fooling people.  You may be getting away with it, but you are not loved by those suppliers.  And if they are able to find work from others who treat them fairly, they will drop you in a second. 

 

But fear of being disliked or fear of losing suppliers shouldn’t be the reason for paying value for value.  You should do it because it’s right.  Full stop.   

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