[STUDY] Suppliers underperforming? Chances are it’s your fault

Sydney, Australia - Business leaders across Australasia are struggling with underperforming suppliers. According to a study by Grosvenor Management Consulting, leadership style might be to blame for the disappointing results. Making small changes to the way business managers lead their suppliers could result in 27% better results and a 50% decrease in time spent managing them.

Inspired by the vast amount of literature available on the impact of leadership style on staff performance, Grosvenor’s Procurement Practice Lead Dr Stefan Gassner set out to understand the impact of leadership style on supplier performance. Surveying 119 business managers from organisations across the region, he differentiated four leadership styles based on the Multifactor Leadership Questionnaire (MLQ) framework developed by Bernard Bass and Bruce Avolio.

The difference proved to be quite significant. Business managers who apply a Transformational Leadership style or work with Contingent Reward achieve 27% higher performance from their suppliers than leaders who prefer a Laissez-Faire or Management by Exception approach.

Not only do these champions get better results, they also spend less effort managing their suppliers. On average, survey respondents spend seven hours per week managing their best performing suppliers. In comparison, it takes more than 13 hours per week trying to improve the delivery of the worst performing suppliers.

Laissez-Faire and Management by Exception leaders tend to prefer a hands off approach to managing their suppliers. They only get involved when serious issues arise and, in the case of Management by Exception, use punitive measures such as non-payment to get suppliers to perform. This results in suppliers who deliver the bare minimum or even take advantage of the client.

On the other hand, Contingent Reward leaders incentivise their suppliers and tend to reach contract goals. Transformational Leaders who invest time in coaching suppliers are rewarded with suppliers who proactively contribute innovative ideas and even exceed performance expectations.

While the results of the study show a dramatic difference in supplier performance depending on the leadership style, they are not entirely surprising. “Organisations spend up to 80% of their annual revenue with external suppliers. Even though they have a different company logo on their business card, it’s fair to say that the supplier’s staff are an extension of the internal team”, says Dr Gassner. “Forgetting everything we know about the impact of leadership style on performance when managing suppliers is a big mistake.”

For a full copy of the study please contact Grosvenor’s Procurement Practice Lead and study author Dr Stefan Gassner (details below) or download it here: https://info.grosvenor.com.au/study-leadership-impact-supplier-performance

About Grosvenor

Grosvenor is a team of specialist procurement consultants based in Sydney, Canberra and Melbourne. They work with clients across both the public and private sectors to deliver confidence and project success.

Media enquiries & interviews

For interviews and enquiries contact:

Grosvenor’s Procurement Practice Lead and study author

Dr Stefan Gassner

Email: stefangassner@grosvenor.com.au

Mobile: 0406 263 419

Land line: 02 8274 9200

Images

Please contact Stefan for images and infographics relating to the study.