Our last
contribution, “The myth of the Ultimate Decider”, described the approval of the
decision by the Relevant Decision Maker rather as “rubber stamping” needed to
commit the company to spend the funds with the supplier chosen by the Actual
Decision Maker This triggered an interesting discussion on Google+ making us
aware “approval” having varied meanings leading to quit different outcomes.
What is the meaning of “approval”?
Essentially three different meanings
for” approving” could be identified from the discussion:
• Rubber stamping
• Voicing a concern
• Vetoing
“Rubber stamping”
Relevant
Executives tend to see approving purchasing decision rather as “rubber stamping
the final step in the process to decide how to solve a problem. These
executives are more actively involved in the decision whether an identified
problem is urgent enough to be addressed by the organization. They usually are
also actively engaged in make/buy discussion, which end in a decision to buy a
solution. The finding and selecting the supplier of the solution is considered
less critical and therefore is frequently delegated.
Evaluating or vetoing
Sometimes
Actual Decision Makers admit that their decision needs approval in particular
from the legal and the purchasing department.
Approval in this context can mean checking suppliers’ proposals and
contracts for conformity with internal rules in place. As examples, the legal
department will check terms and conditions from a legal perspective whereas
purchasing might first check whether the supplier figures on the preferred
supplier list and whether terms and conditions are in line what usually can be
obtained on the market.
It is
essential to understand for the seller what will happen when one of these
approvers denies approval due to elements not being in conformity with the
rules they usually apply. Are the Actual
Decision Maker or the Relevant Executive actually bound to consider this
“disapprovals” and have to abandon a deal if these elements cannot be overcome?
If this is the case, the purchasing and legal departments therefore have a
defacto veto power.
In other
cases, Actual Decision Makers or even more so Relevant Executives take
“disapprovals” rather as recommendations which can be overruled. In this
scenario, the “disapproval” has the character of a recommendation that might be
considered or can be overruled. Purchasing and legal departments therefore
should rather be considered having an Evaluator role in the formal buying center.
“Approving” actually means: Evaluating a
supplier’s offer from their legal or purchasing point of view.
Conclusion
Whenever
sellers hear somebody else than the Relevant Executive referred to as an
approver in a description of a purchasing process, they should ask whether
approval implies having veto power. If this is the case, knowing the issues
that have led to vetoes in the past as early as possible can help minimize
stalling of a deal at the last moment for such reasons.
One
contributor to the discussion mentioned that in his experience getting early to
the Relevant Executive minimizes the danger of purchasing and legal Departments
trying to veto a decision.
For knowing
how the Relevant Executives will use his/her approving power, more subtlety is
required. Understanding the level of
trust between the Relevant Executive and the Actual Decision Maker is key. If
asked directly, Actual Decision Maker’s may consciously or unconsciously
overestimate their ability of getting a deal approved. An indirect approach
might be necessary to find a more viable answer to this question.
What else
would you consider that can minimize the risk that you might be surprised by
veto power used at the last moment hindering a deal to close?
