Cultural fit is something that is talked about and widely understood in the context of human resources. According to the Society for Human Resource Management (SHRM) the impact of a poor cultural fit on turnover can cost an organisation between 50-60% of the person’s annual salary.
Cultural fit, employee satisfaction and team working are all recognised for their contribution towards employee productivity and profit, and HR leaders have developed interview techniques and lines of questioning to uncover cultural fit of candidates.
Supplier collaboration is seen as an important factor in overall cost reduction, less defects, continuous supply and more. Yet not many talk about or seek cultural fit when selecting suppliers.
We find this curious.
In fact, cultural fit is one of our 7 key ingredients of disruptive procurement.
Good cultural fit could have several outcomes:
- the difference between the supplier going that extra mile to satisfy your delivery even when they have been let down by their supplier
- their responsiveness when your customer changes their mind and you need to change the order you placed on your supplier
- their attitude to collaborating on design work to create a superior product at a lower cost
- their approach to sharing best practice and creating supply chain efficiencies
Poor cultural fit has the opposite effect and the net result is inevitably additional cost to your business.
We have observed, however, that highly successful procurement teams are starting to talk about cultural fit.
Interestingly, one industry that has recently hit the headlines on the subject of measuring cultural fit in procurement terms is the public sector. Two recent tenders from the Department for International Trade specifically asked companies to demonstrate they were ‘committed to the best possible outcome for the United Kingdom following its departure from the European Union’ in order to have the right ‘cultural fit’ and interestingly the cultural fit had a weighting of 15% whereas price was only 5% more at 20% of the overall evaluation.
At the time of writing, the topic is under scrutiny because of potential infringement of UK and EU procurement rules but comes at an interesting time post-Brexit.
Regardless of Brexit, the Department for International Trade still has the challenge of actually measuring cultural fit in a fair and transparent way. Are there specific questions that can be asked to judge cultural fit? Can they be answered unambiguously and easily scored? Or is cultural fit more about the feeling you get when you meet someone?
The responses to the following six questions could help to assess cultural fit of potential suppliers.
- Who is your best customer and why?
- What are your company values?
- Why would you like to see us as one of your customers?
- How would you describe our culture and values and how does that impact the way you see us working together?
- How will working together take both our businesses forward
- Tell me about a time when you worked with an organisation where you felt you were not a strong cultural fit. Why was it a bad fit?
After all, when it works well your supplier should be an extension of your team – sharing compatible values with both parties working together to create value for your end customer.