Are your contract customers producing the sales volume promised during the negotiation process? A quick review often reveals a considerable gap between revenue promised and revenue realized.

You know the story: during negotiations, the customer claimed a contract was worth $350,000 to the selected distributor, yet in the first two years it's been less than half that number. Your fill rates are great, the margins thin, and the customer says all is well. So what is the problem? Chances are that your adversary is corporate culture. Every organization has one, and suppliers who ignore it do so to their peril.

Culture determines how things get done in an organization, and nowhere is that more evident than in MRO purchasing. While no two companies are alike, three primary cultures dominate the landscape:

Hierarchal culture: Companies in this model make top-down decisions. If the contact person has the authority to sign the deal, he can implement the contract and assure full compliance without the approval of others. A purchasing agent, for example, can mandate that all purchases go through the chosen supplier; and renegade buyers (those who purchase outside the contract) will face swift and stern disciplinary action, perhaps even the loss of purchasing privileges.

Committee culture: The most visible trait of this culture is indecisiveness. The negotiator of the agreement, fearing failure or rejection by his peers, allows the decision to contract with a supplier to fall to a peer group that agrees on very little. Committees may generate a contract and even implement it, but offer no help in assuring that buyers in the plant will comply. The challenge in this model is consensus; can you convince the group (and other groups within the company) that your solution is the best of all those proposed, and that measuring compliance to the contract is in everyone's best interest?

Empowerment culture: Here are the last remaining disciples of management consultants from the seventies. Companies of this variety don't enter into supply contracts; they issue "hunting licenses" to willing distributors. In other words, even if you sign an agreement, you will have to hunt for every order that you get. The idea is that everyone is empowered to make buying decisions, so they feel they make a significant contribution to the company. Distributors unprepared to invest the time necessary to gain compliance in such a contract generally fail.

When a supplier drives the negotiation, he assumes the customer will adapt to his culture. The same is true of the customer when he drives the process. In both cases, the results are anemic. Both parties lament the outcome, and spend the final years of the agreement blaming each other for lackluster performance. In the end, both are dissatisfied, going their separate ways in search of a more suitable partner.