One in the Eye for the Giant

Every day we encounter at least one giant. It will be a bank, a resources company, an insurance company, a public service behemoth. 

It has been created by economies of scale and the accrual of wealth beyond critical mass. For the ordinary person, its revenue is beyond imagination and sometimes defies credible measurement. 

It is considered too big to fail.

But is it beyond reproach?

Westpac allowed millions of illegal transactions to pass over many years, resulting in a corporate fine of $1.3 billion. The Commonwealth Bank of Australia was fined $700 million to settle its violations of anti-money laundering. 

Rio Tinto allowed the destruction of the 46,000 year old Juukan Gorge sacred site and shareholder calls resulted in the dismissal of the CEO and 2 other executives. Further repercussions are likely. 

A burst tailings dam at BHP joint-venture Samarco iron ore mine in Brazil, devastated a nearby town with mudslides. At least 19 people were killed and more than 50 were injured, not to mention the devastation of home and the community infrastructure. BHP signed a deal which settled a $7 billion civil claim, although the final payout has not been made public.

Thankfully, corporate giants don’t have ultimate immunity from such highly visible transgressions. They may be brought to account by the law, industry regulation, public inquiries, shareholder revolt or by market forces.

But they can get away with supply chain transgressions that can erase small and medium sized businesses with immunity.  These are unfair practices that put small- and middle-sized enterprises at risk, leading to significant loss and even obliteration.

There are 2.1 million SMEs in Australia, employing 99% of the workforce. When seeking a supplier contract, many see the giant:

• Agreeing to a contractor’s price during the tendering process, then demanding a reduction after the tender has been won, under threat of removing the contractor from the project. 
• Demanding lead times from the contractor to enter the project, but then ignoring them as they fail to meet their own project deadlines.
• Requiring the contactor to recruit and tool up for commencement of a project, only to impose repeated delays, causing holding costs, embarrassment and lost opportunities for the contractor.
• Imposing a schedule on the contractor for completion of works but not taking delivery—delaying payment and forcing the contractor to store finished goods at their own expense. 
• Failing to observe terms of payment, forcing the contractor to wait so long that it forces the contractor into receivership with the result that the giant avoids full, or any, payment. 
• Being driven almost solely by price, with much lower weightings in regard to quality, product/service support, timeliness, after sales service, or the much more savvy total lifetime cost.

Are these practices the result of decisions made deliberately at the top? Or are they the result of impossibly tight cost margins set for their supply managers? Or are those managers merely unaware, incompetent or officious—acting beyond acceptable business ethics or their job description?

In many transactions, customer satisfaction and commercial viability (the return on investment) are taken as the ultimate measures. But life is much more complicated than that. Especially in these times of the massive wild card, the pandemic. The business community and the community at large expect and deserve that the major corporate players:

1. Treat suppliers with respect. Every SME represents a massive personal risk, yes with the expectation of reward, but with no guarantees. Honour them with fair practices.
2. Develop emotional intelligence. Lift your eyes from the price and see the factors at play that will foster the development of genuinely reciprocal relationships.
3. Be a responsible corporate citizen. You have the market presence to make and break communities—well beyond the high profile sporting sponsorship. Think community sustainability.
4. Act with restraint. Your bargaining power far outstrips even the aggregation of total supplier leverage, but know that without them, the corporation is nothing.
5. Show authentic leadership. Do what is right for all stakeholders, rather than what is comfortable for the corporation.

If there is natural justice, the combination of these will reduce the possibility of any corporation receiving another massive one in the eye.

Next week: Is Optimism Overrated?

About the Author

Jeff Bell is Principal of executive consultancy ResultsWise in Perth, Western Australia. 

To boost your leadership, ask Jeff about consulting, coaching, strategy facilitation, his Band of Leaders Australia (BoLA) group or Advanced Leadership Course: [email protected]; mobile 0439 988 662

Jeff’s podcasts: https://www.audible.com.au/pd/As-a-Leader-Audiobook/