Expert view: How to make suppliers work for you

I sit on the management committee for the block of 16 flats that I live in. Monthly meetings get very heated, particularly when it comes to spending money on the building.

It was built in 1911 in a conservation area, so regulations and work mount up. Two long-term directors have very different motivations.

John always divides any expenditure by 16 to work out his exact contribution, because he considers it his money and wants to spend as little as possible. He is very cynical and does not trust any suppliers, even if they do a good job.

Shirley wants everything to be of a very high standard whatever the cost, from the flowers in the garden to the brass trimming on the doors. She trusts all workmen, even against the evidence.

This brings me to our motivations for purchasing decisions and managing suppliers. The theory goes that if you are spending other people's money on yourself, then you make sure the quality is good and are not bothered about cost. Think about Lord Irvine spending £59,000 on hand-made wallpaper for his official residence as Lord Chancellor.

If you are spending your own money on other people, you think mainly about cost and less about quality. Think of rail companies reducing the numbers of trains and train carriages.

If you are spending your money on yourself then you think about quality and cost. Think about how you decided which digital camera or fridge to buy. I often find it useful to ask: "If this were your business or money, what would you do?"

Suppliers have their own motivations too - chiefly, what's best for them. If they are paid by the hour, there is a temptation to drag work out, extend negotiations or find extra things to do. We all fear plumbers, car mechanics or consultants finding problems only they can fix.

If suppliers are paid a flat rate, the temptation is to spend as little time and energy as possible. With performance-related fees there is a strong incentive for success, but it can come at an undeservedly high cost. Establishing the right fee basis and a win-win relationship requires time to be spent on building a good working relationship.

At tonight's meeting, we are looking at appointing a new managing agent because the previous one simply stopped doing any work about three months ago, but failed to tell anyone. Luckily, John noticed and Shirley will maintain good relations with whoever we appoint. Although definitely not recommended for trustee meetings, wine will always encourage late-night attendance and create livelier discussions.

- Rohan Hewavisenti is director of finance and resources at Breast Cancer Care.

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