You may have thought we reached the pinnacle of organizational damnations when we discussed damnation 54: Marketing, and while Marketing can be bad when they stretch the truth, promise products months before they can be developed even if everything were to go absolutely perfect (which it won’t), and create a hype that the organization may never be able to live up to, but it’s nothing compared to sales. It’s one thing to sell an expectation, especially when one can always weasel one’s way out with an “it’s all a misinterpretation” argument, but it’s another to sign a contract knowing that there is no way the organization can possibly deliver. That’s why the Sales damnation often trumps the Marketing damnation (even though the two are often intertwined).

Why is Sales so bad?

They often live by the mantra that the customer gets what the customer wants.

Regardless of reality, sanity, or the huge loss that could ensue when the product is not delivered, a penalty clause kicks in, and a large lawsuit is filed for incidental damages when the customer finds out that the organization(‘s salesperson) made a promise with the full understanding that it could not keep the promise (because the salesperson wanted to make a quota to get a year-end bonus).

Moreover, the customer gets what they want when they want it.

Sometimes sales will actually limit themselves to selling a product or service the organization actually has today, but promise unrealistic delivery times. For example, Sales might promise 100,000 units of the new motherboard next Monday, when they haven’t even been produced yet by the Factory in China which can only produce 10,000 a day working double shifts and requires 72 hours to air-freight a rush order when you add in packaging, customs clearance, and ground-transportation time.

Even if what the customer asks for is not what they really need.

Not satisfied selling deep freezes to Eskimos, or heat lamps to Colombians, some salesmen have to one-up their peers and sell complex products and services they don’t need to gullible CXO’s who, after seeing the success their peer organization’s supposedly achieved with the same service, acquire a “me-too” mentality. For example, BPO for invoice and payment processing when the organization is a staff augmentation operation and needs deep insight into it’s T&E cost in order to accurately bill and price it’s resources under different cost models. Or lean workshops when all the organization does is joint product design with strategic suppliers and the bottleneck is not the design process, but the suppliers with inefficient plant floor setups. Or customized web-based order entry screens for the sales-team to input orders when in fact the real bottleneck is inventory visibility and availability – not the time to enter an order. Or, even worse, a new ERP to support that new Procurement platform when, in fact, the current ERP is just fine and the data migration effort is monumental.

And more horror stories than you care to count. As long as compensation is immediate on signed deals, instead of long term based on customer retention (for example, instead of 30% of deal value, 10% of annual revenue for as long as the organization is a customer, even if the sales person leaves the organization or retires), Sales will do whatever it takes to line their pockets, even if it means promising the impossible (which will, in the end, come back to bite Procurement in the rear end when they have to source additional product or service support that just may not exist). So keep an eye on Sales, and be prepared to step over their head if need be before deals are signed that Procurement cannot possibly deliver on.

Joan Jett may not give a damn ’bout her bad reputation, because when you’re a rock star (or a bad girl movie star), that’s actually a good thing, but when you are a consumer-driven corporation, these days, that’s about the worst damnation that can be thrust upon you. Brand disasters can far outweigh the average 10%+ decrease in shareholder value found by Hendricks & Singhal back in 2003. As per a recent study by CIRANO on Corporate Reputation, not only is there an 80% chance of a company losing at least 20% of its value at least once during a five year period, a major incident that significantly impacts the brand can wipe out over half of a company’s value overnight! Just look at what happened to BP after the Deepwater Horizon disaster. BP’s share price experienced a 52% drop in 50 days. Brand has went from that crazy ethereal concept unnecessarily promulgated by marketing mad men to that very real, critical, corporate requirement that must be maintained at all costs. Why?

Bad press results in backlash and consumer boycotts.

Any indication that your corporation is not the most sustainable, ethical, and corporately responsible organization on the planet can land your organization in the news. A minor supply chain infraction will result in a back page story that will be picked up and circulated by bloggers and activists until every concerned customer notices it and decides to write you angry letters and stop buying your products, resulting in that 10% decrease in sales and value found by Hendricks & Singhal while major supply chain oversights such as using suppliers who experienced preventable (man-made) disasters such as the factory collapse in Bangladesh (which should have not only been condemned but demolished) or the Philippines factory fire (in an overcrowded factory with no fire exit) that resulted in large death tolls will get your organization in front page headlines. This will result in significant backlash and widespread consumer boycott. If consumers will boycott a franchise for its beliefs (such as the boycott of Chick-fil-A for its beliefs on same sex marriage, as opposed to an actual refusal to serve the LGBT community), imagine the backlash and widespread boycotts your organization is going to get if child labour, slave labour, or human trafficking is found in your supply chain as a result of lack of oversight.

Bad decisions result in NGO and governmental investigations, fines, and seizures.

If your company gets caught holding the bag when someone finds melamine in the milk, diethylene glycol in the toothpaste, or BPA in the baby bottle plastic, it’s going to have every governmental agency with authority investigating, watching, and looking for ways to fine it even if it was a supplier two tiers down in the supply chain that did the dirty deed. And every NGO in the sustainability and Corporate Social Responsibility space doing a 360-degree supply chain review to find out what other skeletons are hiding in your closet and what snakes are lurking in your supply chain. So, not only will the government seize any products it finds that violate any environmental laws and fine you as much as it can under environmental, supply chain, and human rights / trafficking legislation, but the NGOs will be feeding the media that will in turn be feeding the consumer backlash and consumer boycotts. Losses will multiply quickly.

And both result in lost investor confidence and severe value drops!

As soon as something goes wrong, even if Procurement had absolutely nothing to do with it because a decision was made, or forced on it, by another department and/or it followed organizational protocol in supplier evaluation and selection, it is going to be blamed by the Investors and the Board who are going to be quite perturbed at the egg on the company’s, and their, face, and want someone else to point the blame at. Procurement’s going to be hung out to dry and if the situation is perceived to be bad enough, someone is going to be made a scapegoat that will be sacrificed in efforts to appease the masses.

It’s extreme damnation, and any Procurement department that wants even the slightest hope of being able to deflect the blame is going to have to go well above and beyond the call of duty in supplier evaluation, selection, monitoring, development, and, if all else fails, dismissal if it wants to survive any attack on the corporate brand intact.

You’re probably asking why this is a Procurement damnation because, on the surface, it doesn’t appear to have anything to do with Procurement. And it’s a good question, because, on the surface, it has to do with the health of the overall economy, and nothing to do with the supply and demand (im)balances that drive day to day Procurement decisions, especially for those organizations still using the Kraljic (Portfolio) Purchasing Methodology.

And from that perspective, you would be right. But here’s the thing. The employment rate is related to the overall health of the economy and the amount of disposable income in the economy. The amount of overall disposable income combined with views on acceptable (consumer) debt levels determines how much consumers have to, and will, spend. The amount of spend determines overall demand for unnecessary and necessary products alike. (Yes, people need to eat and will always spend on food, as long as they can afford to, but if money is tight, “essentials” gets redefined to low-cost basic essentials and high-end food products like prepared meals, imported fruits and vegetables, and lobster are off the menu.) This, of course, determines demand, and demand determines not only your volume leverage in negotiation, but the overall profitability and health of the business, and, thus your overall budget. (Remember, no sale, no store.)

And even if you are in B2B sales, because you supply office supplies, MRO, technology, or equipment, you still depend on consumer spend because if consumers aren’t buying from your customers, your customers aren’t buying from you.

But that’s just one side of the equation. The other side is the talent side. If employment is high, people are buying, but talent, which you so desperately need to take your Procurement organization to the next level, is scarce, and your only option is to hire them away from a rival. This means a big bump in expected salary and lots of perks (and training, so bring that budget back or else) to get them to stay.

In other words, there is no good (un)employment situation for you because either unemployment is rising, which means falling demand and reduced leverage in negotiations and operating funds, or unemployment is falling, which means a lack of available talent and more funds dedicated to talent to keep the talent base you have.

In other words, the eternal damnation of (un)employment rate is not restricted to governments and economists. It affects Procurement quite heavily too.