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Is Microsoft its suppliers’ benevolent benefactor or dictator?

Jonathan Cooper-Bagnall
Apr 14, 2015 4:08:00 AM

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Microsoft and its suppliers

Last week, the technology giant Microsoft took a progressive stance with its supplier base, taking steps to ensure that the suppliers with whom it conducts business give their employees at least 15 days of paid leave each year. Sure there’s the questionable policy of corporate dictation (especially in the case of Microsoft, with its Samson and Goliath overtones). And, there’s the inevitable fine print: “this new benefits minimum will apply to suppliers with 50 or more employees in the United States. It will apply to their U.S. employees who have worked for them for more than nine months (1500 hours) and who perform substantial work for Microsoft.

Putting all that aside, this is a uniquely forward-thinking policy that speaks to what research has shown us for some time: time off benefits both employers and employees by contributing to a happier and more productive workforce. Beyond that, however, the policy speaks to two largely unrecognized, but critical, business truths:

  1. Corporate virtualization: As the Microsoft policy concedes, we live in a world where corporate virtualization has taken root. “Hollowed” corporations are directing more and more spend outside the business and looking to a complex web of global specialist suppliers to help deliver on the businesses’ core proposition (See our corporate virtualization study for more on this topic). As a result, the very definition of who and what makes a company has been transformed to mean that external agents can be just as critical to success as internal agents. As such, suppliers, just like “traditional” staff, need to be managed, encouraged, targeted, incentivized sanctioned, coached, rewarded and motivated to help achieve corporate objectives. The fact that Microsoft believes they can impose HR policy on their suppliers is a reflection of just how blurred the lines between company and supplier have become.

  2. Value vs. cost: While the two are intrinsically linked, they are fundamentally different. Seeking the lowest cost provider will not necessarily return the highest value solution – and the latter return should be the holy grail of corporate objectives. It’s a nebulous topic that is difficult to articulate and even more difficult to implement when answering to shareholders who like tangible proof points. But, the (many) failed experiments in the low-cost lure of offshore outsourcing have nonetheless helped shine a new light on the trappings of a cost-only equation. Microsoft’s policy here is among the first real example of a company placing a higher premium on value. To note: “because we recognize that this approach may increase the costs for some of our suppliers, our plan is to work with them to implement these changes over the next twelve months. We appreciate that this may ultimately result in increased costs for Microsoft, and we’ll put a process in place for addressing these issues with our suppliers.

Now, whether Microsoft will truly embrace the extra costs this policy may (likely, will) impose on the company, remains to be seen. We applaud the progressive talk….we’ll applaud, even more, should there be real implementation.

In the meantime, it’s a lesson that other major corporations should heed: In this era, companies will live and die by the success (and happiness, and benefits, and diversity) of their supplier network.

So, executives…just how much do you know about your supplier networks? What are you willing to find out? And, most important, what are you willing to pay to change?

As always, if you have any thoughts or comments, please add them to the box below.

Corporate Virtualization

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