Tag Archives: Threat

How Do You Respond to a Price Increase from a Supplier? Six Points

Situation: A small company has a parts supplier for product that they sell to their most important customer. That customer’s specs are “copy exact” on components for existing products; also, their new products are usually based on existing components. The supplier significantly raised prices on the parts supplied to the company. How you respond to a price increase from a supplier?

Advice from the CEOs:

  • This is an extremely sensitive situation. One solution is to not to rock the boat. The reality is that the company needs the parts, and it will take a lot of effort to replace them with parts from an alternate vendor. Just continue the relationship. Quit worrying about it and milk it for as long as it lasts.
  • Find out what caused the supplier to raise prices. The supplier needs to understand that to preserve the company’s margins they may have to raise prices to the final customer. This may threaten both the company’s and the supplier’s business with the customer.
  • Make sure that the supplier understands the company’s costs: office, salaries, equipment, maintenance, and local regulations that are unfriendly to business and difficult to deal with. Ask them to reconsider or reduce the price increase.
  • Assure that the supplier understands the value that the company provides and the importance of this collaboration to the business and profits and bottom lines of both companies. Leverage this value to get the price that the company needs.
  • Renegotiate the relationship to assure that supplier can’t go around go around the company and sell directly to the final customer.
  • Start building relationships with alternate suppliers.

How Do You Manage Communications Post-Riff? Three Thoughts

Situation: A company missed production milestones and had to reduce top and line staff by 20% to keep salaries in line with expected revenue.  An executive who was very angry about being let go has asked the CEO to meet him for lunch. How do you manage communications with employees post-riff?

Advice from the CEOs:

  • If you haven’t already, call a company meeting to explain the situation, as well as the rationale for the riff. The company has to manage itself financially in line with current and expected future revenue to assure that it can take care of employees. Explain the connection between production milestones, revenue, and the company’s ability to afford staff. Employees generally understand these connections and will accept this well.
  • When you have lunch with the executive, first listen to what he has to say.
    • Anger expressed in an exit interview is part of a natural emotional response to difficult news or change. Listen for signs of ongoing anger or progress toward acceptance of the situation.
    • If the individual threatens the company or tries to bargain the severance package, don’t negotiate.
    • However, if the individual is reasonable and asks for assistance in finding a next position – references, introductions, etc. – then offer to assist as you can.
  • Should the CEO make an attempt to follow-up with others who were riffed?
    • No. If they contact you, then respond in a similar fashion as you are to the VP, but otherwise don’t try to contact them.
    • In the Silicon Valley economy, people are familiar that employment situations change and know that as this happens they can be affected.