A budgeting process was recently outlined by a senior manager in the security division at a very large state university. The annual budget is primarily, and in many ways exclusively, created by the office of the Vice President and Chief Operating Officer, which includes the Vice President and Chief Financial Officer. The president at this large state university takes almost no part in the budgeting process; he mostly acts as a fund raiser for the institution, always on the road looking for large contributors.
     
The senior security manager had little to no input in the budget process, and basically was given a budget that he had to follow. All acquisitions over $1,000 made by the senior security manager had to be authorized by the office of the COO.
     
By comparison, at a small private college a senior purchasing manager detailed his intricate involvement with the budgeting process. Each senior manager at this small private college is required to submit a detailed departmental budget to the chief financial officer, who shares final authorization with the president. Each senior manager is able to purchase products and/or services under $5,000 without executive management authorization.
     
There are clear budgetary process distinctions between the small entrepreneurial college and the very large state university system. The small institution is able to react more efficiently than the very large state university primarily because of the small staff who wear many hats and because the smaller institution is not overburdened by state regulations and mandates.

The larger state university budget is also partially created by state control of salaries and employee benefits, which includes retirement and medical insurance, to name only two. The office of the state comptroller has a considerable amount of control when it comes to the process of purchasing products and/or services for the state university.

On top of the multi-layered expansive purchasing process that a very large state university must endure is the process of obtaining federal and state grants. The specifications of the grants process and what specifically can be purchased is so wrapped in red tape that obtaining grants creates a double edged sword. Most federal and state grants specifically dictate what can be purchased with the grant monies, and often give very little leeway for creative thinking in regard to additional products and/or services needed.
     
If a vendor markets their products and/or services to only small colleges they might have a quicker process of procurement, but be faced with a less lucrative opportunity. The small college might not be able to purchase enough goods and/or services to make it worth the vendor’s time and effort, especially in regard to long-term service which a smaller college might require a vendor to continually maintain, because of the lack of trained college staff on campus.
     
If a vendor markets their goods and/or services only to large well funded state institutions then they will most likely be faced with a multi-layered purchasing process that would test even the patience of Mother Theresa. Many times it is the last man standing that gets the state contract. It is the extreme length of the purchasing process that weeds out the companies who are in it only for the short gain.
     
There are primarily three key persons involved in the decision making procedure who need to be considered during the sales process: the very important top office (key decision maker), the influencer, and the researcher.
     
This sales and marketing approach holds generally true in the corporate world, but is not as apparent in academia. The decision maker, the influencer, and the researcher at a small college look much different than at a large state university.
     
The larger the college or university the more barriers there are between these individuals. The purchasing process might encompass senior managers in regional offices, or state offices with little to no involvement with each other.
     
Mixed in with this multi-layered high yield purchasing process is researchers and influencers in the form of consortia, associations, foundations, and group purchasing organizations, to name only a few.
     
A vendor that successfully wants to market their products and/or services to higher education needs to take into consideration the bigger marketing picture. A company needs to deliver their message to not only the key executive management decision maker, but to all the different and many times disconnected researchers and influencers.
     
This multi-layered purchasing process might need to be marketed with a multi-layered approach, taking into consideration all the players who might or might not be centrally involved in the process, and all the peripheral organizations such as consortia that support their member colleges with collaborative solutions.
     
To a small company this might seem to be a daunting task, which it might be, because most of the companies that regularly and consistently market to higher education are usually the largest top 5% of the 8,000 companies that supply higher education with products and/or services.
     
The Catch 22 in higher education is the companies who have the exposure get the contracts, and make the money, which in turn helps them to get the exposure.
     
Over the last few years mounting pressure on higher education from the growing global economy and from the critical shifts in energy are creating new opportunities for smaller companies in the form of collaborative endeavors.
     
A collaborative infrastructure has been continually built into higher education, going all the way back to the beginning of Harvard University, but because of the new challenges that academia faces, cooperative endeavors will be asked to facilitate even more solutions to the mounting pressures of colleges and universities.

In the race to build proactive and effective higher education consortia, the European Union is slightly ahead of the global curve, leaving many U.S. colleges and universities behind. Europe has found that higher education consortia can be a highly powerful and centralizing force behind their goal to become the world intellectual property champion.
     
Historically underutilized U.S. higher education consortia have also gone through a shift over the last ten years to meet the new and increasing needs of their member colleges and universities. They offer more services and collective power that can help even their smallest member colleges.
     
This increase in collective power is also changing the playing field for all vendors who supply higher education with products and/or services.
     
A collective endeavor such as a group purchasing organization, college benefits alliance, or shared services organization can drastically decrease the multi-layered purchasing process at a very large university, and at the same time open new opportunities with small colleges because of the collective buying power the group offers.
     
This collaborative approach can also help leverage the marketing power of even the smallest company, because “economy of scale” can be a powerful influencer to any very important top officer in higher education.

Carrot and Stick Approach
Partnering with a Group Purchasing Organization Can Pass the Test

Recently a purchasing director at a prestigious private east coast college outlined how he takes into consideration a vendor’s ability to deliver on a contract. The purchasing director considers himself more of a sales person than a purchaser. A considerable amount of his job is finding both the right vendor to work with and with being able to sell his institution to the vendor for the long haul. One of the measurements he uses for vendor capacity is the “carrot and stick” approach.
     
The purchasing director will start the process by selling the vendor on a smaller carrot of business, but at the same time communicating the opportunity for the long haul and bigger carrots of business to come.
     
The purchasing director uses the carrot to continually and actively manage the vendor, so that the vendor will not vary too much from the original agreement. If the vendor strays, and does not deliver on promises with the small amount of business awarded than the purchasing director will come down with the stick and the vendor will be gone.

The “carrot and stick’ approach will ferret out a small or large vendor that is in the selling game for only the fast buck, and as well as the smaller vendor with a single vertical niche product and/or service. A company that presents a false face or doesn’t deliver on promises will be ferreted out.
     
This “carrot and stick” approach to purchasing is tightly woven throughout colleges and universities purchasing departments in the form of business based on trust.
     
There are roughly 8,000 companies servicing higher education with products and/or services. Around 60 percent are national with many having regional offices in high traffic college and universities areas, 25 percent of vendors doing business with academia are international, and the rest are mainly regional servicing at least three states.
     
Vendors that tend to be more successful in academia have both a variety of products and services to offer colleges and universities, but also a layered service and product approach that will pass the carrot and stick test. They can offer an institution any size product with a considerable amount of service taking into account a long-haul partnership.
     
Very large companies are able to do this by size, but many of the smaller and midrange companies are able to pass the carrot and stick approach by aligning with other companies that can expand their portfolio of products and/or services.
     
The reverse can also be true in regard to how a vendor might look at a college or university. The 80/20 rule simple states that eighty percent of the companies in higher education are trying to sell to twenty percent of the schools.
     
A tiny college might only reap a small amount of business for a vendor, but at the same time the small college might need as much, or sometimes even more, service than a large university, because of the minimal amount of college faculty and staff.
     
This “economy of scale” dynamic shifts drastically with considering higher education consortia, particularly a robust group purchasing organization (GPO). A GPO managed effectively and fairly among member institutions can offer a vendor a window of opportunity that will never be achieved by doing business individually with small colleges. 
     
Passing the carrot and stick approach at a GPO can accelerate exponentially the opportunities both for the member colleges and universities and the vendors, because a GPO built on trust and ethics has already established a middle group for all parties concerned.

Purchasing Directors
Partnering with a Purchasing Director Might Be An Opportunity