Nine Ways to Improve Motivation in Your Organization

In his book Drive: The Surprising Truth about What Motivates Us, Daniel H. Pink describes methods that can help organizations to foster motivation in their employees. The goal is to encourage "Type I" behavior, which is an approach to life built around intrinsic versus extrinsic motivators.  It focusses on our innate need to direct our own own lives, to design and create new things, and to do better by ourselves and the world.

Nine Ways to Improve your Company, Office, or Group

1. "Try 20 percent time with training wheels".  Based on Google's 20% time in which employees are given the freedom to work on any project they want, this could mean 10% of an employee's time, one afternoon per week, was spent working on great but untried ideas.  Even done for a short period such as six months, this will allow people to convert their down time into productive time.
 
2. "Encourage peer-to-peer 'now that' rewards".  Giving employees the responsibility for giving their colleagues $50 bonuses when they do something exceptional carries a deeper meaning than a bonus from management months after the fact. And it is motivating.
 
3. "Conduct an autonomy audit". Find out through anonymous survey how much autonomy the people in your department believe that they have for task, technique, and team. Compare what employees perceive as their autonomy with what management thinks. Do these perceptions match?

The Five Whys

The Five Why is a question asking method for getting at the root cause of a problem.  The method involves asking the question Why? five (or more) times until the root cause is revealed, and the problem can then be resolved.

The following example demonstrates the basic technique:

• My air conditioner does not work. (the problem)

1. Why? The unit blows air, it is not cold.
2. Why? The compressor seems to run, but it is not effective.
3. Why? There is probably not enough refrigerant in the system.
4. Why? I have not had the unit serviced in several years.
5. Why? I did not think of having it serviced when it was working.

• I will have it repaired, and have it serviced at the recommended intervals in the future so it doesn't break unexpectedly again.

This technique was originally developed by Sakichi Toyoda and was later used by Toyota during the evolution of their manufacturing methodologies. Taiichi Ohno, the architect of the Toyota Production System, described the Five whys method as "the basis of Toyota's scientific approach . . . by repeating why five times, the nature of the problem as well as its solution becomes clear."

The tool has seen widespread use beyond Toyota, and is now used within Kaizen, lean manufacturing, and Six Sigma.

"If you don't ask the right questions, you don't get the right answers. A question asked in the right way often points to its own answer. Asking questions is the ABC of diagnosis. Only the inquiring mind solves problems." -- Edward Hodnett

Change Management: The Key to Unlocking Procurement Savings

Companies are spending millions on procurement savings initiatives in order to drive improvement to the bottom line. Buyer and supplier enablement is one of the most critical links between sourcing initiative and measurable bottom-line savings.  This process includes connecting buyers and suppliers electronically and aligning business processes between vendors and buyers.  This alignment is critical to ensuring that both parties can do business efficiently and effectively.  The last critical step in achieving measurable cost savings is driving desired end-user behaviors.

Strong and sustained user compliance rates of 80% and higher will ensure maximized cost savings. The most successful programs have the following characteristics:

• Strong executive commitment
• Targeted communication strategies
• Company-wide user involvement
• Comprehensive user training
• Compliance programs that phase out incumbent suppliers

Hiring the Winning Way

In his book, Winning, Jack Welch talks about the four characteristics that employees need to have in order to be successful.  it's therefore imperative to look for these qualities when you are hiring.

People who have positive energy are generally extroverted and optimistic, they thrive on action and relish change.  They love to work, love to play; in short, they love life.

People who have the ability to energize others, get them revved up with enthusiasm, can inspire members of their team to take on the impossible.

People who have edge have the courage to make tough decisions.  They know when it's time to stop analyzing and start deciding.  Many very bright people have trouble with edge because they see too many possibilities, and this prevents them from making a decisive choice and taking action. This kind of indecisiveness can keep an organization in limbo.

People who can execute have the ability to get the job done,  They know how to turn decisions into actions and push them to completion through resistance, chaos, and unexpected obstacles.

If a job candidate has all four of these characteristics, then look for their passion.  This is an authentic, heartfelt excitement about the work they do, and about the people with whom they work.  They love to learn and grow their responsibilities, and they're enthusiastic when the people around them do the same.  People with passion tend to excited not just about their work, but about everything in life.

Adapted from Welch, Jack with Suzy Welch. Winning. New York: HarperBusiness, 2005.

Lean Thinking

Lean is a concept that is most often associated with manufacturing.  But the concept of lean, delivering a service more efficiently, either by producing more or do more with fewer resources. The goal is to produce value while eliminating waste.

Value is defined as something the customer is willing to pay for. Value-adding activities transform or enhance information or materials into an end product that the customer wants. Non-value adding activities use up resources, but do not contribute to the value of the end product from the perspective of the customer. Examples of waste include overproduction, defective products, excess motion, transportation, and waiting.

Lean principles focus on creating value by:

• Defining value from the perspective of the end user
• Determining a value system by:
• Identifying the steps that create value
• Mapping the value stream
• Challenging each step by asking why? five times 
• Lining up value and creating rapid, sequential steps
• Creating process flow
• Pulling parts, products, and information from customers
• Continuously improving
• Reducing and eliminating waste

KPIs for Responsible Sourcing

Responsible sourcing has reached a crossroad as companies have evolved from an approach based on employee compliance to one that goes beyond this to drive continuous improvement through strong supplier management and partnerships. Companies seek to demonstrate the value of responsible sourcing, but the lack of common standards for evaluating these successes threatens to undermine further development and wider adoption of these responsible sourcing practices.

There are a number of metrics currently in existence that impact the process of goal setting and evaluation:

• Goal setting and the key performance indicators for supply chain sustainability remains a work in progress. Most focus on qualitative program descriptions and challenges, rather than focussing on outcomes or value. A better approach would be to focus on continuous improvement.
• Public reporting is still focussed on negatives such as lack of supplier compliance, while measure so of positive values are underdeveloped. A more sophisticated approach would be to measure both supplier capacity as well as performance. Suppliers need to be able to understand the value created by their meeting responsible sourcing requirements, as this will provide them with the best motivation to comply.
• Supplier scorecards do not capture the data needed to allow internal audiences to make informed sourcing decisions. It's important to build ownership for metrics so that responsibility for implementation can be assigned throughout the company and accountability is clear. Micro-level targets can be established, and rolled up to provide a picture of overall performance,
• IT infrastructure remains a critical barrier to program measurement. Difficulty in accessing information has limited the ability to manipulate and analyze data. Fixing these problems will be expensive.
• Supply chain processes are not sufficiently transparent so that it can be determined that companies are managing their supply chain responsibility at an acceptable level. Companies need to demonstrate that they are meeting these commitments to their investors and other stakeholders, and they need to demonstrate how the value derived from these efforts on social and environmental issues.

Methods for evaluating the success and impact of supply chain sustainability programs must continue to be developed. Deficiencies in creating internal alignment must be addressed, and IT systems must be upgraded and improved. Communication between companies and investors must be developed with greater clarity around responsible sourcing practices and how they impact social and environmental outcomes. Communication and collaboration among stakeholders as well as transparency in the collection and analysis of metrics and indicators needs to be developed.

Adapted from: Key Performance Indicators for Responsible Sourcing, http://bit.ly/cD3EuM

The Six Laws of Persuasion

Persuasion is the ability to influence people's thoughts and actions through the use of specific strategies.  Getting what you want in life will require negotiation with a variety of people and the use of communication skills such as active listening and attention to non-verbal cues. Mastering the persuasion process will enable you to create the attitude change necessary for persuading others to agree with your line of thinking. You must be able to sell your ideas, and in a win-win situation, provide the other side with a fair deal.

To become skilled at persuasion, you need to know more; you must understand the the Laws of Persuasion. Psychologist Robert Cialdini described the six laws of persuasion in his book, Influence:The Psychology of Persuasion. He discusses the prevalent methods of marketing, and how by understanding persuasion laws, you can control how much marketers unduly influence you, as well as how to use these laws to your benefit during negotiations.

Cialdini’s Six Laws of Persuasion:

1. Law of Reciprocity  People try to repay what others provide them. Small favors bring on a sense of obligation. People feel compelled to “return the favor.” If someone gives you something you want, then you will wish to reciprocate because you now feel obligated. In negotiation, limited disclosure of the real reason for a stance, such as "this is all the money we have" can induce a concession from the other party.

How Can You Avoid a Sole Source Situation?

Negotiating with a sole source supplier can be one of the most disadvantaged negotiation situations for a procurement professional. It's important to know how to prevent sole source situations from occurring.

Sole source situations can occur when an engineer or end user writes a new specification that calls for the use of goods or services from a specific supplier. Once the specified item is launched, the specification and suppliers can be very difficult to change.

It's important to communicate to end users who write specifications that if they are very narrow, procurement will have a difficult time driving value for the end-product. Procurement shouldn't concede to easily to end users, but should instead explore options with these folks to try to find as many satisfactory options as is possible.

If procurement doesn't get much support in this process, they will need to run a parallel process and seek quotes for similar items which can then be presented to the end users for consideration. This approach should be used sparingly. The goal should be for procurement to earn membership on the design team so that early involvement in design becomes the norm. It's much easier to influence change in the early stages, rather than to have to go back and change things once the decisions have been made. Once procurement has established a track record of providing value to the design team, there will be less resistance to their involvement.

Adapted from: Sole Source Situations: Eradicate Them!, http://bit.ly/bmBeCf

How Many Of These Six Mistakes Have You Made?

1. Assuming that a small order doesn't warrant much time. A purchase doesn't have to involve a large monetary expenditure to represent a big risk to the organization if it isn't fulfilled at the right time with the right quality item or service. There can be safety implications involved with small orders, or costly disposal that will be needed when the item is used up, and these should not be overlooked.
2. Assuming that supplier offerings are equal except for price. Suppliers try to differentiate their products or services. Seek to understand those differences, what value those differences have to your organization, and which offering is the best overall fit.  Price is only one consideration.
3. Failing to allow suppliers to suggest alternatives. Suppliers often know a better or cheaper way to accomplish your goals. Not giving them the chance to suggest other options may result in forgoing cost or service improvement opportunities.
4. Failing to build stakeholder consensus in purchasing decisions.  Compliance of the stakeholders in your organization is a big determinant in whether supplier onboarding is smooth, estimated cost savings are achieved, or volume guarantees are met. If stakeholders are given a real voice in the purchasing decision, the likelihood of compliance - and purchasing department success - is much higher.
5. Failing to qualify a new supplier. You should select a supplier because that supplier is the best fit for your organization, not because the supplier was the best proposal writer or has a long standing positive relationship with your organization. Always qualify new suppliers in a way that is appropriate for the value and criticality of the purchase. This may even mean trying out a supplier before making along-term commitment.
6. Agreeing to things that the organization can't support. When purchasing agents focus solely on price, they may be tempted to do anything to achieve savings. But being able to trade concessions for lower prices means knowing your organization's limits. For example, don't agree to pay a supplier in 10 days or via EFT if you haven't confirmed that your organization can actually do these things.

Adapted from: Do You Make These Purchasing Mistakes?, http://bit.ly/9SJik5

The Five Rules of Negotiating

1. Always ask - you never know what you might get.
 
2. Know what you want - it is difficult to have a successful negotiation if you don't know what you want. It's also important to know what is totally unacceptable, and would be a deal breaker. Sometimes it's better to go with the status quo, rather than to accept a lesser deal.
 
3. Prepare for the kind of negotiating you will be engaged in. There are five types of negotiations: impromptu, informal, formal, one-of-a-kind and ongoing relationship.  It's this last kind that requires the most preparation and care. These are the negotiations that take place with your spouse or your manager, and they deal not only with tactical issues, but also longer term strategic ones. This kind of negotiation is more cooperative, and has a greater atmosphere of trust and concern for the ongoing relationship as well as possible solutions.
 
4. Understand cultural differences. In may places outside the United States, the marked price is not the one that people expect to pay. There is an expectation that there will be haggling. And it turns out that these days, you can go to a store like Home Depot in the United States and ask for a lower price. 
 
5. Practice, practice, practice. This means ask for things everywhere in your life. If the person you're asking can't give you what you want, find out who can. As kids, we learned to ask Mom or Dad for what we wanted until they gave in. Don't accept the first "no", and remain committed to win-win.  Look for ways to reach a mutual agreement on solving a common problem.

Adapted from: 5 Rules of Effective Negotiating, www.globalknowledge.com

Purchasing Ethics: 7 Sensitive Situations

The procurement group can sometimes find itself in the uncomfortable situation of having recommended a supplier that has left internal customers unhappy. Even when cross-functional teams are sued to ensure buy-in to decisions, the end result can sometimes be a questioning of the ethics of the procurement group.

There are a few areas where procurement professionals can unintentionally add to this negative perception.

1. A procurement team member has accepted a gift from the winning supplier.  It could be something as small as a pen.
2. A procurement team member mixes business and pleasure with a supplier, such as discussing business over lunch.
3. A procurement tram member has a personal or financial relationship with a supplier or an employee of the supplier.
4. A procurement team member owns a supplier's stock.
5. A procurement team member provided certain information to one supplier that was not provided to other suppliers in a competitive bidding environment.
6. The procurement team did not provide transparency for a supplier selection, including failing to internally share selection criteria, proposal details, and the rationale for the decision.
7. The supplier selection criteria used was different than the criteria noted in the Request for Proposals.

Regardless of how low in value, procurement professionals should not accept gifts of any kind from suppliers. This is not because it automatically indicates impropriety, but because of how such an action might be construed. This includes free pens and lunches.

The Argument for a Centralized Procurement Strategy

It's important to get as much spend as possible under procurement's control rather than scattered in the departments where it is handled locally.  The following arguments can be used to try to convince senior management of the wisdom of this approach.

1. Personnel in local departments who spend time on procurement activities are doing so at the expense of their primary goals.
2. Procurement personnel are trained in cost savings, negotiation and contract management, and should be able to get lower prices and better service than employees in local departments who are experts in their own areas.
3. Procurement personnel have exclusive access to tools such as eSouring systems.
4. Procurement professional  are skilled at sourcing alternatives, and then guiding the the organization to select the best option. Internal customers are more likely to select the first supplier found, and this can lock the organization into a sub-optimal arrangement for years.
5. Procurement  works with all internal departments and so they are aware of enterprise-wide needs.  They can leverage aggregated volume to achieve lower costs, minimize inventory, and avoid products that have previously been shown to be less than satisfactory.
6. Suppliers have been known to charge different prices to different departments within the same organization. Having a centrally-led approach can avoid this practice, and ensure that all departments are benefitting from the organization's leveraging power.

Adapted from:What Justifies An Increase In Purchasing's Scope?  by Charles Dominick http://bit.ly/9Hf7n0

Procurement Card Pros & Cons

What Should You Know About Procurement Cards?
More than a decade after becoming mainstream, procurement cards remain a key component of procurement departments’ repertoires. Whether implementing a new procurement card program or managing one that has been in place for years, procurement departments need to continually consider the pros and cons of procurement cards...

Advantages/Pros:

• Procurement cards reduce the cycle time of purchasing transactions
• Procurement cards can improve supplier relations as suppliers receive payment quickly
• Procurement cards can reduce the number of supplier invoices
• With proper controls, procurement cards can restrict maverick buying as well as the buying of non-authorized categories of goods and services
• Some procurement card programs can provide clearer reports of how money is being spent
• Procurement card programs foster a feeling of empowerment among employees

Disadvantages/Cons:

• Procurement card use exposes the organization to the potential for undetected credit card fraud, which will take time and effort to resolve
• The work involved in reconciling a procurement card statement with a purchase log and distributing charges to the proper accounts can divert resources from other value-added work
• Procurement cards generally don’t provide the same level of budget visibility as does an ERP system
• Multiple ways of placing orders (e.g., Pcard, eProcurement, non-catolog requisitions) requires a steeper learning curve for requisitioners who need to know the procedure for each purchase type
• Procurement card spend data may not be integrated with other purchase data, resulting in incomplete information when conducting spend analysis

It's important to weigh the pros and cons of a procurement cards system, and put in place business processes so that that the benefits outweigh the drawbacks.  Purchasing cards have a valid place in the modern procurement departments' arsenal, as long as they are managed advantageously.

Adapted from: Procurement Card Pros & Cons. http://bit.ly/9ok8yv

The Top 10 Procurement Changes in the past Decade

10. ERPs Proliferated. Today, eProcurement and eSourcing are two of the most useful tools in purchasing. Ten years ago, these terms were unknown.

9. "Procurement" replaced "Purchasing". Ten years ago, even top purchasing departments processed purchase orders. Today, procurement departments centralize the supplier selection process, not the transactions, which are delegated to end users or outsourced.

8. Procurement Controls More Spend. When procurement deliver results, management seeks more spend that they can positively impact. Once sourced by other departments, categories like fleet management, benefits, and travel services are now sourced by procurement.

7. Social Responsibility Became A Top Priority. Whether for philanthropy or to avoid media scandals, management counts on procurement more than ever to buy from diverse suppliers, make environmentally-conscious decisions, and do business ethically.

6. Measurement Was Mandated. With the potential of smart purchasing widely known, senior management more strictly holds their procurement professionals accountable for results. The use of procurement KPIs and dashboards is now the norm.

5. Strategic Sourcing became an Internal Process. In the past, strategic sourcing was done mostly by consulting firms hired to help companies reduce spend. Today, many companies have their own refined and documented in-house strategic sourcing processes.

4. Vendor Roles Expanded. In 1998, there was talk about "partnering" with vendors. Today, there's action. Top procurement departments actively develop their vendors and look to their supply base for ideas, performance, and innovation.

3. Global Sourcing Went Mainstream. Ten years ago, only the progressive companies were searching abroad for suppliers. Now, in some countries, it is difficult to find products manufactured domestically.

2. The CPO Position Got Adopted. There is a growing number of professionals with the title "Chief Procurement Officer."

1. The Supply Chain Was Recognized. In the last decade, companies more closely analyzed the way material flows into, through, and out of the organization. This "supply chain" focus has those who once just placed orders now responsible for inventory, warehousing, outbound logistics, and distribution.

Adapted from: Top 10 Purchasing Changes In 10 Years. http://bit.ly/cfPJKj

Are You Managing your Vendor Relationships?

Vendor Performance Evaluation. In the absence of agreed upon performance standards, it is not possible to know how well a vendor is performing. This information needs to be established and shared with the vendor, so they can work on meeting these standards. Agree on what to measure (e.g., percentage of orders delivered by their due date) and what the goal is (e.g., 95% on-time deliveries). These numbers should be reviewed at frequent intervals depending on the size of the spend (weekly, monthly, quarterly).

Idea Sourcing & Value Creation. Better profitability comes from ideas. You can greatly increase the number of good ideas by sourcing ideas from your vendors as well as from your employees. Some leading organizations have systematic processes in place to collect ideas from vendors, measure their impact, and reward for them.

Vendor Development . It's logical that when you improve the capabilities of your company's workforce, your company benefits. But even though vendors now do work once done in-house, that logic hasn't followed the work. Leading companies engage in vendor development - providing resources to improve their vendors' capabilities. This can be any collaboration that makes vendors more capable of delivering benefit to your company.

A Joint Review of Purchase Costs - If you work for a big company, you have a lot of buying power - buying power that may you may be able to leverage in a novel way. By jointly reviewing costs further down the supply chain, you may find opportunities where you can buy some goods and services your vendors need in order to serve you, but at a lower cost, and these savings can be passed on to you.

Adapted from: Are You Truly Managing Your Supplier Relationships? http://bit.ly/dcLyz0

The Wrong Cost Savings Goal

The wrong cost savings goal is something along the lines of: Achieve cost savings of $400,000 this year. This is also what is generally expected from the finance people.

Novice purchasers often start out by replacing their old vendors with cheaper ones without considering the new suppliers' performance standards. This is unacceptable, and may end up reducing profits instead of increasing them.


The 21st century procurement professional must get the best price while evaluating and qualifying suppliers who will perform better than the incumbent. This means improving on-time delivery, material defect rates, internal customer satisfaction and supplier service levels in addition to getting a lower price.

Achieving cost savings does not not necessarily mean finding new suppliers. In a recovering economy, it is worth trying to renegotiate with current suppliers, simultaneously maintaining service levels while also getting a lower price.

The right cost savings goal should mention supplier performance in addition to cost savings.  One without the other will not result in a profitable outcome.

Adapted from: The Wrong Cost Savings Goal. http://bit.ly/cJhZXf

Procurement Key Performance Indicators (KPIs)

How Do You Compare Procurement Performance?

To know how well your organization is performing, you need numeric baselines or points of comparison. The baseline can be your prior years' performance, but it is most helpful if you use the same key performance indicators (KPIs) as other organizations you benchmark.

The first five procurement KPIs focus on financial measures. But focusing only on money can lead to operational disruptions, which of course leads to lost money. Procurement KPIs 6 through 10 focus more heavily on operational performance.

The "Harder" Side of Change

Managing the people side of a change is sometimes referred to as the "soft" side, while the technical aspects is the "hard" side. But despite this terminology, managing the people along with their hopes, fears, beliefs and misconceptions is actually the most difficult; it is often neglected, and frequently is the source of the failure of a project.

The financial success of change is most dependent on how individuals embrace the change, and adopt and utilize it in their day-to-day work. It's both a learned process and a new competency. It's about changing individual employee behaviors, and modifying the holistic tool set used to get the job done.

Organizational change happens one person at a time, but it is the cumulative effect of these individual efforts that results in successful organizational change. Poorly managed change will result in productivity declines, lowered employee morale, missed deadlines and budget overruns. In many cases, projects are abandoned as failures when progress is slow and milestones are missed.

The likelihood of success increases when effective change management strategies are utilized. Benchmarking studies conducted in 2007 and 2009 showed that 95% of participants with effective change management programs met or exceeded objectives compared to 16% of participants with poor change management strategies. A 2002 McKinsey Quarterly article found that projects with excellent change management approaches delivered 143% of their expected ROI, while those with poor change management methods delivered only 35% of expected ROI.

Managing ERP Users

Resistance to change is human nature. In the 21st century, the one thing that will remain constant in our work lives is the need to adapt to change.

Employees without previous exposure to ERP systems will naturally compare the new system with the outgoing legacy one and perceive that there is more work to be done and that their comfortable systems with which they have developed speed will be taken away. This is not a good feeling, and if it is not acknowledged, these employees may resist adopting all the features of the new system.

It's important to add business process orientation training to initial end-user training, so that employees can begin to appreciate how the new system will be better in the end, even if it is a challenge in the beginning. They will do more work in some areas and less work in others.  The goal is to get a better outcome with less overall human effort. Some juggling of individual responsibilities may be needed to balance each person's workload.

ERP Application ROI Through the Care and Nurturing of End-Users

It is not unheard of for end-users to receive initial training at the time of an ERP deployment, and then nothing after that, even in the face of business process changes, employee turnover, and upgrades. The initial training may be rushed due to tight schedules and budget shortfalls, resulting in lower user competence accompanied by the attitude from management that "they'll sort it out on their own".

Wise firms cultivate a culture where the efficient deployment of the ERP applications are constantly reviewed and refined. There needs to be a budget for ongoing end-user training, both as a refresher, as well as to address changing business processes.

The deployment of an ERP application passes through stages, which are described below in the ERP Maturity Model. Note that it is not possible to pass on to a new stage without entirely completing the current one.  This is where most companies fail.