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.

Candor - the Biggest Dirty Little Secret in Business

can·dor  (kndr)

n.

Frankness, honesty, or sincerity of expression; openness.

The biggest dirty little secret in business is the lack of candor.  It blocks smart ideas, quick action, and it’s absence as a cultural norm prevents good people from contributing everything they've got. People often don't communicate in a straightforward manner; they don't put forward the kind of ideas that might stimulate real debate. Instead, they withhold comments or criticism, they sugarcoat bad news, and they keep things to themselves in order to maintain appearances. Lack of candor permeates every aspect of business, and yet it is absolutely damaging.

A better Approach to Vendor Evaluation

Vendor evaluation is often inadequate. Typically, pricing and systems criteria are given greater weight in the decision versus people and performance management.  In some cases, vendor selection is based on past business relationships rather than a pragmatic evaluation of capabilities. 

The following vendor evaluation protocol provides guidance regarding the key areas to consider in vendor evaluation and a point scale for weighing each component of a vendor’s capabilities. Companies can compare vendors objectively by rating each vendor’s capability in each area and weighting according to the percentages and then adding up the total.

The Supplier Risk Scorecard

The supplier risk scorecard provides valuable guidance for supply base rationalization decisions and maintaining the health of core suppliers, and is useful to a company that evaluates its dependency on a given supplier, as well as the financial solvency, and innovation investment, customer concentration of its key suppliers.

Rather that evaluating suppliers using aditional supplier evaluation dimensions such as on-time delivery, production yield, and price/ value relationship, which ignore the inherent “riskiness” of the supplier, the scorecard evaluates vendors' financial solvency.

Dependence on suppliers is based on expenditure over time, not just current transactions. Financial viability of suppliers includes considerations of their liquidity, capital structure, and cash flow. Suppliers’ revenue concentration should be monitored to understand suppliers’ dependence on Delta and other large customers.

Project Risk Management

Risk Management Plan

There are four stages to risk management planning:

1. Risk Identification
2. Risk Quantification
3. Risk Response
4. Risk Monitoring and Control

Risk Identification

There are different kinds of risk:

• business risks
• generic risks

Risks need to be identified and defined: what are their causes and will be their impact?

Risk quantification

Risks need to be quantified in two dimensions: impact and probability.  Prioritization of risks can be done using a matrix that combines probability and impact.

Risk response

There are four things that can be done in response to risk: 

1. Avoid
2. Transfer
3. Mitigate
4. Accept

A risk response plan should include a strategy and action items.  This means a who, what, when, where, why plan needs to be developed.

Risk control

It's important to continually monitor the status of risks so that it will be known if they have turned into a problem.  It's also important to keep track of the effectiveness of risk mitigation steps, and to follow risks so that it is known when they have passed and no longer represent danger.

From a White Paper by Project Perfect: http://bit.ly/cNOHvb

What are the Basics of Good Managing?

The first basic skill of good management is to select good people. When you hire, you are selecting a human being with innate patterns of memory, learning, emotion, and overall behavior. Know what talents you need in a new team member. Ask open ended questions and listen for specifices. The best predictor of future behavior is frequent past behavior.

The second basic skill of good management is defining clear expectations. Confusion hampers efficiency, focus, teamwork, as well as pride and job satisfaction. Despite consensus on the need for for clarity, research shows that less than 50% of employees claim to know what is expected of them at work. 

It's managers who make the difference between clarity and the lack thereof. Good managers begin bringing clarity to the virtually every employee encounter. They do this tactfully, so as not to suggest distrust or disappointment.

The third basic skill of good management involves praise and recognition. Every behavior has a consequence, which will be positive or negative, immediate or future, and certain or uncertain. The least powerful combination of these is a consequence that is negative, future, and uncertain. The most powerful is the exact opposite: positive, immediate, and certain.

To be the most effective as a manager, we must recognize excellence immediately, and praise it. As obvious as tis may seem research shows that less than a third of employees report that they frequently receive recognition for their work. This either means that they either do not often do excellent work, or that their excellent work was not recognized. Neither of these situations is a good thing.

Praise is a creative act, it is a cause of good behavior. Excellence is the result of practice and incremental improvement.  Celebrating these gains is a part of the drive toward excellence.

The fourth skill of good management is showing care for your people. Research studies show that employees are more productive when they feel that someone at work cares about them. This is a causal link; employees who feel cared about are less likey to call in sick, have on-the-job accidents, file workers' compensation claims, steal from the company, or quit, and they are more likely to advocate for the company to family and friends.

Mastery of these skills won't guarantee that you are a great manager, but doing so will assure that you are a good one. These skills will come naturally to some people, but will be more of a challenge to others. Knowing what you need to do to achieve excellence as a manager is the first step in winning the battle.

Adapted from: Buckingham, Marcus, The One Thing You Need to Know ...About Great Managing, Great Leading, and Sustained Individual Success. New York: Free Press, 2005, pp 73-125.

Eight Leadership Skills for succeeding in the 21st Century

Embrace change.  

Know your purpose in life and the values that support it.

Expect the best while preparing for the worst.

Act decisively.

Learn from every experience.

Laugh often and enjoy the journey.

Celebrate the small victories.

Help others to succeed.

Based on a white paper by Mark Sanborn: http://bit.ly/a9OGhF

The Twelve Cardinal Sins of ERP Implementation

The biggest issue in ERP use is implementation failure.  This often comes about as a result of the Twelve Cardinal Sins of ERP Implementation, which are:

1. Lack of top management commitment
2. Inadequate requirements definition
3. Poor ERP package selection
4. Inadequate resources
5. Resistance to change/lack of buy-in
6. Miscalculation of time and effort
7. Misfit of application software with business processes
8. Unrealistic expectations of benefits and ROI
9. Inadequate training and education
10. Poor project design and management
11. Poor communications
12. Ill-advised cost-cutting

There are numerous similarities of this list with the essence of John P. Kotter's book "Leading Change" (http://bit.ly/bRwhJ1). To succeed in implementing any kind of major change in an organization there are several requirements. It's necessary to establish a powerful guiding coalition and to assemble a group with enough power to lead the change effort. A vision of this change must be created and communicated, others must be empowered other to act on this vision so that obstacles can be removed and small victories achieved. These improvements must then be consolidated and new approaches institutionalized.

Too often, change is dictated by executives who have little or no understanding of the processes underlying their business. Without this understanding, there is little chance that a chosen solution will represent an improvement, and in a worst case, it could be a disaster. Regardless of of the outcome, if the people doing the work of the business don't believe in the proposed change, it is destined to fail. The most important part of implementing change is to get the buy-in of the workers and give them the support that they need so that they can succeed. This means resources, training, and rewards for the extra effort required to bring about change successfully.

Adapted from a White Paper by Rockford Consulting

http://bit.ly/aigWub

The Downside of ERP Implementations

ERP vendors do not talk too much about the downside of ERP implementations, but they do exist.  Some issues that companies might experience include:

• The implementation effort will be bigger and more work than anyone imagined. These projects never come in ahead of schedule or under budget.
• The functionality possible with systems can temp users into wanting all the bells and whistles causing the scope to grow out of control.
• The swing from manual to automation for the many tasks covered by the ERP will improve efficiency, but decrease flexibility.
• Users will need to become more computer literate. Many see this as personally challenging - even beyond their ability - and will not cope, and possibly even leave the company.
• Computers are literal, and this means that data integrity is imperative. Don't ever forget: Garbage in leads to garbage out.
• The "E" in ERP stands for enterprise.  Never forget that what one person does can have a ripple effect across the entire company.
• ERP systems tend to replace old systems, and as such they are a quantum leap for all areas of the company. It is like replacing the trusty old Ford with a high performance Ferrari. This happens at a technical level as well as a business level. New ways of doing things and of thinking need to be learned in a very short space of time.
• Things have to be done consistently. No longer are we going to be able to do something one way in one branch and another way in another branch. The system is going to determine how we do things in all locations. Even within one location, special treatment may not be possible any more without changing the configuration of the system. If consistency can be implemented, there is good potential for cost savings as well as getting rid of special arrangements that reduce profit.

ERP systems have both upside potential for good outcomes and downside potential for bad outcomes.  Aim for the former and prepare to avoid the latter, and your organization will have a winning experience.

Adapted from: http://bit.ly/cW2osy

Seven ERP software implementation success factors

1. Focus first on business processes and requirements, not on the choice of the software.
 
2. Focus on achieving a healthy ERP ROI (return on investment), including post-implementation performance measurement, by establishing key performance measures and setting baselines and targets for those measures.
 
3. Strong project management and resource commitment.
 
4. Secure the commitment from company executives including the CEO and the entire C-level staff.
 
5. Validate the software vendor's understanding of the business requirements/project plan and that these needs will be met.
 
6. Ensure adequate training and change management. People make or break ERP implementations. Job redesign and training of staff will be needed, both of which will take time and money.
 
7. Make sure you understand why you're implementing ERP. If process improvements or targeted technology will meet your business needs, you will be able to reach your objectives at a lower cost. The most appropriate choice for your situation may or may not involve implementing an ERP.

The decision structure needed to make the right choice when it comes to an ERP implementation is complex. Business needs must be understood, and business processes clearly defined. Rushing through this process will lessen the chance for the project's success.

Adapted from a White Paper by the Panorama Consulting Group, March 2009: http://bit.ly/bcs9NQ

How controlled is YOUR telecom spend?

n my experience, telecom is viewed as a necessary evil, and the invoices and service are never examined for errors or waste. I instigated a detailed spend analysis of a previous employer's telecom service, and discovered:

1. The bill had not been examined in ten years.
2. 34 out of approximately 185 phone lines on the bill did not exist.
3. Telecom usage patterns had changed since the services were installed, and many of the lines were no longer needed.
4. The bill contained many errors, including double charges, erroneous rental charges and charges that were patently incorrect.
5. These problems were organization wide.
6. Despite the fact that this was draining much needed funds from the budget, nobody cared.

The Aberdeen Group published a White Paper titled "Best Practice in Telecom Spend Management", detailing these problems. In it, they concluded that:

7% to 12% of telecom service charges are in error. For large enterprises, such errors are costing more than $8 million a year in lost profits. 

Up to 85% of a typical enterprise’s telecom bills are not audited and are simply paid in full. 

There is a lack of insight into telecom spending. Forty-five percent of companies are actively managing <50% of overall telecom spending.

To read this insightful paper, follow this link:

http://bit.ly/bA0SUP

Top-Down versus Bottom-Up Change Management

Top-down change management is the traditional management strategy in which all decision-making, guidance, and authority flows from top management down to everyone else. It is typically the only methodology used to manage change in organizations. This approach often fails due to low employee buy-in and lack of flexibility and empowerment of line management and front line employees. An even bigger problem with this methodology occurs when top-management doesn't understand the work processes of their own company, and so they are unable to make good decisions about how things will get done in the new system. This dissonance will lower productivity and ultimately damage employee morale.

Experienced project managers understand that employee buy-in is the most important variable in the success of any change management process. The most successful outcomes are achieved when supervisors actively engage employees in the change management process using bottom-up management techniques. This is the most effective method for managing employee expectations and securing end-user commitment.

Supervisors have the most direct line of communication with employees, and they have the greatest influence on employees' perception of change and of new systems. Each employee's attitude to the project needs to be assessed, and individual concerns addressed one-on-one. This should be treated as an educational process, with a goal of dispelling negative attitudes through increased understanding of the process, and the sharing of a clearly articulated common goal.

Change can be challenging, but handled correctly, it need not pose an insurmountable obstacle to achieving an organization's goals.

Reasons Why e-Procurement Projects Fail to Achieve their ROI

The typical ROI of an ERP implementation shows break-even in about two years. Real world experience shows that break-even usually doesn't happen until more than four years after implementation.  Many companies are forced to give up on these projects because implementation costs have run over and there was a lack of tangible results.

Sourcing strategy and technology are equally necessary in this scenario. Sourcing strategy finds and pursues the savings, while technology captures the data so that the savings can be sustained over time.  Initial aggregation of spend and negotiation of better deals with suppliers can help offset the costs of an ERP implementation.

Equally important is a thoughtful category rollout.  It's best to go with straightforward categories first, the ones most likely to meet with success, and refrain from choosing complex categories simply because their spend volume is great.

Electronic catalog content is important for a successful ERP rollout.  If the vendors don't have adequate content in their eCatalogs, or they fail to update and cleanse their data, users cannot buy, and the ROI of the ERP is undermined.

Effectively transitioning employees onto a new ERP system so that adoption rates are high and tools are used correctly requires a consistent message from all levels of the organization that this is priority #1. Communication needs to to be clear and consistent, training needs to be thorough and ongoing, and users need to see evidence that their efforts are paying off with feedback on savings and compliance rates.

Change management is the least expensive aspect of an e-Procurement project, and yet the lack of it is a leading cause of project failure.

Adapted from a White Paper by ICG Commerce, August 2009: http://bit.ly/dkCaXk

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?

Motivation 3.0: the Key to Business Success in the 21st Century

In his book Drive: The Surprising Truth About What Motivates Us, Daniel Pink delves into the science of human motivation.  There's a gap between what science tells us about human motivation, and what business does to harness it.  Our current system, based on carrot and stick rewards and punishments, no longer works, and often does harm by stifling creativity and risk taking.

Primitive man was was driven by biological needs such as hunger and fear. These drives provided the motivators for survival, and they form the basis for what Pink calls "Motivation 1.0".

As human society became more complex, new rules were devised to keep us from bumping into each other.  A new form of motivation evolved to meet our emerging need, that was based on rewards and punishments (carrots and sticks).  Pink calls this "Motivation 2.0".  This is the model that business have run on for millennia. Rewards were in the form of money, titles, perks, and prestige, and sticks were in the form of retribution, firing, demotions, and shame. This model worked well for a very long time, but recently it has started to falter.

One hundred years ago, work consisted of simple, not very interesting tasks  that were repeated over and over again. This is the algorithmic model where you follow a set of established steps down a single path to a defined conclusion.  More recently, work has shifted to a heuristic model.  No algorithm exists for it, and so the worker has to experiment with various possible answers to find a novel solution. Creativity, risk-taking, and thinking outside the box are key components of success in the heuristic model.

Motivation 2.0 is based on the notion that work is dreary and repetitive, and that workers will shirk whenever they are left to their own devices. Clearly this is not true in the case of creative and inspired work. Motivation 2.0 can, in fact, backfire, crushing motivation. Pink describes this as the Seven Deadly Flaws.

The Carrots and Sticks of Motivation 2.0 can:

1. extinguish intrinsic motivation
2. diminish performance
3. crush creativity
4. crowd out good behavior
5. encourage cheating, shortcuts, and unethical behavior (Enron, Goldman Sachs)
6. become addictive
7. foster short-term thinking (the housing bubble of 2008-09)

Twenty-first century business sensibilities are very different from those of the past. Open source software like the Firefox browser and Linux operating system have taken the world by storm.  Wikipedia, written and edited entirely by anonymous volunteers, is bigger and more successful than anyone could have imagined. Clearly, neither carrots nor sticks are motivating these contributors.

Motivation 3.0 is the new upgrade that the world needs for the smooth functioning of 21st century business.  It acknowledges that modern workers want to learn, create, and better the world.  We want autonomy; to be able to exercise self-direction.  We want to achieve mastery by getting better at what it is that we do.  And we want our work to have a greater purpose so that we can be a part of something that is bigger than us.

Pink, Daniel H. Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Books. 2009.
http://amzn.to/dpnn1r

The Five S's

I have this hanging above my desk so that it will inspire me to improve my organizational methodologies and work processes so that they are always becoming more efficient.

The 5 S's

Seiri: (Tidiness) :Sort and separate - the first step in making things cleaned up and organized
Seiton: (Orderliness): Set In Order - organize, identify and arrange everything in a work area
Seiso: (Cleanliness): Shine - regular cleaning and maintenance; make things shine
Seiketsu: (Standardization): Standardize - make it easy to maintain - simplify and standardize
Shitsuke: (Sustaining the discipline) - maintaining what has been accomplished

The 5 S's is a workplace methodology that describes how items are organized and how the new order is maintained. It is a component of Kaizen which means "change for the better".  It is meant to be a daily activity that prevents the need for overly hard work through daily incremental improvements in processes.  While originally intended to apply to manufacturing settings, this philosophy can be applied to the activities of daily life both at work and in the home.

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

Driving New Efficiencies in the Indirect Supply Chain

In difficult economic times, companies look for new ways to increase efficiency and cut costs. Most companies focus their efforts on direct materials and capital expenditures. In the 1980s, companies tried outsourcing purchasing, inventory and other functions as a cost cutting measure. However these bundled services did not provide the transparency needed to eliminate waster and inefficiencies. Now Supply Chain Managers can implement lean processes that provide better visibility and promote continuous improvement in every aspect of the supply chain. Best-in-class companies have reduced MRO costs by 19 percent, according to an Aberdeen Group Study, however there were significantly lower savings realized by average and laggard companies at 7% and 3% respectively.

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

Purchasing Best Practices: Ten Keys To Effective Purchasing

1. Improve your vendor relationships
 
• Collaborate to reduce costs
• Order in a manner so as to keep vendor's costs low
• Focus on overall total cost
 
2. Develop a scorecard to keep track of your vendors' performance
 
• Track quality, service, and price performance
• share this information with your vendors
 
3. Get the right information so that your efforts are well spent
 
• Determine your purchasing volume so you can leverage your spend
• Collaborate with internal colleagues to identify spend that can be improved
 
4. Develop a talented purchasing staff
 
• Hire people with the potential to grow
• Provide training in negotiation techniques, analytical techniques and contracts
• Open lines of communication from the top down as well as laterally

Seven Habits of Effective Sourcing Organizations

It was common in the past for companies to consider strategic sourcing as an activity reserved for large spend categories. But emerging technologies and processes have made it possible for this approach to be applied to smaller spend categories, with tremendous opportunities for additional savings. Sourcing should be viewed as an ongoing, iterative process that does not end.

1. Always start with a thorough assessment of spend patterns. Prior to the advent of today's automated eSourcing tools that capture spend data, looking at historical spending was an arduous and back looking task that could not be repeated very often. Once data has been cleansed and normalized, the impact of off-contract and maverick spend can be analyzed.  The truly low-hanging fruit can be identified through this process and harvested.
 
2. Use the appropriate sourcing strategy and cost model for each category. Sourcing methodologies must be applied to all externally purchased goods and services. The correct strategy depends on the category.  For example, spend categories with a large supply base may benefit most from the use of leverage. It's important to look at the total cost of ownership of everything that is purchased. Service parts often have significant costs in the form of delivery and warehousing. Direct materials have fixed costs such as tooling which must be included in the total landed cost. Globally sourced items may have taxes, tariffs, and significant and varying freight charges that need to be included. Even indirect goods and services can have significant total costs. It's important to understand all the details behind each spend category.
 
3. Engage stakeholders every step of the way. Including stakeholders at the beginning of the process, but not throughout the process will create a lack of ownership, and as a result, compliance may suffer.  Spend data needs to be validated by key personnel in each category.  This will help achieve buy-in.
   

The Five Most Commons Supply Chain Risks and How to Avoid Them

The current economic climate combined with an increasingly complex global business and regulatory environment has made supplier risk greater than it has been in decades.  Supply chain operations that are not carefully managed can lead to negative outcomes which can threaten a company's ability to make decisions quickly enough to protect the bottom line.

The following are common mistakes made by companies:

1. Trusting historical trends.  For example, financial data covering the last five years may not reflect current conditions since things are so different from even one or two years ago. Current data from the past six months should be closely examined, and it should be continually updated
 
2. Disregarding obvious risks due to outdated information. Be sure that the data you are using is truly current, and does not lag.  An example where this would be particularly important would be when using a market index to hedge against cost increases.  If the index lagged by several months, it would not provide the information needed to hedge effectively. Be certain you understand the data you are using. 

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

Making the Case for Spend Analysis

Getting a handle on procurement spending isn’t easy, but it can pay off in many ways. Spend analysis and the resulting opportunity to participate more efficiently in purchasing decisions can pay off in the long, run even if the up front costs are significant.

A good place to start is with an audit of existing purchasing data. Look for invoice duplication, overcharges, and transactions that are contractually prohibited.  Initial savings can bolster the case to bring in new software to better manage and analyze spending. Forcing all purchases, including Pcard,  to go through a PO system doesn't necessarily, solve the problem, but the purchasing group needs to be able to better see the spend in an easier and more complete fashion.

Some of the solutions available include:
SAS's Supplier Relationship Management
i2 Technologies' Strategic Sourcing
Oracle's Purchasing Intelligence
Ariba's Spend Management Solutions

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.

Contract Negotiation Mistakes

1. Thinking the yard is fenced in Don't assume only a certain subset of resources or conditions can be negotiated.  Get creative, and look for alternatives.
2. Failure to study your opponent Don't fall into the trap of failing to study your vendor, their market and any other things that might influence them.
3. Too aggressive Don't put the vendor on the defensive by attacking the negotiations too vigorously.
4. It's all about price It's actually all about win-win. Look for items that are high on your list and low on your vendor's list and vice versa.
5. Jumping too quickly Even if the opening offer is low enough to meet your needs, counter offer with something lower, or ask for something else.  This will leave the vendor feeling good about the negotiations.
6. Don't gloat No matter how good the deal is, never let the vendor know this as it may come back to haunt you later.
7. Terminology not defined or understood Insist that any terminology that could possibly be misunderstood be defined in the contract.
8. Inconsistencies within the contract Consider having a third party review the contract for inconsistencies.
9. Concern in one area will be overridden in another area Do not allow any area covered by the contract to be weak.  Every part must be solid for the contract as a whole to have strength.
10. Avoid redundancies You may not think so, but lawyers may view the same thing that is apparently stated twice as being in conflict, and this could cause headaches in court.

Adapted from Contract Negotiation Mistakes: Ten Mistakes to Avoid in the Contract Negotiation Process, about.com: http://bit.ly/axIVJ5

Networking Should be a Part of Every Work Day

More than one third of workers are knowledge workers, people whose productivity is measured by their ability to add value to information. The productivity of knowledge workers depends on their ability to coordinate their efforts as part of an organizational team. 

When a group of people come together to collaborate, they they have a group IQ, which is the sum total of their intellectual abilities. The single most important element in this turns out to be social harmony. This is the ability of group members to get along and to pool their talents for the greater good.

Many of the tasks that people are asked to do requires them to call on a loose network of colleagues who can share their knowledge and skills. Just how well people can work with these ad hoc teams, and cultivate members of their network is a crucial factor to success on the job.  Developing rapport with a network of key people before their expertise is needed in a crunch time will make the difference between getting help quickly and not getting help at all.

Informal networks can be divided into at least three types, communication webs, based on who talks to whom; expertise networks based on which people are turned to for technical advice; and trust networks based on who people turn to with their secrets, doubts, and vulnerabilities. Success depends on being a major node in all three kinds of networks, and this requires high levels of emotional intelligence.

Adapted from Goleman, Daniel. Emotional Intelligence. NewYork: Bantam. 1995.

Why Emotional Intelligence Matters more than IQ in Business

IQ has long been considered the key measure of a person's ability.  However, studies have shown that having a high IQ is not a good predictor of success in life or in the business world.  It is thought that IQ contributes about 20 percent to life success leaving 80 percent attributable to other factors such as emotional intelligence.

Emotional intelligence includes abilities such as being able to motivate oneself; to persist in the face of difficulties; to control impulsiveness and delay gratification; to regulate one's mood so as to keep emotions from blocking the ability to think; and to be able to empathize and to hope.

There is a cost to the corporate bottom line from low levels of emotional intelligence on the job. The consequences for a work group can be severe if a member or leader keeps exploding in anger, or has no sensitivity to the feelings of others.  Emotionally upset people cannot remember, attend, learn, or make decisions clearly.

On the flip side, there are clear benefits to working in a group whose members are skilled in emotional intelligence.  They would be attuned to the feelings of others, able to handle disagreements so they do not escalate, and have the ability to get into flow states while working.

Eight Leadership Skills that Matter Most in the Real World

1. Competence  This is the most important leadership quality; it's not enough to have vision and purpose.  Competence has four pieces to it, intellectual, emotional, strategic and instinctive. This characteristic often is not transferable - the news is full of stories of successful CEOs from one industry failing when they try to apply their skills to a new industry.
 
2. Accountability Leading is mostly about the relationship between the leader and the led, and trust, accountability, and the faith others have in you is at the core of this relationship.
 
3. Openness This is a soft skill that can't be quantified, however, openness, candor, frankness, and honesty are bedrock qualities of leadership.  This includes the ability to speak plainly, to listen to new ideas, to tolerate errors on the learning curve, and to build relationships with people at all levels.
 

The Supplier Risk Scorecard

The supplier risk scorecard provides valuable guidance for supply base rationalization decisions and maintaining the health of core suppliers, and is useful to a company that evaluates its dependency on a given supplier, as well as the financial solvency, and innovation investment, customer concentration of its key suppliers.

Rather that evaluating suppliers using aditional supplier evaluation dimensions such as on-time delivery, production yield, and price/ value relationship, which ignore the inherent “riskiness” of the supplier, the scorecard evaluates vendors' financial solvency.

Dependence on suppliers is based on expenditure over time, not just current transactions. Financial viability of suppliers includes considerations of their liquidity, capital structure, and cash flow. Suppliers’ revenue concentration should be monitored to understand suppliers’ dependence on Delta and other large customers.

The Third Law of Performance: Future-based Language Transforms how Situations Seem to People

Future-based language, also called generative language, has the power to create new futures, craft vision, and eliminate the blinders that prevent people from seeing alternative possibilities for the future.  This kind of language doesn't just describe how things occur, it transforms how the they occur. It achieves this by recasting the future in a new mold.

People live for the future that they envision for themselves, not the one they will actually live. This imagined future is a person's default future, and it consists of expectations, fears, hopes, and predictions, all of which are based on our past experiences. But it's future language that shapes historical moments and causes them to become turning points.  Think of Martin Luther King's "I Have a Dream" speech.  What started out as his dream was passed on to his followers, changing the future.

The steps to creating a new future are:

1. Seeing what binds and constrains us, which most often isn't the facts, but our interpretation of the facts. ("Nothing ever improves, management won't change anything.")
2. Articulating our default future and deciding if this is what we really want. ("Things can be both different and better in the future because we can make it so.")
3. Creating a blank space by completing issues from the past. ("Management can see the situation from our side, which means things really will change.")

The Second Law of Performance: How a Situation Appears Arises in language

How situations appear is tied to language, including written and spoken as well a body language. Understanding the complexities of language begins with knowing that whenever somebody says something, other non-verbal communication is carried along with it.  This is a phenomenon known as the unsaid and communicated but without awareness.

Someone who is hiding something will often appear evasive or distant.  The unsaid is the most important part of communication when it comes to elevating performance. Think of coworkers who are all hiding things from each other, and consider how this will impact the performance of the group.

The First Law of Performance: How People Perform Correlates to How Situations Appear to Them

There is no one true reality; we all see the world through our own, sometimes distorting, perceptual filters. There is a significant difference between the objective facts of a situation, and how those facts appear to each of us. Well-informed, intelligent people often have a very different take on a situation because of this difference in perception.

Most people don’t realize that their perceptions differ from those of other people. This is their personal reality illusion. People act and talk as if what they perceive is how things really are. In reality, none of us knows all the facts, and we bring to the table different backgrounds of knowledge, experience, bias and preconceived notions.

Candor - the Biggest Dirty Little Secret in Business

can·dor  (kndr)
n.
Frankness, honesty, or sincerity of expression; openness.

The biggest dirty little secret in business is the lack of candor.  It blocks smart ideas, quick action, and it’s absence as a cultural norm prevents good people from contributing everything they've got. People often don't communicate in a straightforward manner; they don't put forward the kind of ideas that might stimulate real debate. Instead, they withhold comments or criticism, they sugarcoat bad news, and they keep things to themselves in order to maintain appearances. Lack of candor permeates every aspect of business, and yet it is absolutely damaging.

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Step Five of the Vendor Selection Process: Contract Negotiation Strategies

The purpose of negotiating an agreement is to find a win-win solution that benefits both parties, and sets the stage for a long-term relationship. Negotiating the lowest price possible, especially if it is not sustainable for the vendor is to be avoided.

It's important to establish the following objectives in contract negotiation:

• Terms and conditions 
• Definition of goods/services 
• Compensation including total cost (shipping, taxes, fees, etc.) 
• Financing or payment terms 
• Dates such as contract start and end dates, renewal dates, etc.

Contract Negotiation Strategies

1. Rank your priorities and their alternatives It's not only important to know what your priorities are but also which ones are very important and not flexible, and which ones are lowest in importance and could be "given up" to achieve your top goals.  Higher priority goals should be discussed first.
2. Know the difference between needs and wants Political pressure can elevate "nice to haves" to "must have" status. allowing this to happen
3. Know your BATNA (Best Alternative to a Negotiated Agreement) It's important to know which of your requirements are non-negotiables so that you will know when it is better to walk away from the negotiation table rather than continue. This would also include upper price limits, or the iron-clad necessity for certain 
4. Define any time constraints and/or benchmarks or milestones This includes performance measurement standards such as start, delivery, completion dates or lead times, Associated penalties for non-compliance should also be established.
5. Assess potential liabilities and risks Responsibility and liability need to be established - whose insurance covers the project? Which party is responsible for ensuring government compliance?
6. Clarify confidentiality, non-compete, dispute resolution, and changes in requirements needs This needs to take place before any harm can result.
7. Repeat the above steps from the perspective of your vendor It's important to the relationship that both parties benefit from the contract. Signing a contract with a naive vendor that is damaging to them will be harmful to both parties, and could have a long-lasting negative impact on future contract negotiations with that or other vendors.

Adapted from Contract Negotiation Strategies: Step #5 in The Vendor Selection Process, about.com: http://bit.ly/d4F9Ip

Step Four of the Vendor Selection Process: Proposal Evaluation and Vendor Selection

The main goal of this step is to reach a decision that's in the best interests of the company while minimizing politics and personal preferences that are not based on the facts.

1. Preliminary Review of all Vendor Proposals All proposals should be reviewed for clarity and completeness, and any ambiguities or gaps resolved by the vendor before analysis begins.
 
2. Record Business Requirements and Vendor Requirements The business and vendor requirements of the project should be listed in a spreadsheet.
 
3. Assign Importance Value for Each Requirement Each requirement should be assigned an importance value on a scale of one to ten.  The average of individual team members ratings can be used, or if the team is small, an agreed upon value can be used.
 
4. Assign a Performance Value for Each Requirement This is the equivalent of assigning a grade to vendors for each of the requirements defined in step 2.  Average team members ratings can be used, or the team can agree on a value.  In some cases, vendors will have failed to meet a requirement, and they can be eliminated from consideration.
 
5. Calculate a Total Performance Score This is done by multiplying each Performance Value by the associated Importance Value, and summing these to get the Total Performance Score.
 
6. Select the Winning Vendor The Total Performance Scores should be used as a a starting point for discussion of the top vendors, but not as an absolute decision maker, especially if the top scores are clustered.  Vendors whose scores are very low should be able to be eliminated without much further discussion and analysis. 

Adapted from Proposal Evaluation and Vendor Selection Step #4 in the Vendor Selection Process, about.com: http://bit.ly/atoDH5

Step Three of Vendor Selection: How to write RFPs and RFQs

A Request for Proposal (RFP) is used for services or complex products where the quality, service or final product will be different from each vendor. Negotiation points will depend on these differences.

A request for Quotation (RFQ) is used for commodities, simple services or straightforward parts with little room for differentiation between vendors. Negotiation points will depend on it things beyond the actual product or service such as delivery charges or schedules, packaging, or after-sale support.

The purpose of RFPs and RFQs is to evaluate each vendors ability to meet your company's interests.  They can also be used to leverage the competition between vendors to arrive at the best deal for all stakeholders within your company.  Most importantly, they start building the relationship between your company and the vendor.

RFPs and RFQs should contain the following:

1. Submission Details This should include items such as company address, contact name and deadlines.
2. Introduction and Executive Summary This should include a brief introduction of your company and the requirements of the product or service desired.
3. Business Overview and Background This should include an overview of your company's business, products, and market sector, which will help vendors understand your business needs, and provide background information.
4. Detailed Specifications For an RFP, detailed specifications that are qualitative are needed to drive the vendor selection process.  For an RFQ, quantitative specifications in the form of an explicit set of technical requirements including such things as measurements, minimum tolerances, and quality standards should be included. Other items that should be included include schedules, deliverables and milestones, including penalties and rewards if appropriate.  This list is not exhaustive; it is important not to miss anything.
5. Assumptions and Constraints This includes items such as expenses, upgrade modification allowances, licensing rights among other things.
6. Terms and Conditions These may include financing options delivery penalties, and service levels among other things.
7. Selection Criteria This information may be kept confidential, or it may be shared with prospective vendors to better help them to meet your company's needs.

Adapted from Request for Proposal (RFP) and Request for Quotation (RFQ), Step #3 in the Vendor Selection Process, about.com http://bit.ly/bZ3Brv