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