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.

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.

The Future of Procurement: 2020: Data Predicts the Future

Procurement data analysis has thus far focussed on historical information. In the future, procurement will be able to focus on more forward-looking analyses that are predictive. This will allow procurement to determine ahead of time where supplier defects are most likely to occur, and which parts of a supplier's processes are most likely to negatively affect the end-user.

Predictive information is already used by on-line communities such as eBay and Amazon. This information tells us how a seller is likely to behave based onPTAst behavior and which books we are likely to enjoy, based on the choices of others who share our likes.

Adapted from VISION 2020: Ideas for Procurement in 2020 by Industry Leading Procurement Executives http://bit.ly/kIwoW3

The Future of Procurement: 2020: Communities Collaborate

It's happening already. End - users and sellers are connecting online, allowing them to communicate and collaborate.

Procurement's role in the future will be to break down barriers between their internal customers and the vendors who sell the goods and products they use. Procurement will need to develop the kinds of contractual environments that will allow these collaborations to be successful, so that they meet the requirements of legal, audit, and finance.

Technology makes collaboration easier, and confidential information can be shared securely. But people wil lstill need to meet in person. And procurement will no longer need to fill a role as an information intermediary; customer's requirements will flow directly from end-users directly to the suppliers who sell to them.

Adapted from VISION 2020: Ideas for Procurement in 2020 by Industry Leading Procurement Executives http://bit.ly/kIwoW3

The Future of Procurement: 2020: Work goes Mobile

New technologies in computing, particularly in smart phones, means that one can actively engage with people in the field or across the globe. What this should mean in the future is that more people are involved in projects than is the case now, as barriers of distance will be reduced.

Managers will be able to approve purchase orders, or check the status of auctions or invoices from smart phones, tablets, or other devices not yet in existence. As more work is done from the field, better intelligence will be brought into critical supply management and sourcing processes as well as data gathering and analysis exercises. This will lead to better, faster decisions.

Adapted from VISION 2020: Ideas for Procurement in 2020 by Industry Leading Procurement Executives http://bit.ly/kIwoW3

The Future of Procurement: 2020: Intelligence moves into context

When intelligence moves into context, sourcing professionals will be alerted in real-time as to the possible risks as well as the available opportunities that stand between them and the achievement of real benefits. By 2020, it will be routine to be able to reach into corporate systems to pull out data that provides all the information needed to make informed decisions.

Real-time intelligence from third parties will improve in quality, and decline in cost. This will impact negotiations, as the effects of decisions on both the customer's and the supplier's bottom line will be transparent. This full visibility will affect all kinds of decision making, and should result in better outcomes for all involved.

Adapted from VISION 2020: Ideas for Procurement in 2020 by Industry Leading Procurement Executives http://bit.ly/kIwoW3

The Future of Procurement: 2020: Everything will be Automated

What will Procurement look like in the future?

• There will be a move away from traditional ERP systems to web-based, open architecture systems that are able to interface with many systems in a company as well as its supply base.
• Centralized purchasing will become a thing of the past as end-users handle routine transactions in non-critical spend categories. Buying will be done by the people who use the goods and services. The sourcing system will enforce workflow and compliance.
• End-users will produce agreements that meet minimum criteria. Exceptions will be escalated to Sourcing.
• Contract management and administration will be automated, and will use templates and collaborative tools.
• Risk management will be built into the systems and processes. They will no longer be ad hoc initiatives.

Adapted from VISION 2020: Ideas for Procurement in 2020 by Industry Leading Procurement Executives http://bit.ly/kIwoW3

What are reverse auctions, and how are they evolving?

A reverse auction is a one-time on-line event in which pre-qualified vendors are invited to bid using provided criteria. Participating vendors can see the best price that has been bid so far, and can see where they rank in the bidding process. This allows for vendors to react by lowering their bids. The traditional reverse auction is best suited to spend categories where price is the only criteria.

Newer versions of the reverse auction, called online Requests for Proposals, allow vendors to compete on both price and non-price factors. This lets buyers seek out the best overall value.  The buying organization determines ahead of time which criteria are important, and what their relative weighting will be in the final decision. This weighting can be shared with vendors during the online RFP process. Criteria might include such things as such as production capacity, delivery times, or service levels.

Reverse auctions are useful tools, but it's important to know when factors beyond price will matter, and to consider these factors when making the final choice.

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.

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.

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

Step Two of Vendor Selection: How to Conduct a Vendor Search

1. Compile a list of possible vendors. You will need to collect contact information in a spreadsheet or database. Possible sources for your search could include:

• Google 
• Business associates 
• Registers and directories specific to your industry as well as general ones such as The Thomas Register 

2. Select vendors from which to request information. Use RFIs to narrow your list. Depending on project size, RFIs should be sent to 3-12 vendors.

3. Write a Request for Information (RFI). For smaller, straightforward needs these should be short and simple.

• A cover letter introducing your company 
• A description of the good or service needed 
• A request for company brochures 
• A list of vendor criteria including the response deadline 

Some examples of questions that would establish vendor criteria:

• Are your employees bonded and insured? 
• Can you provide references that we can speak with directly? 
• What are the hours of your technical service department? 
• What is the turn around time for local orders? 

4. Evaluate responses and create a short list of vendors to assess further. Gather the vendor evaluation team and go through the responses. Any vendors not meeting any of the "must have" requirements should be eliminated. The final list should have between two and seven vendors, depending on the scope of the project (both duration and dollar amount).

Adapted from Step #2 in the Vendor Selection Process, about.com http://bit.ly/cCY6Ei

Step One of Vendor Selection: How to Analyze Business Requirements

The first step in choosing a vendor is analyzing your business requirements.

1. Assemble an evaluation team.  This team must include representative stakeholders who will be impacted by the final choice of the vendor for the product, material, or service. Commodity councils, staffed by volunteer employees, are an invaluable method for gathering end-user input.  The size of the evaluation team should range from three to no more than ten participants.
2. Define the product, material, or service. This may be a single line or paragraph from a bill of materials, and it may contain specifications.  It's important to keep "wants" separate from "must haves".
3. Define the technical and business requirements.  Technical requirements can be obtained from the bill of materials or from engineering drawings or manufacturing procedures. Business requirements should include not only required features, but specific minimum quality standards.  The more detail in the requirements, the more likely the outcome will be satisfactory.
4. Define the vendor requirements. It is important to list the criteria the vendor must have.  This can include but is not limited to size, market capitalization, availability of references, domestic origin of raw materials and location.
5. Publish a requirements document for approval.  It is important to aggregate all the information collected in the previous steps,so that members of the evaluation team can provide feedback and ultimately approval.  It can then be sent to senior management for final approval.  This document will become the basis for generating a Request for Proposal (RFP) or Request for Quote (RFQ).

From Analyze Business Requirements Step# 1 The Vendor Selection Process, about.com: http://bit.ly/ad1ZZC

Five Steps to Successful Vendor Selection

The vendor selection process can be daunting, especially if the goods or services are unfamiliar or technical.  Following these steps will help to ensure a successful outcome.

1. Analyze the organization's business requirements:

• Assemble an evaluation team including end users
• Define the product, material or service
• Define and prioritize the technical and business requirements
• Define the vendor requirements
• Publish a requirements document for approval

2. Perform a vendor search:

• Compile a list of possible vendors
• Select vendors from which to request information
• Write a Request for Information (RFI)
• Evaluate responses and create a "short list" of vendors

3. Prepare Requests for Proposals and Requests for Quotations:

Submission Details:

• Introduction and executive summary
• Business overview
• Background
• Detailed cpecifications
• Assumptions and constraints
• Terms and conditions
• Selection criteria

4. Evaluate the proposals and select a vendor:

• Perform a preliminary review of all vendor proposals
• Record business requirements and vendor requirements
• Assign  an importance value for each requirement
• Calculate a total performance score
• Select the winning vendor

5. Negotiate a contract:

• List rank your priorities along with alternatives
• Know the difference between needs versus wants
• Know your BATNA (best alternative to a negotiated agreement)
• Define any time constraints and benchmarks
• Assess potential liabilities and risks
• Define confidentiality and/or non-compete requirements
• Plan for any future dispute resolution
• Assess all of these from the perspective of the vendor (i.e. walk a mile in their shoes)

Adapted from "The Successful Vendor Selection Process" on about.com: http://bit.ly/c12HI5

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.

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.

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.
 

Procurement 2020: Qualifications needed in tomorrow’s team

The field of procurement has evolved from tactical to strategic, and the skill sets required in the workforce have also changed.  Rapid change and evolution have become the norm.  Ever-shorter product life cycles and the constantly changing economic and political landscape, mean that supply management professionals must be able to respond effectively and adapt to meet this new reality.

This level of responsiveness and flexibility are important characteristics that will need to be sought out and cultivated in the supply chain work force. The ideal team member of this new nimble procurement team will have a wide array of talents, interests, and skills, along with flexibility and inquisitiveness, a desire for continuous learning, and a willingness to do things in new ways. 

The three characteristics needed in supply chain professionals are:

1. Entrepreneurial thinking

2. Ability to manage relationships and work in teams

3. Ability to understand and do complex financial analyses

Also important is a broad base of business knowledge.

Employees who have long focused on the transactional side of purchasing may find this new normal to be a real challenge. Education and training that supports these individuals will be critical to ensure their continued effectiveness.

Fortunately, the younger generation now entering the workforce is accustomed to rapidly evolving technology, and they are very comfortable with dynamic change. For them, a new version is anticipated and welcomed. It will be important to give these employees opportunities to do many different things, and have them thinking creatively right from the start. Procurement leaders will need to focus on building collaborative, integrated and forward thinking teams, that make people enthusiastic to contribute, and this giving the company a competitive edge.

Adapted from “The Agile Individual”, Inside Supply Management, May 2011, http://bit.ly/k9C8, and  “The Agile Supply Chain”, American Executive, 1 January 2006, http://bit.ly/kMY65x

Procurement Best Practices

Companies are spending more than ever on products and services to keep their business running. As a result, the strategies chosen by the procurement group will have a more profound impact on the bottom line of the business, both positive and negative.

It’s important for companies to understand the forces and components that determine the total cost of their business processes. Understanding these cost drivers is an important first step that must take place before new best practices can be developed and implemented.

There are four procurement best practices:

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.

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.

Strategic Category Management - The Next Step after Strategic Sourcing

Management of indirect spend through strategic sourcing has lead to dramatic cost savings. But, opportunities to cut costs have diminished as the remaining low hanging fruit has been harvested. Strategic Category Management (SCM) is the next evolution that procurement organizations need to undergo in order to continue to positively impact their companies’ bottom lines.

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.

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.

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.

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

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?

How Can You Become A Better Purchasing Professional?

Define the criteria for being a good purchasing professional. Is it cost savings? Continuity of supply? Innovation? All of these and more?

Establish metrics that support the criteria. For example, for continuity of supply, you might select "Percent on-time delivery."

For each metric, determine the value that would separate "good" performance from "average" or "mediocre" performance in your particular situation. For example, for actual cost savings captured, is it $10,000 per year? $100,000 per year? $1,000,000 per year?

Establish the baseline of your current performance. Now that you know the line that separates good performance from mediocre performance, measure your current performance to determine whether you meet, exceed, or fall short of that standard.

Analyze what you do for improvement opportunities. Identify changes that you can make that will help you improve your numbers. If you already exceed the standard, aim even higher!

Improve your performance. Now that you've identified changes you can make, make them!

Hold yourself accountable. Put in place methods of ensuring that you don't lose focus. This can come in the form of charts that you hang in your office, promises to management, self-reward systems, or even hiring a personal coach. It's easy to lose momentum if you don't have some tangible way of maintaining your focus.

Adapted from: Can You Become A Better Purchasing Professional?, http://bit.ly/cTEjKu

Managing and Leading: What's the Difference?

Everyone is fascinated by "leadership". It's viewed as the secret ingredient that's needed to transform a good organization into a great one. But great managers are the backbone of successful organizations, and the truth is you need to have both kinds of people. The roles of leader and manager are completely distinct, with different responsibilities, starting points, and talents required to excel. Anyone can be a leader or manager, but to be great at either requires certain core talents.

Great managers turn each employee's talent into performance. They do this by making each employee believe that their success is the manager's primary goal. Employees will respond to this by giving their best effort. Great managers are tough on their employees; they hold them to high standards, and then show them how to achieve these benchmarks. They paint a picture of excellence in a role, and then coach their employees to embrace this vision.

Great managers commitment to each employee's success is driven by a form of spontaneous intuition commonly known as the coaching instinct. They are drawn to and thrill at the small successes of others, and this is a talent that is innate and cannot be learned.

Great leaders rally people to a better future that they see as a vivid image in their heads. Leaders are fascinated with the future, they are restless for change, impatient for progress, and deeply dissatisfied with the status quo. This friction between "what is" and "what could be" propels leaders towards that better future.

The core talents of great leaders are ego and optimism. The former is important because ego allows a leader to channel his self assurance, self confidence, and press them into the service of an enterprise bigger than himself. The latter is important because leaders must believe deeply and instinctively that things can get better. Not just hope they can be improved, or to put on a brave face. The possibilities of the future must seem so intense that they have no choice but to do everything in their power to make them real.

The necessity for great leaders to possess both optimism and ego means that they are born, not made. The skill of bringing the best performance from employees also cannot be learned. You either have this ability, or you do not. It is possible to be both a great manager and a great leader. but it helps to know when to change gears. Management starts with the person, while leadership starts with the picture of where you are headed.

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 29-71.

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 strategies for effective ERP implementations

The first step in effectively managing technology change is to identify and evaluate the attitudes of individual users and influential groups and to determine:

·       Who are the resisting individuals?

·       What are their interests?

·       What are their needs?

·       What are their beliefs and values?

Leaders can use knowledge gained from the previous stages of the ERP project to design strategies that can best overcome users’ resistance to the ERP system, and to convince as many users as possible to adopt it. The goal should be to try to modify users’ thinking processes that are negatively influencing their attitudes.

Top management must create awareness for the ERP system by communicating its benefits to workers. In many cases, ERP implementations fail because of lack of this type of positive communication. Knowledge about what the system can deliver to the organization and its workers can build anticipation for it. The success of future initiatives depends on building a cumulative base of credibility by management.

Workers who hear how the new system will yield a positive cost-benefit analysis to them as individuals by improving their daily work life with minimal costs are more likely to develop an interest in the ERP system.

Positive reviews of the new system, and the perception that it is of high quality is another factor that influences user acceptance.

Hands on training is important to help users adapt to the new system, and to help build a positive attitude toward it.

 It’s also important to have a performance system to monitor the progress of ERP change management efforts. It’s imperative that top management ensure that  workers’ anxiety and resistance to ERP is under control. 

Last but not least, top management commitment is critical for the success of the ERP implementation process. Change requires a strategic vision to ensure long-term success. Leadership is the number one facilitator of large transformation efforts. ERP implementations will only be successfully accomplished when senior management is totally committed to the initiative.

Adapted from: Change management strategies for successful ERP implementation by Adel M. Aladwani, Business Process Management Journal, Vol. 7 No. 3, 2001, pp. 266-275. # MCB University Press, 1463-7154. http://bit.ly/eaAyNj

Global ERP Implementation: Tips for Organizational Change Management

Organizational change activities often have tangible results on the success of an ERP implementation. Some aspects of change are more important than others and have a more immediate impact. There are five specific steps that companies should take in order to develop, actualize, and sustain the long-term organizational changes needed to best realize measurable business improvements enabled by new technology:

1. Business process standardization. Companies with global offices, particularly if those locations were acquired from another company, often have very non-standardized business processes. A global enterprise software implementation provides an opportunity to standardize processes across locations, but it can be very challenging to make that change happen. Organizational change management is crucial to overcoming such challenges.
 
2. Balance of local needs vs. standardization. Optimization of ERP benefits requires standardization in order to achieve a positive return on investment. But it's is also important to understand the local situation to ensure that the standardized operational model of the new system will accommodate these local needs.
 
3. Localized delivery of employee communication and training. Global operations may officially speak English, but it is important to communicate and train in the language of each location. New ERP software takes enough time to learn without language barriers, so translation of key messages and training will typically pay dividends in the long run.
 
4. Rely on your change agents. Each major office should have a local representative that acts as the change agent for the project team. These change agents will represent the local interests of their offices, validate how standardized business processes will work with their location, and communicate key process and organizational changes to their respective stakeholders. This employee representation is key to a successful implementation.
 
5. Leverage performance measures. Performance measures should be used to quantify the results that are expected from the ERP software investment and how each local office is expected to contribute to these improvements. These benchmarks become important in identifying opportunities to improve results after go-live.

Adapted from: Panorama Consulting Groups 2010 ERP REPORT Organizational Change Management http://bit.ly/ba2isg

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.

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.

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

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

The Future of Procurement: 2020: The rise of Service Providers and the Evolution of In-house Procurement

What will be needed in 2020 are people who can take information and proactively develop strategies that advance an organization's priorities. The skills most needed will be those that directly drive profitability, such as:

• Financial assessment
  
• Relationship building
  
• Team management
  
• Ability to drive internal and external collaboration
  

Those who excel at sourcing processes, or at being power users of procurement systems, but who lack the above described skill set may find themselves working for a third party service provider in 2020, or not working at all.