Monthly Archives: July 2007

Who Wants to Brief the doctor?

Just a reminder that if you’re interested in the chance to Brief the doctor to drop me a line at thedoctor<at>sourcinginnovation<dot>com. (If we’ve already spoken, or you’ve already contacted me, then you’re on the list and I’ll contact you when I know I’m going to be in your city.)

So far this year, as astute readers will have picked up on, I’ve been in the following major cities: Boston, Chicago, Dallas, Indianapolis, San Francisco, and Toronto. Right now, I’m looking for (more) companies in Boston, Calgary, Chicago, Dallas, San Francisco, and Toronto, as I’m likely to be there (again) before the year is up, as well as Denver, Los Angeles, Pittsburgh, Phoenix and other large major Canadian and US cities that host sourcing and procurement conferences and events on a regular basis. (Also, if your sourcing or procurement product or service company is not on my master company list on the Sourcing Innovation resource site, please drop me a brief note introducing your company with your URL. Please allow a week or so for the next site update for it to appear on the list.)

Unlike some analyst firms, this isn’t pay-to-play, so if you have a good story, if I can find the time, I’m happy to listen to it. (However, if you’re looking for a way to get some name, and brand recognition, and are innovative enough to understand the importance of web 2.0 social networking technologies, I would invite you to consider a Sourcing Innovation Sponsorship, which will not only insure that the blog keeps publishing content sourcing and procurement professionals can use on a daily basis, but help it to expand the depth, breadth, and regularity of such content.)

[Shameless Plugs Alert] Finally, while we’re on the subject of me, I’d like to remind you that I do make my living as an independent consultant, who specializes in helping product and service firms create better supply chain information technology solutions (products, processes, or services) as well as companies looking to select and implement such technologies through my consulting company. (And, like Azul Partners, who can help you market those better supply chain information technology solutions, please note that my firm is not a commodity either!)  For more information, drop the doctor an e-mail.

Managerial Delusions

I know this isn’t a management blog, but since the success of a sourcing team is considerably influenced by the quality of the manager running it, I don’t feel too bad about pointing out a recent article from The McKinsey Quarterly on The halo effect, and other managerial delusions.

I loved this article, and not just because just about every manager I ever worked for (during my days as an employee) suffered from at least a few (dozen) delusions. The article describes three common delusions that every manager should be aware of if they care about their performance along with three tips they can employ to help them think clearly.

Delusion #1: The halo effect

The halo effect refers to the tendency to make specific inferences on the basis of a general impression. Company performance, good or bad, tends to create an overall impression – a halo – that shapes how its strategy, leaders, employees, culture and other elements are perceived. Most everyday concepts in business – including leadership, corporate culture, core competencies, and customer orientation – are ambiguous and difficult to define and what we believe to be contributions to performance may actually be attributions. In simple terms, as the author points out, outcomes can be mistaken for inputs. Thus, it’s important that managers look for independent evidence that their company, when successful, has a visionary leader and superb customer orientation or that their company, when struggling, has a poor strategy and weak execution. Sometimes even a poorly run company can do well in a bull market and a well run company can do poorly in a market slump.

Delusion #2: Absolute Performance

Following a given formula can’t ensure high performance, and for a simple reason: in a competitive market economy, performance is fundamentally relative, not absolute. Moreover, whereas a given set of factors may appear to have led predictably to success, the reverse is more likely – it would be more accurate to say that successful companies tended to be described in the same way. The direction of causality is wrong.

Delusion #3: Lasting Success

The halo effect can lead to a second misconception about company performance: that they can achieve enduring success in a predictable way. Statistically, lasting success is an anomaly and, in reality, markets, and marketplaces, change daily. There is no reason to blindly believe that a strategy that worked yesterday will work tomorrow. Most companies that have enjoyed long-term success have generally done so by stringing together many short-term successes, not necessarily related.

Clear thinking tip #1: Recognize the role of uncertainty

Rather than search in vain for success formulas, business executives would do better to adjust their thinking about the context of strategic decisions. Strategic thinkers must recognize the fundamental uncertainty of the business world. This uncertainty is everywhere – customers, competitors, capabilities, technology.

Clear thinking tip #2: See the world through probabilities

This will help you improve your odds of success through a thoughtful consideration of multiple external and internal factors.

Clear thinking tip #3: Separate inputs from outcomes

Clear-thinkers understand that in an uncertain world, actions and outcomes are imperfectly linked. Just because a choice didn’t turn out the way you expected does not mean it was a mistake. Thus, it’s important to examine your decision process as well as your decision – good decision processes have a much better chance at arriving at good decisions.

There are, of course, many more delusions – and a more detailed description of a good decision making process could have been included – but it’s a great article, and great advice.

JLP Responsible Sourcing Part VI: Freedom of Association and Employee Representation

In our last post, we focussed on discipline, and how you prevent discipline-related issues,

corresponding to section E of the report.

In today’s post, we cover section F of The John Lewis Partnership‘s Responsible Sourcing Supplier Workbook which covers freedom of association and employee representation.

In addition to a worker’s right to socialize with whomever they choose, freedom of association refers to a worker’s right to form and join a workers’ association, council, group, committee, and / or union of their choosing. A worker must have the right to belong to a group that provides them with an effective process to raise their concerns with management and which works to ensure continual good communication between workers and management.

Freedom of association and employee representation is important because it contributes to an employee’s sense of well being. It’s a proven fact that content employees who enjoy going to work everyday are much more productive than those who hate their jobs and fear going to work because they are degraded or abused. Consider the statistic in our last post that found that workplace bullying contributes to an estimated loss of 18 million working days every year in the UK alone. Imagine the global productivity loss from poor disciplinary management alone!

Associations, trade unions, and committees, when formed under good intentions and properly led, can help significantly by:

  • improving two-way communication between employees and managers
  • negotiating improvements to working conditions and compensation
  • acting as a positive force for change

It is true that there are often real and perceived barriers to freedom of association and employee representation, which include:

  • many companies find the concept of a union or worker’s group threatening
  • workers are often scared of putting themselves forward for election
  • in some countries, the formation of a union is illegal
  • sometimes the worker who is elected does not have the skills or training to effectively run the organization

But it is also true that these barriers can be easily overcome with education and a positive approach. The report offers some suggestions:

  • suggestion boxes as a mechanism for anonymous reporting of issues
  • committees to act as an interface between employees and management
  • informal committees to handle specific issues

The report also offers a checklist that you can follow to make sure that your employees have sufficient freedom of association and employee representation:

  • workers are able to collectively bargain regarding key aspects of employment
  • workers have a union, association, or committee they can use for reporting issues and collectively bargaining
  • management meets regularly with the union, association, or committee that handles employee representation
  • management actively responds to concerns and communicates outcomes
  • members or representatives of unions, associations, or committee are not treated differently in any way
  • employee representatives of such organizations can carry out their duties within working hours without penalty

Anyone who knows me well might wonder why I do not have a problem with this section of the JLP responsible sourcing workbook since they will believe I am adamantly against unions, as I have spoken quite negatively about them many times in the past. However, that view is specific to the formation of unions in IT and other knowledge industries in developed countries where adequate government protection exists to protect basic employee rights and freedoms. With regards to agricultural, manufacturing, and other hard-labor based industries in developing countries where there are little or no laws to protect the rights and freedoms of an employee, my stance is different. In that context, I have no problems with unions.

Furthermore, I believe unions could have a positive impact on many developing economies, just as they did in our own during the industrial revolution which took place a little more than a hundred years ago. Back then, we didn’t have all of the laws we do today that protect basic worker rights and freedoms. Furthermore, in a labor-based industry, the productivity is not going to vary much between your worst employee and best employee, and, thus, the notion of an open-market, while quite beneficial to a knowledge-based job where your top employee is order of magnitudes more productive than your average employee, does not have the same effect. And even if it had a slight impact on an organization’s ability to attract the best and brightest, considering the atrocious working conditions in some countries, this would be more than compensated by the improved working conditions that would result.

In our next post, we’ll tackle the sixth major issue addressed by the workbook, that of working hours. (You can access all of the posts in the series (to-date) by selecting the JLP category at any time.)

Cadbury gives Oompa Loompas a Bad Name

Last month I reported that Cadbury, who was making grandiose efforts to become synonymous with the color purple was down on its luck and was announcing massive job cuts to try and right the ship. But before you go feeling sorry for the sugary giant (which is the world’s largest confectionary company with revenues of about £7.4b in 2006) and it’s self-reported need for a £650m four-year cost reduction plan, which it is partially blaming on its enterprise rollout of SAP (which caused too many chocolate bars to be produced and forced it to take a £12m hit on profits), it seems that it decided to introduce a new testing system for salmonella last year that allowed “safe” levels of salmonella in its products.

Well, when it comes to salmonella, there are no safe levels when consumables are involved, and that’s why the official guidelines say that there is to be no salmonella in ready-to-eat products. Furthermore, they did this knowing perfectly well that outbreaks of salmonella had been associated with very low levels in chocolate. See, salmonella is a bacteria … a gram-negative enterobacteria to be precise … and, like all bacteria, they have this funny habit of multiplying like mad under the right environmental conditions (which, oddly enough, are provided by the human body). And what did they get for it? A slap on the wrist for potentially exposing thousands and thousands of people to a bacteria that is known to kill at least 600 people a year (as per the CDC) and infect over 40,000.

Salmonella
and you’re to blame
Cadbury, you give oompa loompas
a bad name

The Cost of Capitalism

Capitalism, the foundation for a free market, has its cost. It’s called inflation. And when that cost is accompanied by rising raw materials prices, especially in metals, that cost multiplies. We’ve all heard the arguments that we should at least stop using pennies in North America, since the average penny cost 1.25 cents to make in the US in 2006, and maybe even nickels, since they cost 5.73 cents to make in the US in 2006, but it seems that our problems in North America are nothing compared to the problems they have in India.

It seems that their rupee, worth about 2.5 cents in North America, is actually worth about 15 cents to your average resident if they melt it down and make razor blades. It’s as illegal there as it is here, but when your currency is worth at least 600% more as scrap metal, and at least 25% of your population is below the poverty line, it becomes a bigger problem than copper salvage in China. The coin shortage is so bad in some places that some tea gardens have had to resort to using card-board coin slips internally.

It’s a good thing the smugglers and grocers aren’t thinking globally, because razor blades these days cost a heck of a lot more than 2.5 cents! The going price is somewhere in the neighborhood of 2.22 cents for a Gillette Mach 3, or roughly 74 cents here in Canada (as evidenced by a recent Walmart receipt, which is the lowest cost seller in the area). If they ever figure this out, I doubt there’ll be a single rupee left in India!