Category Archives: Best Practices

How to Insure Your Employees (Re)Connect with the Business

A recent article in Industry Week presented “ten tips from Watson Wyatt that were designed to help you help your employees reconnect with the business” in these troubled times. They weren’t bad, and are definitely worth a review (if you add a little flair). In the doctor‘s words, they are:

  1. Ditch the Dotted Lines
    The organizational structure should be crystal clear. Every employee should understand their role and how they contribute to organizational success.
  2. Cut the Crap
    Be honest about the situation. You might think otherwise, but an average employee can smell B.S. a mile away.
  3. Lead-line the Golden Parachutes
    Make sure executive compensation is in alignment and dependent upon the executives driving value to the business. Remember, while few people will have a problem with a 2M bonus to a CEO who increases profits by 20M (as long as all the contributors are justly rewarded as well), you can bet no one will agree with a 2M bonus to a CEO that led the business to a 20M loss.
  4. Sink Signature-based Sales Commissions
    A salesperson shouldn’t get a 1M cheque for signing a 10M contract. They should get the 1M cheque for delivering 10M of profitable revenue to the business. This means that they should be selling software and services aligned with the business and making sure that the customer stays happy and actually pays the business the 10M. Considered structured plans that give, say, 25% each time a revenue target is realized (such as first payment, second payment, etc. or every quarter the customer remains).
  5. Pitch Performance Penalties
    Review performance management and make sure you’re focussing on measures that contribute to success. For example, number of calls per day and number of bugs fixed are NOT good measures. The first entices customer service reps to get the customer off the phone as soon as possible, which leads to repeat calls when the problem doesn’t get resolved, and the second entices programmers to put easily fixable bugs in their code.
  6. Weed out the Weak
    Make sure you focus on the key talent that contributes to your organizational success and that the Wallys are the first to go when cuts are made.
  7. Trash the Touchy-Feely Awards
    You should only be rewarding exceptional performance, not the norm. Otherwise, what incentive does anyone have to truly excel? (Personally, I hate this “everyone should get a reward” crap that has infiltrated our society in recent years. It’s inspiring a culture of lazy lolly-gaggers. While it would be nice if everyone was capable, you should have to work for it!)
  8. Pitch the Proctologist
    The reports he finds with his flashlight are rubbish. Get a real data analysis system and base decisions on facts and analysis, not on gut-feel and emotion.
  9. Discard the Dunce-Hat
    If anyone needs it, they shouldn’t be working for you. Instead, make sure you understand where the critical roles and skills are and do what you can to support them.
  10. Abdicate the “Me-Too” Attitude
    A business needs leaders, not followers. Who cares what your golf-buddies are doing. You need to figure out where you business needs to go, how you’re going to get it there, and lead your employees out of the dark and into the light.

Share This on Linked In

e-Leaders and Service Leaders Speak

David Bush: Strategy for Success in e-Sourcing Execution

Gary Hare: B2B e-Commerce: Are We Starting to Get It Right?

George Gordon: Are You Prepared to Grow?

Garry Mansell: Strategic Procurement through Optimization

Ron Southard: Creatively Educating our Sourcing Professionals Today for the Challenges of Tomorrow

Chris Newton: e-Sourcing Access for All

Jason Hekl: The Future of Sourcing is Crowd-Sourcing

Robert Rudzki: Consultants, Use Them Wisely

William Dorn: Do More With Less

Jim Wetekamp: Sourcing Leadership for the Recovery

Bernard Gunther: Reducing Bypass Spend

Kris Colby: Time for Sourcing 3.0

Ben Scott: Opportunities Provided by the Great Recession

Ashton Udall: Supply Chain Sustainability and Transparency

Mark Usher: A Game Changing Procurement Initiative

Brian Sommer: The New Sourcing Concerns

Vinnie Mirchandani: The Costs of Software Renewal

Robert Rudzki: Procurement and Supply Chain Transformation

Want a Turnaround? Start With Your Workforce

I enjoyed this recent article in Industry Week on the “Miller Centrifugal Casting Comeback” from revenues of 8M in 2003 to 22M in 2008 because it highlighted the key elements of a successful turnaround: your people. According to MCC, five key structural supports were required to achieve the turnaround, with the first two being workforce morale and employee satisfaction. In other words, it had to put the people who would ultimately be effecting the turnaround first.

MCCs secrets of a turnaround? They are:

  1. Workforce Morale
    MCC starting treating its workforce as valued customers and human beings, not just “resources” and numbers. Managers walked the floor, engaged in open dialogue, and equipped the workforce with decision making power.
  2. Increased Employee Satisfaction
    MCC implemented a gain sharing program in 2005 based on a pay-for-performance system.
  3. Lean
    Specifically, MCC focussed on eliminating waste.
  4. Quality
    MCC strategically invested in equipment and technology that would have a direct impact on quality.
  5. Customers
    MCC focussed on responding to actual customer needs and wants and not just perceived needs.

And they’re pretty much dead on. Add:

  1. Senior Leadership
    Leadership from senior management who embrace the change and walk-the-walk as well as talk-the-talk.
  2. A Realistic Transformation Plan
    Developed in conjunction with an expert that starts with a gap analysis between where you are and where you want to be and lays out a realistic path to get there

Then you are on your way to turnaround success.

Share This on Linked In

Overcoming Cultural Differences in International Trade, An Introduction

While there’s a lot of profit to be made in properly conducted international purchasing, there’s also a lot of risk, especially when you are starting out. One of the biggest risks is that of cultural differences. If you don’t understand the culture you’re dealing with, and they don’t understand you, assuming you even get to an agreement, it’s a disaster waiting to happen.

Fortunately, of all the risks, this is the easiest to mitigate … all it takes is a little understanding, patience, and, first and foremost, a little education. Furthermore, most of your issues will probably revolve around the following eight key cultural differences outlined in Dick Locke’s classic text on Global Supply Management.

Basically, the key to purchasing success ultimately boils down to understanding the key differences between your culture and that of your potential supplier, which include:

  • power distance
    a measure of the inequality of power and influence within a society; it determines how well “displays of power” will go over
  • uncertainty avoidance
    a measure of how uncomfortable a society is with uncertainty, it determines how receptive a supplier will be to a proposal that is too uncertain or too rigid and how the supplier will react to sudden surprises
  • individualism
    a measure of the balance between the needs and wants of the individual and the needs and wants of society, it determines how much of the negotiation will be between individuals and how much will be between groups
  • polychronic vs monochronic time
    monochronic cultures, which view time as something to be “spent” or “wasted”, are schedule-driven while polychronic cultures are interaction driven; while monochronic cultures will usually adhere to the schedule no matter what, polychronic cultures will finish one interaction before moving on to the next, even if it means being three hours late
  • personal/impersonal
    this relates to the importance of personal relationships in the business setting; personal countries will require a good relationship before they do business with you; highly personal countries will often use relationships as a substitute for a legal contract
  • buyer/seller rank
    cultures with social ranks, castes, etc. may view you as someone in power or someone without power, someone inside or someone outside, or someone unknown and act accordingly
  • importance of harmony
    in Asia, harmony is often the ultimate goal and the push will be towards compromise; confrontational approaches will not yield success
  • importance of face
    in many countries, “face” is important and individuals will go to great lengths to avoid being “embarrassed” in front of their peers; this can lead to misunderstandings as they might say they understand when they don’t, agree when they don’t, etc.

When you understand these differences, you are on the road to success. Of course, these cultural perspectives are different for every country, but to get you started on your path to global cultural understanding, I’m going to discuss China, Germany, India, Japan, Korea, Mexico, and Thailand at a high level in this series of posts. These discussions will, of course, be general and not specific and, as Dick Locke points out in his classic text, while it is too easy to stereotype a country, individuals in each country will vary from the stereotype. You might also run into people who are trained to act like you … while in your presence. You need to take time to get to know the people you will be dealing with because their behavior may be nothing like the usual behavior of the country in which they reside. (This is especially true in countries like China where the contrast between life in big, modern cities and life in out-out-outlying rural areas is literally night-and-day.) These posts, which will be partially based on materials used by Dick Locke in his Global Procurement Group seminars, will be edited by Dick Locke himself.

Finally, if you’re serious about doing international business in a new country, I strongly recommend you do your homework first. You could start with Dick’s course on the Basics of Smart International Procurement (which is offered through Next Level Purchasing and counts towards the SPSM2 certification or ISM Continuing Education Hours) and his seminar on International Purchasing and then bring in an expert (from the Global Procurement Group, for example).

Share This on Linked In

Nine Survival Tips for a Down Economy from PurchasingNet

Almost a year ago, Supply & Demand Chain Executive published PurchasingNet’s top 10 survival tips in a down economy. Even though the consensus is that the economy is starting to recover, the recovery is likely going to be a slow recovery and, if you’re not prepared, a painful one. That’s why it’s important to keep operating lean and mean, and nine of the tips put forward by PurchasingNet are still very relevant. In this post I will explain why they are still relevant, and also explain why one of the tips, while well-intentioned and seemingly a good idea, is actually not that great in practice.

Top 9 Survival Tips from Purchasing Net:

  • Make sure you have a “Descending Dollar” list of your supply-base for at least the last 12 months.
    I’d also do it for the last 2 years, 3 years, and 5 years. It’s the first step of a good spend analysis, which should also answer what are you spending your money on, and how it breakdowns by supplier. This helps you keep track of your low-hanging fruit opportunities, which helps you find savings fast and lets you know whether your spending has improved over the last year.
  • Rank your suppliers as A, B, or C according to spend.
    A suppliers are the first suppliers you should target for savings. Also make sure that any “strategic” suppliers that supply non-commodity, hard to replace, “strategic” parts or services are not ranked as a “C” supplier.
  • For each high dollar spend category, initiate negotiations or renegotiations.
    Renegotiations are ok if it is the difference between survival and bankruptcy. Just make sure to follow these tips and renegotiate with integrity.
  • Use “Demand Management Techniques” for indirect spend.
    Don’t let your employees spend willy-nilly or buy what you don’t need. Also consider adopting an e-Procurement platform that steers employees to preferred or low-cost alternatives for needed office supplies and equipment.
  • Determine which KPIs are important to your success.
    You should only have a few of these.
  • Measure actual performance vs. best practices KPI benchmarks.
    Measure and report progress monthly.
  • Match invoices to purchase orders automatically.
    Not only will this dramatically reduce errors, it will dramatically increase actual savings as you will immediately know when you are not being billed at contracted rates or when you are being shipped substitutions which are off contract (which is a favourite tactic of some office supply vendors).
  • Track and report the number of “after-the-fact” purchase orders.
    This helps you determine how well your processes are being followed as well executed processes should produce very few “after-the-fact” purchase orders.
  • Push all purchases and invoices through a central procurement system.
    This will help reduce maverick buying.

The last tip put forward by PurchasingNet was to consolidate as much spend as possible with one supplier. This is a bad idea in practice, especially in current economic conditions. While it seems to make sense from a savings perspective, as it would theoretically give you more leverage in negotiations with the high volume supplier, it is very dangerous from a risk perspective. Putting all of your eggs in one basket when earthquakes (bankruptcies) are at an all time high is just not a good idea.

Share This on Linked In