Category Archives: Norman Katz

Why You Should Use a Consultant

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

Over the years I’ve come to realize that clients rely on consulting services for two reasons:

  1. Because they don’t have the personnel
  2. Because they don’t have the personnel

The difference between the two reasons is that clients either don’t have enough warm bodies to throw at a problem and they need an extra one in the interim or they don’t have the specialized talents and expertise the consultant brings to the table.

Those are two pretty good reasons for organizations to use a consultant — especially one who is willing to transfer knowledge which enables them to take ownership of the projects that they work on jointly with the consultant. For short-term projects of a few weeks or a few months it usually does not make sense to hire an employee when using a consultant is actually a more effective and efficient answer.

So how do you find the right consultant?A great consultant strides to distinguish herself from other consultants by not offering commodity products and services, even though it can be a double-edged sword at times. Let’s face it: a great consultant’s bag of mixed tricks is somewhat specialized and can be a little difficult to explain. Her best “elevator pitch” is likely reliant on the elevator getting stuck between floors for an hour or so. But then again, if a consultant can provide you with their full value proposition in a minute or two, how much do they really know?

But there’s third reason — and a really good one — to use a consultant. And this aspect is what can even separate specialists from being viewed as valued advisors: a good consultant is professionally “out there”.

Aside from reading a daily newspaper or two and approximately a dozen or so various business publications (supply chain, manufacturing, technology, financial, fraud, security, etc.) each month, a good consultant will attend conferences and informational networking events and be on top of current trends and best practices. She will then relay this information to her clients when she learns something she thinks they should know — and do so in a timely fashion. (And, unlike a lawyer, won’t charge a minimum hourly fee to do it!) And the client stays on the ball without having to fork out tens of thousands of dollars to an analyst firm whose reports are stale as soon as they are published.

So hire a consultant today. It’s the best investment you can make with your money.

Norman Katz, Katzscan

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Teaching our Children (Not) Well

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

(Title with apologies to CSN&Y.)

I saved an article from the October 4, 2009 edition of my local newspaper because I knew that it would make a great blog topic: Some Russian business leaders have created an MBA program that teaches bribery and bureaucracy. Having such extensive experience themselves these business leaders want to pass along their knowledge of these topics to up-and-coming executives.

(It makes me wonder if it’s okay — if not a necessary requirement — to cheat to get a good grade in this class. Hmmmmm … I also wonder what it takes to get a scholarship?)

It’s bad enough that the percentage of surveyed teens who believe unethical behaviour is needed to get ahead in business jumped from 22% in 2005 to 41% in 2007 in a Deloitte / Junior Achievement poll. Now we’ve got business leaders providing an education on how it’s done.

(I think those were likely American teens surveyed. It’d sure be interesting to see the same survey’s results from Russian teens.)

In comparing his school’s curriculum, the dean is quoted as saying that Harvard “[is] a business school of the past, I have to say. But a business school of the future has to be different.”

Around the time of this article several Broward County (FL) commissioners, school board members, lobbyists and fund raisers have been removed from office and/or arrested by the FBI on a long laundry list of fraud, corruption, and ethics violation charges, and more people are due to get snared in the legal net being cast. I have to think that maybe the Russian school dean has a valid point in his comment. Ethics — or so it would seem — are passe and the foundation of the future would seem to be fraud.

No, no, no! I don’t want to believe this! But it’s tough to turn a blind eye to the endless acts of shenanigans when they seem to be escalating in frequency all over the place. Corruption seems to be the new norm (no pun to my name intended). Is fraud our apocalyptic future?

How weak has the fortitude of people’s integrity become to be so swayed by corruption and for sometimes such small dollar amounts? Do an Internet search on the latest Broward County corruptions and you’ll learn that these folks sold out for nothing greater than five-figure amounts, and that these were on the low end of the scale at that.

Instead of teaching future business leaders how to cheat and work around the system we should be educating them on how to fix the system. Instead of teaching kids how to con one another, capitulate to corruption and gravitate to greed, we should be educating them on how to stand up for oneself even in the face of adversity, instilling values and a belief that doing what’s right is what’s right and that there can be plenty of profit in doing so.

Where will we find these educators? I hope that they are among the vast majority of people who live their lives on a straighter path. They are the politicians and business leaders of today who have turned away from greed and corruption and stick to the right behaviour. They are the retirees who “remember when” and talk of the days when a handshake was able to seal a deal and a person’s word meant more than a signed contract. These are the folks who need to guest lecture at schools and universities and let the future employees, employers, and leaders know that ethical behaviour and success are complimentary, not adversarial, concepts. These are the people who — through their interactions — are able to promote good behaviour and explain why bad behaviour is not acceptable in a civilized — at least for the present — society.

Let us teach our children well.

Norman Katz, Katzscan

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When Short-Term Gains Equal Long-Term Miseries

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

Dimitrios P. Biller, a former managing counsel for Toyota Motor Sales USA Inc., alleges in a recent lawsuit that Toyota forced him to withhold evidence from opposing counsel in lawsuits relating to vehicle rollover accidents. As some readers will remember when (small) sports utility vehicles (SUVs) were introduced there were a rash of rollover accidents that occurred. I recall that the reasons were generally centered on the vehicles being top-heavy and thus prone to rollover due to sudden steering wheel movements such as in accident-avoidance scenarios (see the physics of SUV Rollover Accidents).

Toyota paid Mr. Biller a $3.7M severance in 2007; the severance agreement forbade Mr. Biller from discussing company information such as what he is doing in his lawsuit against Toyota which accuses the automobile maker of concealing or destroying information in over 300 such rollover cases where vehicle passengers were injured or died as a result.

But this blog is not about the merits of the lawsuits Mr. Biller and Toyota are filing against each other. Those cases will be played out and decided in a court of law or through some mediation. Nor does this blog post look to accuse or absolve either party of their alleged sins. I merely needed a business example for the subject of this post: when short-term gains equal long-term miseries.

Too often the right thing is sacrificed for short-term gains but then found to lead to long-term miseries, and here is where I believe so much of the root-cause of what ails us lies. There may be early benefits to burying proverbial – and sometimes actual – skeletons but invariably they resurface to haunt us.

The telltale sign of trouble is when vision of short-term gains eclipses, blocks or otherwise obscures and obstructs our view of the long-term goals, and it is here that we can expect the long-term misery from our short-sightedness.

Enron, WorldCom, the real estate bubble, the dot-com bubble, (some) outsourced manufacturing … these are just some of the examples of how knee-jerk reactions to satisfy short-term fantasies created some miserable results in the not-too-distant future. The result is that markets, industries, and supply chains get whiplashed back-and-forth as more knee-jerk reactions are taken under the guise of “corrective actions”. In the fabled race between the tortoise and the hare, let’s not forget why the tortoise won and that there is an allegory to our personal lives and professional conduct.

What we see is that short-term huddling of resources, short-term planning, short-term damage-control, short-term gains to boost balance sheet numbers, etc. only leads to long-term misery. Chaos and confusion lie in wait ready to strike when we are probably least prepared to deal with them. The result is havoc that requires excessive resources to bring under control or at least attempt to damage-control.

Yet this advice seems counterintuitive to the competitive nature of business today, but I don’t think it needs to be. Would sound advice in a logical risk-management strategy be to blaze ahead or put all your eggs in one basket? Probably not or at least not for too long. Yet too often I think we forget that short-term gains do not equate to long-term success. A good risk management focus will recognize this.

So what is the point here? What are the lessons to be learned? (Blog posts need to lead to logical conclusions AND teach us something???) It’s better to clean up small messes early on when they happen than to keep sweeping things under the rug because eventually that big lump under the rug is going to get noticed. A good risk management strategy is one where supply chain frauds are caught early and before they infiltrate our organization and manifest themselves into disasters.

The proper perspective for a risk management strategy is one that looks both short-term and long-term and does not consider those viewpoints as distinct but rather as interrelated.

Norman Katz, Katzscan

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Fraud Investigations Are NOT a “DYI” Project

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

Not long after one of my supply chain fraud presentations I was informed that one of the attendees had gone back to her employer and reported “I think I (now) smell a rat”. The company owner was not able to schedule to attend my seminar so he sent someone in his place, and was quite thankful he did.

(Fortunately it was not the fraudster who the company owner sent to my seminar!)

Indeed a trusted employee had been perpetrating fraud for quite some time and to the tune of somewhere between $60,000 and $250,000. The company owner was quite upset that this employee, who had always been treated very well, had stolen through good times and bad. I told the company owner that fraudsters are rarely concerned about their employer’s fortunes because they are more concerned about their own, even if their frauds affect their co-workers and friends.

If the amount of loss seems a little vague it’s because the company owner made a critical mistake: he investigated the fraudulent activities himself and in doing so exposed the investigation to the fraudster. By performing this investigation himself he scuttled the ability to have caught the fraudster “in the act”, involve law enforcement, prosecute the fraudster criminally or civilly, truly understand how the fraud was perpetrated and the depth & breadth of the fraud itself.

Fraud investigations are not “do-it-yourself” projects to be undertaken by those without experience. I was quite surprised at the simplistic mistakes the company owner made which seemed to defy logic and common sense. These mistakes resulted in the fraudster being blatantly tipped-off that the company was on to him. So what did the fraudster immediately do? He stopped his activities and began to cover his tracks faster than the company owner could investigate. Thus we will never know the true amount of the fraud loss. Further I question whether the fraudster’s methodology was completely understood so that corrective measures could be implemented.

By tainting the investigation the company owner allowed a fraudster to walk away with no punishment. The fraudster was either fired or simply resigned, I cannot recall which. This fraudster is likely to just get a job at another company and perpetrate fraud again. The fraudster will certainly make up a reason for leaving his last company. And what of the reference check? The prior employer can make no mention of any suspected fraudulent activity as it was never properly investigated or proven.

(Laws may further restrict what an employer can and can’t say about an employee, current or previous. But one point is that by not investigating properly and pressing charges no public record of this employee’s misdeeds will ever be recorded. Granted no company wants it made public that they were the victim of fraud; however as word spreads that a company is a victim of fraud isn’t it better publicity to make it known that the fraudster is being prosecuted? Doesn’t this send a better message to employees, suppliers, and customers that fraud will not be tolerated? This is an unfortunate “passing of the buck” that allows fraudsters to move from one company to the next, perpetrating their frauds over again.)

Even on fictional police television shows the need for proper investigative techniques is written into the scripts. Evidence must be secured and analyzed. Leads must be followed-up. Analysis may lead to several different directions where reasoning and investigative techniques will be relied upon to eliminate unlikely roads. Sometimes suspects are allowed to continue their illegal activities to make it easier to trap them and catch them in the act.

You don’t want your accountant performing dental work on you, nor would you (typically) want an attorney fixing a problem on your vehicle. Always ensure you allow those best skilled, experienced, and credentialed to perform the tasks that they are qualified to do. And this includes your fraud investigations.

Norman Katz, Katzscan

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Transfer Knowledge to Reduce Risk

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

As reported on August 15, 2009 in my local South Florida newspaper, two New Jersey police officers in their 20′s failed to recognize singer-songwriter Bob Dylan. Mr. Dylan was wondering around a low-income neighborhood when he was spotted by someone who apparently called the police to report a suspicious character. It’s important to note that Mr. Dylan did not have identification on him. The police officers escorted Mr. Dylan to the resort where tour management confirmed his identification.

[Editor’s note: People worry about a return to 1984, but this smacks of a return to 1963. For those of you old enough to remember, it’s alright, ma (lyrics).]

Around this time I attended a business event and saw some folks I knew from my networking who invited me to join their group. During our conversation I made a reference to the classic rock band Deep Purple (one of my favorites) as we were discussing colors and shades for use in corporate marketing. A young lady in the group, I have no doubt in her 20′s, looked puzzled and said she was unfamiliar with this band. I asked her if she knew the song Smoke On The Water and did my best to hum the famous guitar riff. She confessed she still did not recognize the tune which is understandable if you’ve ever heard me attempt anything musical, though I suspect this was more related to a generational gap. (I did receive a follow-up e-mail from her a few days later stating that she was familiar with the riff but not the band behind it. She may have followed my suggestion and did a YouTube(R) lookup.)

More so in lean economic times companies have a habit of getting rid of employees with deep knowledge and replacing them with younger less-experienced and less-knowledgeable people. This is not a very wise decision when reliance on such knowledge is what separates the company from its competitors as would be the case in most companies.

(One only need look at the demise of Circuit City as an example: experienced floor sales people were let go to bring in a younger less-expensive sales force which failed to provide the same level of customer service and left customers taking their money elsewhere.)

Typical when experienced employees are (suddenly) replaced, there is a failure to transfer critical knowledge. Older employees must understand that they have a responsibility to their employer that goes beyond their own interest of self-preservation: Unless you work for yourself your knowledge belongs to your employer and they have every right to require that you document what you know and provide training to those less-experienced. Good sustainability and risk management practices require this and Sarbanes-Oxley compliance demands it.

Studies have shown that Millenials (aka, Generation Y, born between 1978 and 1989 depending on whose definition you look at) tend to be more result-oriented than process-oriented. This can be problematic in regulated enterprises and public companies. This can run counter to Lean thinking and Six Sigma methodologies that look to process improvements for efficiency. Entities such as ISO (International Standards Organization) rely on documented processes for their certifications.

Is it any wonder why Gen Y is so results oriented when knowledge can be so difficult to acquire and job performance tends to be based on results and not how those results were achieved? It’s important for enterprises to explain and show why the process matters and encourage process improvements that do not cross the line of regulatory or certification requirements.

Classic rock may one day face its own extinction in one form or another and the world will be a sadder place the day the music truly dies.

Enterprises have a more immediate need to and face a greater crisis in the short-term due to knowledge gaps. Risk is reduced when knowledge is transferred. Enterprises should work towards closing generational gaps by creating teams that use the best characteristics of its generational members. Each generation needs to respect the other and acknowledge the benefits each brings to the table. Torches will forever be passed and this does not require that anyone get burned in the process.

Norman Katz, Katzscan

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