Engaging Stakeholders – It’s as Easy as Corralling Cats!


Rant on blogger, rant on along
Rant on buddy till the day is through
Rant on brother, sister too
Rant on momma like I asked you to do
And rant on fellow blogger, rant on (Rant On!)

Today’s guest post is from Joe Payne, Vice President of Professional Services at Source One Management Services, LLC.

A few weeks ago I was giving a debrief to the Manager of Indirect Spend for one of our customers. The engagement was winding down, and I asked the manager if there were any other categories they needed help with that we hadn’t already looked at. “No” he said, “I think we’ve covered everything.”

Up to that point, I knew we hadn’t worked with their IT department at all, so I asked about potentially discussing telecom or managed services. “Oh, I stay away from that side of the building”, he exclaimed. “Those guys don’t even speak the same language.”

As more and more CFO’s and CEO’s realize the value in creating sourcing departments to control indirect spend, sourcing teams are finding more and more end user resistance to their involvement in the supplier selection and supplier relationship management process. In nearly every organization I’ve worked with, there are groups or divisions that don’t want help from sourcing and prefer to manage supplier relationships on their own. Getting stakeholders to engage can be difficult, but is it really as hard as corralling a cat? Well, let’s look at the similarities:

Cats don’t want to be corralled. Stakeholders do not want to be engaged.

“Sorry I missed your call, please leave a message…”

When you begin to corral a cat, their first instinct will be to cautiously avoid you – but they probably won’t run away. When you first attempt to engage a stakeholder, they will do the same.

“I’d love to meet to discuss my requirements; unfortunately I have a full plate this summer. How does next year look for you?”

When you show a cat you are not going to give up until they get corralled, they will become finicky and potentially aggressive. When you continue to pursue an end user, they will attack.

“What makes you think you can do a better job than I did? What do you even know about this subject matter?”

Lastly, just because you are successful in corralling the cat does not mean they are going to cooperate. Give them any opportunity, and they will escape. Once a stakeholder agrees to proceed (usually after being told to by their boss), you can expect:

“Sorry I missed your call, please leave a message…”

Which takes us full circle.

So, what is the value that sourcing can bring to stakeholders and end users, and why is it so difficult for them to recognize that value?

First you have to remember that practically no one in IT, Marketing, or HR was hired based on their ability to run an RFP, write a contract, or perform a negotiation. They were hired to ensure infrastructure uptime, get the company’s message out, or keep employees happy, respectively. They aren’t focused on cost and most of the time they don’t care about cost. There is no question that lack of training, lack of time, lack of market intelligence and lack of focus will lead to higher price – sourcing brings these tools to the table.

Second, stakeholders typically don’t properly manage vendors, track spend or validate compliance. Without a watchful eye, suppliers either get demotivated or greedy. This leads to either very upset or very rich suppliers. Sourcing offers a clear process and communication hierarchy, the ability for incumbent suppliers to expand services or solicit feedback, and spend consolidation and rationalization opportunities – it improves supplier relationships while keeping costs in check.

Third, even when a stakeholder is upset with a supplier, they will continue to use them. When speaking to end users, I am often surprised by how much they dislike an incumbent, but still continue to work with them. Sourcing brings an independent (and objective) third party to the table that can act as the “bad cop”, pushing a supplier to improve or else replacing them with someone better suited for the requirement.

So if sourcing can bring all this value to the table, why do stakeholders often fail to recognize it?

The answer to that question can be a little more complex, but for the most part it boils down to one thing – purchasing is a personal subject! Think about it – whether you are at home or at work, you want to get a good deal. When you buy a new car, you aren’t going to tell your friends and family how you got ripped off – you are going to tell them you got a great price, and you are going to hope that is true! The same can be said, and normally is exacerbated, in business. If you are responsible for managing a million dollar plus budget, the last thing you want is for people in the company to think you are paying more for goods and services than you should. Having a sourcing group come in and save 30% is the same as having your brother-in-law swing by the car dealer and get the same car for $5K less – it hurts.

Sourcing organizations now have a unique challenge. The thing they were hired to do – get savings – tends to be the easy part of their job. Competition always exists and technologies are always improving – finding a lower price is not difficult. The hard part is finding a stakeholder in the organization that recognizes sourcing is just as valid to them as any other support service, and has the wherewithal to use your group effectively.

To date, I’ve never seen it happen without a strong top down mandate, and it is costing companies millions every day.

Corralling Cats
Thanks, Joe!

Some Legal Considerations When Outsourcing to India

A recent article over on Outsource Magazine had a good article on “legal considerations when outsourcing to India” that addressed core legal issues that should form the basis of your Master Services Agreement when outsourcing to India. The four issues addressed could be very problematic if not covered by your agreement.

Lex Contractus
This refers to the governing law, or proper law, of the contract. While the parties of a contract can choose the governing law, as the author notes, due to the fact that a major proportion of the services are to be rendered in India, consideration for services will be received in India and the Indian party may sign the contract in India, the applicability of Indian laws cannot be excluded by contract. So, even if the Indian party agrees to the governing law being a foreign law, it is possible that in case of any dispute, the Indian party could approach a court in India to seek appropriate relief and the court could also entertain the dispute on the basis of factors set out above. Keep this in mind when considering outsourcing to India. In addition, should you choose arbitration, Indian law mandates that for a foreign arbitral award to be directly enforceable in India, the award must meet the following conditions: the award must have attained finality in the country it has been passed; it must conform to and must not conflict with Indian law or public policy; both the parties and the arbitration venue should belong to a New York or Geneva Convention signatory country.

Data Protection and Privacy Laws
While India has been slow on the uptake with respect to data protection and privacy laws, compared to the US which has a number of industry specific federal laws and state laws (that also restrict cross-border transfer of personal and sensitive information) and the EU which has the European Data Protection Directive, it has moved quickly to catch up in an effort to insure it keeps the outsourced work that it has acquired. Since the Information Technology Act of 2000 didn’t have enough enforcement teeth in the eyes of the US or EU, the biggest outsourcers to India, it quickly passed the Information Technology Rules in 2011 that defined what would constitute “Sensitive Personal Data or Information”, laid down obligations for the data collector and data processor, and defined reasonable security practice and procedures. This may not be strong enough for extremely sensitive data, but is a great start. Just make sure you also insist on adherence to the IS/ISOIEC2700 as well.

Employment Issues
It’s important to explicitly state that the service provider complies with all the necessary laws and that the overseas outsourcing company may not be threatened by any kind of claim by employees of the Indian company.

Licensing, Copyright in Database and Infringement Issues
Remembering that the outsourcing company is creating, developing, and processing data for you, the client, it is essential that you state that all data, product, programme, software, designs, and compilations constitute IP and that all IP rights are protected and assigned back to you, the client. Note that, in Indian law, the supplier will hold the copyright interest in the software developed by it but Indian law also provides for the assignment of the copyright interest by the service provider in favour of the client, by entering into an separate assignment agreement.

If not properly handled in the agreement, each of these could come back to bite your organization in its organizational behind if something goes wrong. Think it through, and get some expert legal help.

Best Practice Technology Vendor Selection for True Multi-Nationals Part II: RFX – You’re Not Asking for the Right Information!

Today we continue our series on best-practice vendor selection for your enterprise e-Procurement and e-Sourcing solution. As per yesterday’s post, this series specifically relates to the selection of technology(-based) vendors for your enterprise software needs, and e-Procurement and e-Sourcing solutions in particular.

In yesterday’s post we reviewed the traditional RFX process at a high-level, which is more-or-less correct, and then reviewed how this process is typically interpreted, which is where the problems begin, especially where multi-nationals are concerned. We noted that there are three big problems with the standard interpretation of the process, which occur in the first part of the RFI process. In particular, we noted that most supply management project managers ask for the wrong information when they:

  • ask stakeholders for product/service requirements
  • ask stakeholders for preferred vendor recommendations
  • ask vendors for capability information and self-assessment

This last request in particular is especially futile as the last thing a vendor who wants your business is going to do is say that they can’t meet your request, even if their chances of success are dismal. You need to start by verifying that the vendor has the potential to serve you, independent of the vendor. To do this, you need to start the process where an average organization ends it. In particular,

Start with the Reference Interviews

Too many organizations do this:

  • Collateral-Driven Vendor Identification
  • Request for intent to bid
  • Request for proposal and quote
  • Shortlist
  • Negotiations
  • Final List
  • Reference Interviews

By the time a typical large organization gets to the reference interviews, it’s too late. Months have been spent on the project, which needs to be wrapped up shortly. As a result, the buyer gets stuck with one of the finalists, even if none of the finalists are good solutions for the organization.

If you’re a multi-national organization, you have to start with the reference interviews. If you’re a small company, only do business in one or two countries, and only conduct official business in English (and all your international suppliers are Chinese with english-speaking reps), then it doesn’t matter because just about every vendor can serve you. But if you’re a multi-national that:

  • has offices in over twenty countries,
  • conducts official business in seven languages (English, French, Spanish, Italian, German, Russian, Portuguese, for e.g.),
  • has suppliers that speak six more languages (Mandarin, Cantonese, Vietnamese, Thai, Korean, and Japanese, for e.g.),
  • and has to support customers in over forty countries

then not every vendor in the space is going to be able to support you. In fact, despite the plethora of companies in this space even after the recent M&A frenzy, the number of pure-play best-of-breed companies that will be able to support your global e-Procurement or e-Sourcing initiative is likely countable on your fingers, thumbs optional.

And the only way you can have any assurance that a vendor is going to be able to support such an initiative is to start with reference interviews with customers who are similar in size, scope, and needs.
While this doesn’t mean that the vendor has to have offices in each country that you are in, support every language that you need supported, and have a success story for each of the forty countries you are selling into, it does mean that the vendor needs to have a global presence, should support at least a dozen languages (that meet a majority of your language requirements) with a track record of being able to add new languages quickly, and should be in dozens of countries with a history of successful roll-out initiatives to new countries.

In other words, unless you have been convinced beyond a reasonable doubt that the vendor can support your organizational needs, they shouldn’t even get a detailed RFI. Because it’s not about who can survive the funnel, it’s about who deserves to even be in the funnel. And that’s a very simple determination, as we’ll discuss in the next post.

Best Practice Technology Vendor Selection for True Multi-Nationals Part I: RFX – You’re Asking for the Wrong Information!

Before we begin, it must be clearly stated that this series relates to the selection of technology and technology-based vendors to provide enterprise software platforms, and/or implementation services, back-office (processing) functions, or technology-driven consulting services for your multi-national organization. While some of the best practices contained herein may also apply to the selection of (strategic) suppliers for high-value and/or complex products and/or services, this series particularly relates to the selection of a vendor to provide an enterprise software backbone, and, in particular, a backbone for e-Procurement and/or e-Sourcing technology for your Supply Management organization. Furthermore, no claims, express or implied, are made with respect to any other vendor selection process and, in fact, if you’re only buying paper and pencils, some of the best practices contained herein will, in all likelihood, be overkill.

Now that the preamble is out of the way, let us begin by noting that the traditional RFX processed is well understood, and well documented in many places, including in the e-RFx for Total Value Management wiki-paper, co-authored by the doctor over on the e-Sourcing Wiki. And, in the wiki-paper in particular, the high-level process is more-or-less correct.

As per the wiki-paper, you start with a three-stage RFI before an RFP, which is solution focussed (and not cost or contract focussed), which is issued before a final RFQ, which is when you collect quotes and start the actual selection / negotiation process. Specifically, the high-level process is:

  1. RFI #1: Stakeholder Requirements
  2. RFI #2: Vendor Interest
  3. RFI #3: Vendor Pre-Qualification
  4.    RFP: Solution Inquiry
  5.    RFQ: Clearly-Defined Specifications

So what are you doing wrong, especially if you’re a Multi-National? To answer that, let’s look at how this is typically translated:

  1. Product Needs, Service Needs, Preferred Vendors
  2. Vendor Info. Request, Vendor Interest, NDA
  3. Product & Service Capability Profiles
  4. Solution Design Request
  5. Explicit requirements, process definition, and bid request

See the problems?

  1. Stakeholders typically don’t know what they need in a solution. They aren’t technology experts. They aren’t supply management experts. They are domain experts. It doesn’t matter what they think they need in a product or a service, it matters what problems they are having today. You need to ask them what problems they need to solve, so that you can ultimately select a vendor with the solution that solves as many of your stakeholder’s pain points as possible.
  2. A preferred vendor is one that can offer you the best product or service from an organizational perspective, not a single stakeholder’s perspective. For example, a stakeholder might rate a vendor A+ because the representatives always responds quickly. But this is not necessarily indicative of great service. If the answer is always “we’ll send someone to fix that in a week”, and you need the machine up 80% of the time, that’s poor service.
  3. Asking a vendor if they can provide you with the necessary functionality or service levels after you have shortlisted them as a possibility based upon a review of their collateral is not likely to get you anything other than a “yes we can”, especially if the vendor also offers consulting or “value added services”. One has to remember that most (big) consulting (and value-add) organizations are driven by a greed for dollars and the reps are told to always say yes and take on as much work as possible, leaving the question of how to get it done (if the organization is already stretched or weak in that area) until after the ink is dry.

Which brings us to the biggest problems with the current selection process, which we will discuss in Part II.

The (Board) Gamer’s Guide to Supply Management Part VI: Zombie Dice, Tsuro, and Get Bit!

I’m enraptured to continue this one-of-a-kind summer series that will help you whether you are just interested in finding out about this new and exciting career opportunity, or ready to take your Supply Management career to the next level. Not only is it significantly more fun than counting grains of sand for an hourglass, but when you can grasp a lot of the basic concepts by playing the right mix of strategic (and sometimes tactical) board games with your friends, it’s three blasts squared.

I know we still have to tackle the economic games, like Puerto Rico and Dominion, but we’re gong to continue to make use of the fact that, thanks to the unequaled generosity of Wil Wheaton (@wilw) and Geek & Sundry, we have yet another marvelous TableTop episode where Wil introduces us to yet another great game — or, in this case, three great games. Until the tap runs dry, we are going to collect every precious drop of water that Wil is directing our way.

Wil gives us a very succinct introduction to each of the three games covered in TableTop Episode 3, starting with

Zombie Dice

is a press-your-luck dice game. We are all zombies trying to fill our undead bellies with delicious, delicious brains. On every turn, we will draw three dice from the cup. Each die represents a human survivor or, as we call them, lunch. We roll the dice. We then keep all of the brains and all of the shots to the face. Now we have a choice to make. We can stop, and score the brains, or we can press our luck. There’s one special die. It’s this guy, he’s the runner. If we choose to roll again, we have to include him in the three dice total because we haven’t caught him yet. You keep rolling until you are shot in the face three times or you choose to stop and score all of the brains in front of you. The first player to score thirteen or more brains wins.

Zombie Dice is a great game because it helps you understand the Wall Street mentality which, inevitably, leads to financial market meltdowns when left unchecked — just like the subprime mortgage crisis, the dot-com bubble, the speculative currency crises in Asia, Mexico, and Europe in the 1990s, the savings and loans crisis, the oil crisis, the crash of 1929, the shanghai rubber stock market crisis, the rail road panic of 1893, the gurney crisis, the danish state bankruptcy, the south sea bubble and the mississippi bubble, and the tulip mania. While financial market meltdowns are not a new phenomenon, thanks to the internet and the interconnectedness of the global financial markets, they are occurring more and more and will continue to do so as long as the unlimited risk mentality of Wall Street goes unchecked.

It’s critical that you understand this mentality, and the risks associated with it, because the more you try to limit your risk by playing the currency markets, the hedge funds, or even asset-based investments (like gold), the more types of risk you are actually opening yourself up to. If you don’t know what you’re doing, you’ll end up rolling red die after red die, which triples your chance of getting shot in the face.

In addition, what makes Zombie Dice truly great is that it also teaches us about the unpredictability of risk. You never know when you are going to get shot in the face with a supply disruption due to a natural disaster, a civil disturbance, or a quickly enacted political trade barrier, or how much damage it’s going to do. Supply Management is full of risk, and every time you place an overseas order, you could be rolling the dice.

Tsuro

is a path finding, tile laying game. We are flying dragons. On every turn, we will play a tile on the board. Every dragon touching that tile has to follow the path it makes to completion. … If you fly off the board, you are eliminated. If you crash into another dragon, you are eliminated.

This is a cool game because it forces you to think strategically, which is important in markets where demand exceeds supply and you have to outmaneuver your competition to insure that you always get what you need, and keep your organization on the board. It teaches you that you not only need to think about what you need, but if you are in a market where demand exceeds supply, what your competition needs so that you can lock up supply first.

Get Bit

is a bluffing game, designed by my friend Dave Chalker. We are all robots out for a leisurely swim in shark-infested waters. Each turn, to figure out which one of us is swimming the fastest, we will play a card from our hand, numbered one through five. The fastest number goes to the front of the line, and the slowest number will go to the back of the line. The robot who is closer to the shark gets bit. We each have four limbs. So if you are bitten four times, you become Anchor Bot 9000 and spend the rest of your days on the bottom of the sea.

This is a good companion game to Tsuro because, like Tsuro, it forces you to think strategically, but has the added advantage that it demonstrates what happens if your competition mirrors your movements — you both stand still while the other competitors in the market swim past you. You not only have to outmaneuver your competition in this space, you have to prevent them from blocking you.