CBTM #2: Our People Are Our Key Asset


Today’s guest post is from Dalip Raheja of The MPower Group, who declared that Strategic Sourcing is Dead last year, and who has returned to stir up a new hornet’s nest.

Our people are our key asset! How many times have you seen this on the walls of major corporations? If this is true, then should we be applying some sort of asset maximization strategy to this key asset? I would assume that any expenses (training, coaching, recruiting, etc.) associated with maximizing this key asset have a very high priority and are one of the last items cut from budgets? By the way, how much of your capital dollars are you allocating to this asset? To truly embrace this thinking, you have to adopt a mental model of viewing your organization as a consulting company whose only value producing assets are the employees. In our last post, we laid out the case for Talent Management. In this post, we will address Competency Based Talent Management (“CBTM”) and then talk about some of the key issues in developing and executing a CBTM strategy.

The first step is determining the Intended Consequences (“IC”) of your Sourcing/Supply Chain organization. These ICs need to be directly derived from, and tied to, the overall corporate objectives and strategy of the company. Are you an organization measured by the year-over-year price savings that you get from your supply base while reducing lead time and improving quality? Or are you an organization that is measured by the impact you have in reducing sales cycles, increasing margins on existing deals, and streamlining the time to market of new product introductions? Think of this as defining the market you are trying to serve as a consulting company. Are you aspiring to impact tactical and operational Value Drivers or are you also looking to directly impact the overall corporate goals and strategy and therefore be a direct part of the elusive CEO’s agenda? That will help you determine the required characteristics of the asset base you will need to deliver on the Intended Consequences. This role definition then becomes the foundation for your desired competency model. From there, it’s on to determining where you are today, the gaps between where you are today and where you need to be, and then making sure that you have an asset maximization strategy in place that is funded for the next 3-5 years to close the gaps. Voila! All done! Obviously it’s a bit more complicated than that and we will be happy to share a very detailed model and an approach to getting it done. Here are a number of challenges that you should be aware of:

  • Commit only when you can deliver to expectations.
    CBTM will raise the expectations of the employees so make sure you are ready to launch and deliver.
  • Designing the solution is only a start.
    Focus on the adoption issues and invest as much in them as in solution design, if not more.
  • Competencies are applied skill and knowledge towards the Intended Consequences.
    The focus has to be on demonstrated application whether you are recruiting or promoting.
  • Shortage of talent is a symptom, not a cause.
    Apply systems thinking to the entire life cycle of Talent Management (recruiting, training/development, performance evaluation, career development and succession planning). Otherwise, you will always be recruiting.
  • Hold your direct reports accountable for success of CBTM.
    Ensure it’s in their goal sheets in a meaningful way.
  • It’s not a tactic — it’s a strategy.
    Account for appropriate time for the strategy.
  • Think asset portfolio maximization.

In our upcoming posts we will address some of the Next Practices associated with each of the five phases in the Competency Based Talent Management life cycle.

If you are interested in getting involved or would like to follow this topic further, here are a series of critical activities coming up:

  • Release of the results of the Executive Forum we just facilitated at the IACCM Global Forum for Contracting & Commercial Excellence on Talent Management.
  • A major research project to not identify the problem one more time but to identify Next Practices to solve the problems.
  • A webinar with IACCM on CBTM.
  • A White Paper to focus on Next Practices in CBTM.

Please contact Crystal Jones at crystalj <at> thempowergroup <dot> com for more information.

Has Your Product Been Greenwashed?

About a year ago SI published a post that asked if it was green, or just more greenwashing after Terrachoice released its annual “Sins of Greenwashing” study that found 95% of the 5,296 products that were reviewed were still committing at least one greenwashing sin.

In response to this post, a reader has directed me to an awesome graphic, “Green Marketing Exposed”, created by Marketing Degree (.net), embedded below (with permission), that breaks down the seven deadly greenwashing sins of

  • no proof
  • hidden trade-off
  • smoke and mirrors
  • vagueness
  • false labels
  • irrelevant
  • bold lies

and the top three ways consumers can avoid the greenwashing traps

  • shop at big box retailers (heavily scrutinized by media)
  • beware of the electronics, DIY construction product, toys & baby product, and household cleaning product industries in particular
  • look for trusted logos

This is very useful for your supply chain sustainability manager. Know what to look for before your customer finds it!

Green Marketing Exposed

Still Having Problems Making Ends Meet? The Onion’s Solution Is Still Valid!

Having trouble paying off your mounting credit card debt? Has the interest rate on your variable rate mortgage (on your still under-water property) become too cumbersome? Is that place in the Aspens stretching your budget now that your bonus is only a faded memory?

A classic article in The Onion archives has the perfect solution for you! Thanks to recent advances in quantum physics, primarily in hyper-dimensional string theory, you can now compute perpendicularly across the space-time continuum and take on a 4th shift!

The article quotes Labor Secretary Elaine Chao who notes that, for those lucky enough to have work, the maximum 24 hours of possible work time offered by our plane of existence is simply not enough to provide a living wage in the current economic climate, especially given the debt levels that many Americans are still facing and these difficult circumstances have compelled 76 percent of the American workforce to seek additional hours in an alternate space-time dimension, where more competitive pay can help them to avoid years of crippling debt.

I’m sure this option is going to become especially popular as jobs slowly return as those of us who have been out of work for 6, 9, or 12 months (or more) look for ways to quickly pay down the mounting debt associated with survival in these harsh economic times!

And if you think this article is insensitive, as the real unemployment rate in the working class is approximately 15%, then I ask why you aren’t doing anything about the relative lack of coverage the OccupyWallStreet movement, and similar movements around the world, are getting in mainstream media, which, as I write this, is literally more concerned with Kutcher‘s tweeting than the fact that many of these protesters will be freezing their buttocks off with the coming winter, which can get quite harsh in the northern climates. The 99% is reaching a level of poverty not seen in over a century, and the almost 15 to 1 earning ratio between the top-earning 20% of Americans and those below the poverty line (source: USA Today) is just ridiculous.

Inequality between rich and poor in the US is now more than in many “undeveloped”nations. Something’s just not right and something needs to change. And it should begin with limits on executive pay. The unconscionable ratio between CEO pay and worker pay in 2010 was 325-1. Three Hundred and Twenty Five to One! That’s absurd. There should be strict limits on how much a CEO is allowed to be paid and strict civil penalties on any organization that breaks them. I would propose a law limiting base CEO pay to a maximum of 10 times the average worker salary. If you’re average worker makes 20K a year, I would say it’s unconscionable that you get paid more than 200K. Bonus pay should also be limited as well, and should be a simple formula based on profit or year-over-year return and your salary. Say maximum (10% of profits, 10% year-over-year growth, 10 X your base salary) if there was profit or year-over-year-growth, or half of that if not. And if the corporation pays the CEO more, it has to pay a penalty of 10 times the CEO’s total compensation for greed and unconscionable distribution of wealth. What do you think?

The Basics of Information Technology Cost Management

It’s a simple five-step process:

  1. Get a handle on the TCO of IT to the business
    How many units have IT support staff? How much are you paying in maintenance and software licenses each year? How much are you paying in hardware leases and upgrades? What about consultants and outsourced support? The data center(s)? Hosting? And don’t forget the “device propagation” that results every time a new application is added to the data center or a CXO gets a new toy (like an iPad).
  2. Focus on the Cost Drivers
    Energy? Hardware? Software? Projects? Where’s the money going, and why? Treat the IT organization like it is a business and balance the supply and demand.
  3. Be relentless in Valuing IT services
    Examine the cost structure through the eyes of your customers and segregate functions and services into value-add and commodity categories and drive the associated costs accordingly.
  4. Be creative in meeting demand and sourcing work
    Examine the people, process, and technology infrastructure carefully to determine if there is a more cost effective way to deliver the necessary services.
  5. Bring in an expert to re-source the hardware, software, and support you need
    Don’t negotiate multi-million dollar deals on your own if you’re not an expert in IT systems and the current state of the market. If you try, chances are that you’ll overpay by a lot more than 10%!

Are You Strange Enough? (Repost)

This post originally aired four years ago (on Nov 30, 2007) and is being reposted because it complements Monday’s post by Dalip Raheja on The Difficulty of Finding Qualified Supply Management Candidates very well. In Dalip’s post, he noted that you will never find a good candidate if you can’t define what qualified is. And, if you want a successful organization, qualified needs to capture the skills you want talent to possess — and these skills are highly dependent upon the outcomes that you want. In this classic Wharton article, which excerpts part of chapter four of Daniel M. Cable’s book, Change to Strange, we are told that to get the best results, companies have to build a workforce “that is extraordinary in a way that customers care about” and the only way to do this is to build your organization around measuring and gaming performance drivers . In particular, around metrics that define what you want to capture. These metrics will define the skills you want your candidates to possess, which will in turn define what qualified means, and, ultimately, help you find the right candidate. Plus, in today’s crazy economy, how can you possibly hope to win if you’re not a little strange?

Browsing through the Knowledge @ Wharton site, which is another one of those sites (like the Economist) that is just as important as the supply and spend management sites you visit every day, I stumbled upon an article published this summer that asked “If Your Workforce Is Strange Enough to Guarantee Competitive Advantage”. It’s a very good question.

The article excerpted part of Chapter four of Daniel M. Cable’s book, Change to Strange that notes what characterizes successful companies these days is a “strikingly different, obsessively focussed” workforce, one that — compared to competitors’ workforces — is “downright strange”. More specifically, to get the best results, companies have to build a workforce “that is extraordinary in a way that customers care about”.

In the excerpted chapter, the author argues that a successful organization is built around measuring and gaming performance drivers – and this is what results in a strange workforce. The development, measurement, and enactment of the performance drivers is what provides the required insight into what the organization is creating, and not creating, that is required to differentiate it from its competitors, attract customers, and, most importantly, win.

The process starts by identifying the outcome metrics that provide a valid reflection of what you think your organization exists to create. Then you find a way to make these metrics move in a way that your competitors are not willing or able to pursue. For example, if you’re a procurement outsourcing organization, you might decide that what customers value most is spend under management and spend put through the system. If this was the case, then you’d find a way to integrate best of breed on-demand SaaS technology into your offering so that not only could you put every purchase you make on behalf of the client through the system, your clients could also put every purchase they make against the contract through the system. Then, used meticulously, your customers would find over 95% of their spend against a contract you cut on their behalf would be in the system and that their spend under management goes up as a result. If your competitors think that the most important metric is total leverage-based purchasing power, you’re in a unique position if you’re right as to what customers want.

It’s also important to answer each of the following questions when you believe you have identified an outcome:

  • What produces the number – and what makes it go up or down?
  • What are the two or three most important beliefs our customers need to have about us relative to our competition to affect this outcome? How do we measure our progress toward our goal of having these beliefs accepted by the majority of our target market?
  • How can we influence the outcome in a way that is valuable, rare, and hard to imitate? What are we willing to do that the competition is not in order to drive this outcome?

For example, if you were a procurement outsourcing organization, you might come up with the following answers:

  • Spend through the system is calculated as total dollars on contracted items spent through the system divided by the total dollars spent on contracted items. It goes up when maverick spend is down, and down when maverick spend is up.
  • The two most important beliefs a customer has to have is that we mean what we say and we eat our own dog-food. We do all of our spend through the system. We measure our progress towards this goal by determining the percentage of outsourcing deals we are getting invited to bid on versus the total number of outsourcing deals that are currently happening in the marketplace.
  • We can adopt an open book policy on our own spend, and let prospective clients (under NDA) access the system and verify that our claims are valid – and this is something our competition might not be willing to do. We can also offer an on-demand spend analysis solution to our clients as part of our service offering so that they can calculate for themselves how much spend goes through the system, how much maverick spend is happening in their organization, and what commodities or categories we should be handling for them.

Thus, even though it might be a little too academic for your tastes (as the book was written by an academic who used a Business School as the example – ick!), the article had a very good point and asked some very good questions once you isolated the core of its message. If you want to be the best, it’s not enough to just work harder and more productively than everyone else … you have to be just a little bit different … and maybe even a little bit strange.