Monthly Archives: July 2011

Are Your Employees Disengaged or Frazzled?

A recent article in Industry Week on “putting brain science to work in your company” that reviews Daniel Goleman’s The Brain and Emotional Intelligence: New Insights, which addresses the question of how you get the most from your people, is right when it notes that disengaged and frazzled employees aren’t really contributing to your organization.

Disengagement, where an employee is in a low-motivation state where they are distracted and inattentive to the task at hand, occurs when an employee is not inspired, motivated or engaged in the work they do. A disengaged employee performs well enough to keep his job, but no better.

Frazzled, where an employee is flooded with a cascade of stress hormones that causes the employee to focus on the problem bothering him rather than his job, occurs when the employee is upset with something. A frazzled employee can only address the problem, not the solution.

Only an employee in the flow, a state of neural harmony, where only what is relevant to the task at hand is what is activated, can be truly productive. The flow maximizes cognitive abilities and puts people are at their best. An employee in the “flow” isn’t the problem.

Moreover, not only will disengaged or frazzled employees not be productive, but their disengagement and frazzledness can spread to their coworkers. It’s hard to give a cr@p when no one around you does. And if everyone is stressed out, chances are you will get stressed out to.

Thus, if an organization wants to be productive, and take it to the next level, the first thing it should do is identify those employees who are disengaged or frazzled and figure out why. If an employee is disengaged because tasks, in an effort to become lean or efficient, have been broken up to the point where they are monotonous, then the organization should address its processes and procedures. Sometimes assembly-lining tasks is a good idea, sometimes it isn’t. If all a person does is check totals on reports, that’s not a good procedure. And if a group of employees who are always frazzled have the same boss, chances are that the boss is the problem. Shape him up (with training) or ship him out (with a pink slip). Next level requires productivity, productivity requires engagement, and engagement requires being in the flow. Make sure your employees are there before trying to knock it up a notch.

For Good Outsourcing Contracts, Keep Litigation in Mind

A recent article in the Sourcing Interests Group newsletter that described “a litigation perspective on outsourcing relationships” is right when it states that a litigation perspective will improve your results with outsourcing agreements. Given that outsourcing agreements are typically long in duration, it is important to craft the best agreement possible. A litigation perspective will help. Why?

Without a litigation perspective, a typical outsourcing agreement is:

  • general
    Since it is impossible to predict every circumstance that may arise, most drafters of outsourcing agreements stick to general terms, broad service descriptions, and generic service level improvement requirements. This is bad because generality results in uncertainty, uncertainty breeds disagreement, and disagreements threaten the stability of outsourcing relationships.
  • full of vague terms
    Such as material breach; gross negligence; willful misconduct; direct, indirect, consequential damages; best efforts; generally accepted standards; and commercially reasonable efforts which sound very legal but which are typically unclear in case law.
  • sparse (or devoid) of communication protocol
    While most outsourcing agreements will contain clauses for dispute resolution, they will be sparse, or devoid, of clauses describing proper communication protocols for communicating, addressing, and responding to issues as they arise. Disputes only arise when issues are not adequately addressed as they arise.

However, with a litigation perspective, a typical outsourcing agreement is:

  • specific
    While the agreement will still contain general clauses for modifying procedures to deal with unexpected situations, it will contain provisions for dealing with situations that can be anticipated in advance, such as a spike in data processing, the inability for the service provider to handle increased order processing, or a change in regulations that restrict a service provider from performing one or more functions. For example, in the first case, if data processing requirements increase beyond a certain threshold in a given month, the organization will pay overtime rates to get it done. If the service provider can’t handle a rapid spike in customer orders, the organization will have the right to bring on a second service provider to assist. And if an unforeseen change in regulations preclude part, or all, of the functions from being performed by the service provider, the organization may cancel the affected parts, or all, of the agreements, without notice and penalty.
  • built on clearly defined terminology
    Instead of just saying that the service provider is liable for “direct damages”, the agreement will say that the service provider is liable for “direct damages, which include but are not limited to the additional cost of securing an alternative service provider” or instead of just saying the service provider is responsible for damages that result “willful misconduct”, which may or may not include a deliberate breach of contract, the agreement will say the service provider is responsible for damages that result from “willful misconduct, which include but are not limited to intentional tortious acts”.
  • clear on communication protocols
    The agreement will contain a communication protocol where the organization can officially notify the service provider of issues that arise, and response protocols for the service provider to officially respond to the issues.

Communication protocols are important as they provide official communication trails and a way to “shape the record”. If an official dispute arises, and goes to arbitration or court, and the organization does not have a clear record of events, that includes correspondence officially notifying the service provider of a(n impending) breach, then its chances of winning its case (and receiving damages) are not good.

Moreover, if the organization maintains a good “real-time” written record of events, that includes official communications that follow the protocol, it has a better chance of resolving the disputes quickly, cost-effectively, and with minimal disruption as a provider is not going to want to risk an official dispute when the client organization has a strong case.

Considering that termination of the relationship likely will cause both parties serious economic disruption, its important to draft the best agreement possible. The best way to do this is to keep litigation in mind and consider how you would prove the elements of a claim if a dispute were to arise as this will lead to the creation of clear and unambiguous clauses.

Comprehensive Energy Management: Taking Energy Management to the Next Level


Today’s guest post is from Robert A. Rudzki, President of Greybeard Advisors LLC, who has (co-) authored a number of acclaimed business books, including Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise, On-Demand Supply Management, and the just published text on Next Level Supply Management Excellence that is a follow up to the now-classic Straight to the Bottom Line.

Even the largest and most sophisticated companies tend to look at energy costs in a piecemeal way — plant by plant, facility by facility. One reason for this is the inherent complexity of the energy marketplace. Another is the need for local facilities to ensure adequate supplies.

Yet, by adopting a comprehensive approach to energy management, many companies discover significant opportunities to add value and reduce risk.

As the chart below illustrates, energy management embraces a variety of activities that are cost focused, such as establishing commodity prices, mission critical such as ensuring adequate supplies, and even policy- or community-focused such as green initiatives.



Comprehensive energy management is the process of systematically analyzing all the aspects that influenced total energy cost, with the goal of arriving at an optimal energy cost.

Chapter 10 of the just-released book Next Level Supply Management Excellence (Rudzki, Trent), is devoted entirely to the subject of comprehensive energy management. You can also obtain additional information by downloading the linked two-page PDF.

Thanks, Bob.

To Maximize Value, Don’t Overlook Tail Spend

A recent article in the Sourcing Interests Group Newsletter on “understanding tail-spend management” noted that while ROI for tail spend categories will generally be lower than for core categories, those companies that keep their eye on the efficiency/effectiveness equation and approach tail-spend intelligently can still find significant savings that make the effort worth while. So how does an organization properly approach tail spend, which:

  • rarely includes direct materials
  • contains a disproportionately high percentage of spend from the furthest-flung subsidiaries
  • contains suppliers that no one in procurement has heard of
  • contains large percentages of non-compliance and maverick spend

Intelligently. And iteratively. Data must constantly be reviewed in the light of changing business requirements to determine the best course of action using the following process:

  1. Spend Analysis
    Focus in on the tail-spend data and figure out what is being bought, from whom, where, and for how much compared to market value.
  2. Filtering
    Focus on commodities that can be reclassified into a category that will have enough spend to be worthwhile.
  3. Sourcing Strategy
    Once the category with the biggest opportunity has been identified, determine the right sourcing approach. If a sourcing project is the right approach, accelerate it with standardized templates, RFX, and/or auctions.
  4. Spot Buy
    If the right strategy is to spot-buy in a weak market, then aggregate demand across the organization and spot-buy through e-RFX or automated auctions.
  5. P2P
    And, regardless of the right sourcing strategy, drive as much spend onto technology platforms, like P-cards, so that it can be tracked and analyzed.

And, most importantly,

  • use procurement technology
  • simplify processes and increase controls
  • establish resources and manage performance

Talent Development: A Litmus Test

A recent post on the SCMR blogs by Robert Rudzki on “Talent Development” provided a great litmus test for determining whether or not your organization has what it takes to achieve the next level, which requires top-notch talent.

Bob provides an 8-point litmus test which includes the following key points:

  • Has the company’s strategy and objectives been translated into the required skills and competencies for the supply management organization?
    Talent cannot be developed appropriately if the organization does not even know what skills and competencies its talent needs to have.
  • Has a curriculum of development opportunities being created and made available to all personnel?
    It’s going to be hard to get talent interested in development if they are not even aware of the opportunities available to them.
  • Has a time budget been established?
    Talent development takes time. Time must be allocated for talent to train and develop, and such training and development must be mandatory, not optional.
  • Has a career ladder been established and communicated?
    If the organization wants talent to apply themselves and reach the next level, the talent must see a reason for doing so. If talent does not think they will get a reward for their effort, they will not see a reason for doing it.