Author Archives: thedoctor

Happy 1,450th Nessie!

According to legend, One Thousand, Four Hundred and Fifty years ago today, Saint Columba, an irish abbot, supposedly banished a ferocious, unidentified, water beast to the depths of the River Ness after it had killed a Pict and then tried to attack Columba’s disciple. This unidentified water beast has been equated with the Loch Ness Monster, affectionately known by the locals as Nessie.

Many believers speculate that Nessie was a plesiosaur, which, if it had a metabolism similar to modern reptiles, could allow it to live for hundreds of years. (Of course, considering how long dinosaurs have supposedly* been extinct, it’s hard to know how long they could have lived.)

 

So maybe we should be saying, Happy Birthday Nessie VII!

* Cryptozoologists have found evidence that certain dinosaur species may have survived in remote places of the planet where the climate has not changed in tens of millions of years up until recent times, at least until the time of the middle Egyptians in one case and until the time of the Aztecs in another. As this is not a blog on cryptozoology, we won’t discuss such evidence here but encourage you to do your own research if interested.

Sourcing Innovation is all for Rank and Yank in Procurement!

In particular, SI is all for yanking anyone who suggests that the right way to manage talent is to yank out the worst performers in your organization on an annual basis.

This is another prime example of a consulting cock-up from the Big 5/6 who also brought us (often courtesy of the Board of Directors, as per yesterday’s Procurement Damnation post) baseless outsourcing, unnecessary asset liquidation, and the contingent conversion.

While the doctor is all for the reassignment, or, if necessary, the removal of labour that’s not cutting it, arbitrarily hacking the bottom 10% is the dumbest move you can make. Not only does it ruin your reputation (which is why, on Glassdoor, only 62% of current and former employees would recommend Amazon.ca, which employs the rank and yank strategy, as opposed to Google which is recommended by a whopping 92% of current and former employees), but it ruins your future results.

For example, let’s say a new CPO comes in, does a deep performance review across the talent base and removes the non-performers from the organization (either by having them reassigned to another department or retiring them). If everyone who is left is a performer, arbitrarily removing the 10% of the lowest performers in the following year is equivalent to hammering a nail in her coffin with her in it.

To clarify this, let’s say the department has ten employees including three senior buyers, two intermediate buyers, two junior buyers, one full time spend analyst, one full time relationship manager, and one full time contract and compliance manager. If the performance measurement is geared towards identified savings, because the directors are dictating savings, after two years, the relationship and the contract and compliance manager will likely be gone because, doing their jobs properly, they are not identifying savings but ensuring savings identified by the buyers or analyst is realized. In fact, even if each role has its own scorecard, due to the fuzzy nature of what a relationship and compliance manager will due, it’s still quite likely that whoever fills these rolls will rank quite low and be at risk of getting the axe.

But if they don’t get the axe, then, chances are the junior buyers will because the intermediate and senior buyers, who will be more educated and experienced, will able to skew their projects and results to the performance metrics they are measured against. And that’s equivalent to the CPO nailing her coffin while she is in it because, at some point, the senior buyers are going to retire and need to be replaced by the intermediate buyers who will need to be replaced by the junior buyers, who will need a few years to become intermediate — which means that the organization will never see any junior buyers advance. (As it will be cycling a new junior buyer in every year as it cycles one out every year.) As a result, in the long term, the organization will slowly run out of intermediate, and then senior, buyers and results will diminish rapidly — to the point where all employees are equally poor, returns are dismal, and there will be no difference between cutting the bottom 10% and cutting everyone.

Get the picture?

So the next time someone suggests that the organization employ a rank and yank strategy to get better results from its talent, SI strongly recommends that you jump up and say “that’s a great idea, how about we start with you” as you hold open the door!

Authoritative Damnation #63: Board of Directors

Do we even need to say more? The Board of Directors can be your best friend, or your worst enemy. But either way, they’ll probably be your ongoing nightmare.

Their dictates drive your daily duties even more than the wacky whims of the CEO, because their dictates drive the CEO’s and CFO’s dictates, who in turn drive your daily duties. Do you really think the cost savings chant stems from the CFO alone? A good CFO realizes there are 2 big ways to make more money. Increase revenues — which can come from sales or investments — or decrease costs. An even better CFO will realize that you only have to do so much to appease Wall Street and will want to do whatever will increase revenues in the future, because that will increase the stock value, and fatten his nest egg when he sells out and retires (from the company). But if the board chants “savings, savings, savings“, his hands are tied and he will have to do his best country boy jig.

But it doesn’t necessarily end their. We all know that if this was the extent of the damnation caused by the directors, it would barely qualify as a damnation at all. Where do you think the outsourcing craze (and craze is the proper word) came from? The lease versus buy at any cost (because ownership is maintenance and maintenance is supposedly bad) craze. The move to contingent labour (because, apparently, benefits are bad too) craze. Just about any non-sensical craze you can think of usually originates from the wacky whims of a helicopter board member.

But it doesn’t end there. The board is also responsible for forced entry into markets. Forced entry into new product categories. Forced (use-my-buddy-Bill’s-business-or-else) supplier selection. And so on.

Director damnation is it’s own kind of damnation and sweep it under the table we shall not! Especially when this is one of the few damnations on our list that makes the eighth circle!

Environmental & Sustainability Damnation 17: Greenpeace

Yes, you read that right — procurement damnation #17 is Greenpeace. While it’s important that someone provide the voice of sustainability when your average organization can’t see beyond the Wall Street proclamation that the almighty dollar must come first, and must come as soon as possible unless you want your rating downgraded and your corporate brand value wiped out, this is a case where that someone has inadvertently done as much harm as good.

While Greenpeace is not an eco-terrorist organization, there’s a reason that the (US) FBI (Federal Bureau of Investigation) coined the term eco-terrorism and a reason that the FBI once called radical environmental activists the number one domestic terror threat, and, at SI we’re very sad to say that the reason is Greenpeace. Unfortunately, a large number of radical environmentalists take Greenpeace’s message too far and use, or threaten the use of, violence and sabotage of a criminal nature in an effort to get their responsibility and sustainability messages across. (This, of course, weakens their cause, but they still do it.)

Moreover, its fight to end the use of nuclear power, coal, and oil can be so crippling to a developing economy that still depends on those technologies (and that needs time to convert over to more environmentally friendly alternatives such as solar, wind, and water power) that Greenpeace actually poses a threat to economic security and India even barred international funding for the local branch of Greenpeace (while freezing its seven bank accounts) in April of this year (and, to date, Greenpeace India has only regained access to its two main domestic bank accounts and 25% of the funds in its foreign contribution accounts).

And when it gets a company in its sight, that company loses money. For example, Greenpeace demonstrators regularly put up blockades that prevent companies from clearing land, drilling for oil or mining for minerals, or ships from leaving ports (with a recent example being the blockage of a Shell drilling vessel from leaving port). Renting, maintaining, and staffing heavy construction equipment and ships costs a lot of money and everyday the equipment sits idle can cost a company tens or hundreds of thousands of dollars. This drives up the cost of the raw materials mined or harvested, and hits all our pocket books to the point that the tax credits we get in countries where Greenpeace is seen as a charitable organization is often less than what they cost us.

And if your organization ever gets in Greenpeace’s sights, the reason why it is one of only two organizations to be included on our Procurement Damnation list will become crystal clear.