Tag Archives: Strategic Sourcing

Law Firms – Welcome to the World of Strategic Sourcing

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Often referred to as a “sacred cow” of Sourcing, law firms are finally feeling the squeeze felt by every other business that supplies goods or services to clients.  It took the recent recession for companies to realize that “everything is negotiable”, even the legal fees charged by their outside legal counsel.  According to an article by Jennifer Smith in the Wall Street Journal entitled “Companies Reset Legal Costs” now that the recession is over (is it??) . . . “clients who won concessions on their legal bills when law firms were scrambling for business still are calling the shots when it comes to paying by the hour”.   Finally!!  Welcome to the conversation!!  Could this mean that including legal fees as part of sourceable spend is finally happening?

I remember venturing into the world of Strategic Sourcing 15 years ago and being told that legal fees were out of scope.  We were able to get it done all those years ago BUT it took a lot of selling AND it was painful.  Still, today, as we work with client organizations, legal will end up in Wave 5 where all the most difficult categories are placed.  Not because it is so difficult to actually source legal spend but because the internal resistance is so great.  I believe this is primarily due to the fact that most Strategic Sourcing is cost focused and this particular category of spend really requires a Value-based approach.  In addition, most general counsel do not want any part of negotiating with their external partners even though they are supposed to be the “experts” at negotiating.  Talk to the Chief Legal Officer about outsourcing legal research to India and you can literally see the bow tie unravel.  If you look at legal services as being similar to other professional services such as accounting, finance, IT, HR, management consulting. etc., it’s a wonder that legal has been able to fly under the Sourcing radar for so long.  Or could it be that those well-honed negotiating skills have been used to justify why Sourcing is not applicable.

According to Ms. Smith  . . . “the number of companies seeking novel arrangements is on the rise and expected to grow further.  In 2011, 61% of U.S. general counsel in a Fulbright & Jaworski survey of 405 companies said they used alternative-fee arrangements, up from 48% in 2009.

So, it appears that the veil has been lifted.  When I read this article, I felt like I was in a time warp.  It addition to alternative billing structures, it discusses things like clients demanding visibility into what they are paying for, detail plans on how law firms will execute the work, questions around the number of partners required to sit through a deposition? Really, these are basic sourcing strategies that have been around for well over 20 years – they are not NEW, people!!

While companies are still trying to find ways to save money, now may be the time to jump on the bandwagon.  Legal departments may now be more amenable to exploring the Sourcing process, particularly now that it is becoming more mainstream.  Like every change though, develop your business case, brush off your selling document, let them know “what’s in it for them” and realize that it will not be easy.  Once the sourcing process is complete you need to ensure that the solutions are adopted (our AEIOU model) within the legal department or there will be no actual business benefit.  And if you are really brave and also want to have a little fun just mention outsourcing to India and watch the bow ties unravel . . . . . . . .

Join in the conversation and tell us about your experience in what appears to STILL be uncharted territory.

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Who is the First Person You Should Hire?

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If I had a dollar for every time I’ve been asked that question-well you know how that story goes?  At every single conference across the globe I’ve spoken at, that question has been asked in some way, shape or form.  Almost every single client has asked that question or some variation thereof.  And the ones that did not should have asked that question.  You can think about it in terms of what is a critical role that you must fill in your Sourcing/Supply Chain organization or any other internal “support” function (IT, Finance, legal) or shared service to confirm my contemporary bona fides.

Before I give you the answer, we need to make sure that we are asking the right questions.  And for those of you that have been through TMG’s decision making module, that refrain will sound very familiar.  Remember the New England Journal of Medicine exercise where physicians were asked to evaluate patients for toncillectomies and they were wrong 49% of the time ?  Otherwise, we can turn to what a couple of my friends said.  Pete says “The most common source of mistakes in management decisions is the emphasis on finding the right answer rather than the right question.” My friend Al goes on to say basically the same thing: “The formulation of a problem is far more essential than its solution, which may be merely a matter of mathematical or experimental skill.”

Typically, would you agree that in most cases (not including yours of course):

  • Organizations struggle with convincing their stakeholders of the value they create?
  • They face strong resistance in expanding their influence or footprint?
  • Budget wars are an annual and the quarterly norm?
  • Savings numbers are always questioned for validity?

If any of the above is true, then the answer to the title becomes self-evident.  A Marketing person!  I kid you not.  In the first Sourcing organization I set up in my career 16 years ago we had a full time marketing person (Peter).  His job was to constantly market our services and we took a marketing approach to it.  This wasn’t about creating some spreadsheets or graphs of generated savings.  He had to make sure that we continued to expand our footprint inside the company.  To sell our value to the stakeholders.  To keep in constant communication with them.  To make sure we were getting repeat business.  To ensure that we were getting referral to other stakeholders.

Now I’m sure that you are doing all of the above but I’m talking about most of the other organizations.  We have not seen  a true marketing focus being applied to this effort and I’m always surprised by that.  Especially given the tools available today.  It does not necessarily mean that you need to have a full time dedicated resource but you do need to fulfill that role.  So next time you are sitting in a budget meeting being asked one more time to take another haircut, you may want to think about your marketing effort.  Oh, Pete is Peter Drucker and Al is Albert Einstein.  Let me know if you would like more details.

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The Unintended Consequence of Efficiency

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The Internet along with our iPads, Kindles, Androids, iPhones, laptops, etc. have made our lives infinitely more efficient over the last several years.  Twitter and Facebook give us access to information we didn’t even know we needed.  And who needs an encyclopedia when we have Google search and Wikipedia. We can do almost EVERYTHING virtually through technology – communicate, shop, learn, bank, pay bills, manage investments, etc. and the list goes ON and ON.  Our lives have been made immeasurably easier by our access to technology, almost to the point that we cannot function without it.  Most would agree that this has been a positive step forward and the “intended consequence” of creating efficiency has been accomplished.  BUT I would argue that the unintended consequence of having our entire lives exposed to the world is one that is rarely discussed and can have some serious and even devastating implications.

In an article titled “Google Defends New Privacy Policy” by The Wall Street Journal, it is apparent that we are being constantly monitored and followed when we use any Google product (and don’t we all?).  According to Google, this is being done to make our lives easier, not to mention making Google infinitely richer through increased advertising dollars.  What many users translate this into is receiving targeted ads every time you go to the internet – annoying but not necessarily devastating.  Right?  Wrong!  You are clearly being followed just as if someone was stalking you in a shopping mall.  It is an invasion of privacy and is pretty darn scary.

An article came out yesterday in Business Week entitled “Microsoft Ads Bid to Capitalize on Google Privacy Backlash”.  In the article, Microsoft Corp. is aiming to take advantage of a backlash against Google’s privacy policy changes by rolling out new ads that say its rival is risking users’ privacy to squeeze more revenue out of them.  Will Microsoft really be any better?

Facebook, by the way, may soon be facing the same issue.  In an article in the Daily Caller entitled “Facebook Surrenders Its Privacy In IPO Documents”,  Facebook  openly admits that it has concerns that both the U.S.  and Europe may impose tougher privacy rules that would make it more difficult for the company to stockpile information about its users.  Everyone is doing it!!!

So what does all this mean for the user?  Be careful!!!  In our eagerness to share excessive amounts of personal information from our daily/hourly goings-on in Facebook to our everyday (don’t even think about it anymore) transactions, we are opening ourselves to Trouble (yes, with a capital T).   Many negative unintended consequences such as cyber bullying, robberies, cheating, identity theft, reputation bashing, etc. are all a result of making our lives more “efficient”.  As a recent victim of one of these unintended consequences, identity theft, I can tell you that trying to fix the problem FAR exceeds the efficiency that was initially created.  By the way, my problems were not caused by a local hooligan but by a VERY sharp hacker (most likely tens of thousands of miles away) that helped himself to ALL my personal information.  But for the internet, I would never have crossed paths with this individual (this is an assumption since this person will most likely never be caught).  As a result, I have fallen back to the good old U.S. mail, writing checks that actually require a signature and no longer do any “transactions” on-line.  Inefficient maybe, safer YES!

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An Annual Necessary Evil – The Performance Evaluation

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We all dread the annual performance evaluation process whether we are a Sourcing or Supply Chain employee or a manager. It seems like the same old process year in and year out, used simply to justify compensation increases or not. If the performance evaluation process is part of an integrated talent management program, it doesn’t feel that way. In most cases the measures are tactical in nature and measure activities as opposed to value added outcomes. The measures are seldom tied to the strategic objectives of the company and in many cases drive behavior that is detrimental to achieving those strategic objectives. Your development plan (if there is one) usually lists a variety of training classes you can take individually to improve your individual skill, often ignoring the required organizational competencies that help drive real value for the company. This process should be ongoing and not just annual, but at most companies it is not.

Performance evaluation can be one of the most powerful tools in Competency Based Talent Management (“CBTM”) but it must have a well-defined competency model at its core. It should also be integrated into the other four phases – recruiting, training / development, career management and succession planning. Here is how this should work:

  • Define the role of the Sourcing / Supply Chain organization and the individual job roles in a way that supports the strategic objectives of the company.
  • Determine the competencies (behaviors – both strategic and functional) necessary to be successful in the defined roles. This is your competency model.
  • Use the competency model to:
    • Determine the skills / competencies required when recruiting
    • Determine the skill / competency gaps to drive your training / development program AND the individual development plans as part of performance evaluation
    • Determine the metrics / measures that will be used to drive the performance evaluation process and career management
    • Drive your succession planning

When performance evaluation is supported by defined competencies the process takes on richness for the employees that helps them understand the behaviors (much broader than activities) that are required to be successful currently and those required to move forward in their careers. In addition, competency based performance evaluation helps managers / employees to identify gaps in strategic competencies (e.g. communication, collaboration, teamwork, change leadership) which are less “measureable” but are as, or more, important than functional competencies. If evaluating performance is focused solely on building functional expertise, as opposed to the critical business skills that make a successful business professional, then the organization will have a difficult time moving employees into future leadership roles (career management and succession planning).

Performance evaluation must also focus on demonstrated competency, since having competency that is not being utilized is of no value to the organization. As such, competency based performance evaluation should be structured such that employees are incented and rewarded (compensation $$) for acquiring and demonstrating new competencies and managers should be held accountable to ensure that employees do so. If you think about it, competency building clearly helps the employee build their individual skill set but also helps to build overall organizational competency. Competency based performance evaluation will make it easier to differentiate between high performers and everyone else since the evaluation process will be less about “what you know” and more about “what you do with what you know”.

Lastly, a critical outcome of performance evaluation must be an improvement plan. Here again, the focus should be on identifying gaps in demonstrated competencies and creating strategies to close those gaps. The improvement plan should be mutually agreed upon and managers should be measured on creating opportunities for their employees to acquire and demonstrate new skills.

In summary, a well-defined competency model is a powerful tool when used throughout the talent management lifecycle, particularly performance evaluation. If you don’t have one for your Sourcing / Supply Chain organization, it is a necessary investment in your most critical asset — your people.

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

  • Major research project geared towards not just identifying the problem but to identifying Next Practices to solve the problems
  • White Paper to focus on Next Practices in Competency Based Talent Management
  • A webinar discussing our findings in detail

Please share your thoughts and challenges regarding Talent Management below. We would love to hear your insights.

Regards,

Anne

Reposted on Sourcing Innovation.

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Mind the Gap – Training vs Competencies

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In our previous posts we talked about designing your talent management program and implementing a recruiting plan. However, these are only parts of a larger Competency Based Talent Management (CBTM) program. You have hired the people you needed. So what? How can you make sure they are integrated into your organization and are able to hit the ground running, creating the optimum amount of impact? Not only do you need to look at training your existing team, you need to create a training program for new recruits as well.

This sounds well and good (and perhaps a bit easy). However, it is not as easy as it sounds. We have heard from many of our Sourcing / Supply Chain peers, particularly at our last NPX, that they are struggling with their training efforts. Training is completed, but the learning is never adopted. So what can they do to change the results?

Adoption brings us back to our vowels (AEIOU). In the past we have talked about the importance of Adoption, Execution, Implementation, Optimization and Utilization in any organizational effort. However, training is just not about the act of learning (a consonant); it is about adopting and implementing that learning to drive business results. Using the vowels ensures that the people being trained start applying what they learned. Implementing the vowels is the key difference between training people and developing competency.

To effectively turn a training program into competency development, you must have a good understanding of your desired needs. This requires that you start with the strategic direction and objectives of the company and what role your organization will play. This will show you which organizational competencies you need and will give you an understanding of the gaps you have within your organization. Now, the closure of those gaps can be tied directly to the company’s strategic direction and the role your organization will play, adding value not just for individuals, but for the company as a whole. Sending 2-3 people at a time to some public seminar designed for the masses may develop individual competency but it is never going to develop organizational competency.

Your gap closure strategies must follow a multi-faceted approach (coaching / mentoring etc.). Make sure your entire approach is rooted in Adult Learning Theory and has experiential learning as its basic tenet. Making people sit through day long lectures with no ability to actually practice the new behaviors and competencies in a safe learning environment is of little value. In addition, the curriculum must include the strategic competencies found during the initial gap assessment. A program consisting of functional or process skills alone is doomed. The strategic competencies must also be integrated into the core process modules so that people know how to actually deploy the new process.

Your training strategies must look beyond the technical skills and focus on the strategic skills needed to be successful like change management, communication, collaboration, and decision making. Oftentimes these skills are overlooked when training, although they are the most important to organizational success. Anyone can learn to use any process and those are the skills most organizations worry about when hiring and training. However, developing strategic skills can take your team to the next level and have more lasting effects on the group. It takes your group from Best Practices to Next Practices.

Developing the right competencies within your organization is not easy. It takes a lot of thought and energy to train and develop your team. Sometimes closing the gap can make you feel like you are trying to build a bridge across the Grand Canyon. If you start by looking at competency development in terms of AEIOU and strategic alignment, you will no longer need to build a bridge across the gap. You will find that your organization will soar.

In our upcoming posts we will continue to address Next Practices associated with the Competency Based Talent Management lifecycle.

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.

Regards,

Crystal

Reposted on Sourcing Innovation.

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