Why Influencing Change?

Why Influencing Change?

Today’s Supply Chain professionals are facing numerous, varied and complex changes which often occur simultaneously.  Therefore, to be an effective Supply Chain leader, we must be good at influencing change.  We spend a tremendous amount of our time trying to influence the behavior of others – whether it’s up the organization with leadership, down the organization with our direct reports, across the organization with peers or internal stakeholders or outside the organization with customers or suppliers, or in the community, with friends and family.  When you think about it, leadership is really intentional influence.

The problem is we – individuals and organizations – are not very good at it.  An Arthur D. Little study reports that 85% organization change efforts fail to meet quality cost or timing goals.  Deloitte’s Global CPO Survey for 2014 found that “Some 68 per cent [sic] of respondents still describe their internal influence as ‘mixed‘” meaning that there are significant missed opportunities.  The Corporate Executive Board reports that being an Influencer is one of only six behavioral competencies that set strategic procurement staff apart.  Similarly, University of Tennessee’s 2012 white paper entitled “Skills and Competencies That Supply Chain Professionals Will Need” reports that “Inspiring and Influential Leadership” is one of five critical skills.  We must get good at influence!

There is a huge cost if we fail at this challenge.  We risk the vanishing ROI as our project misses quality, cost or timing goals.  There is the lost opportunity cost from the project we neglected while pursuing the failed initiative.  What is the cost of our damaged reputation with leadership, internal stakeholders, customers and suppliers when we fail to influence change?  Since no one likes working on a failed project, deteriorating morale can easily result in regretted turnover.  Finally, there is organization cynicism.  We’ve all heard it: “This is another program of the month.  If I just sit tight, this too shall pass.”  When this attitude becomes pervasive you have organization stagnation which no business can afford.  Unfortunately, research shows that fewer than one in eight workplace change efforts produces anything other than cynicism.

Traditional change management has failed to deliver the degree, speed or sustainability of desired changes.  Why is that?  There are several reasons.  Traditional change management is very project management oriented, focusing on only the tip of the iceberg – things like strategy, systems, process and structure.  While all of these considerations are important, they are insufficient to drive the desired change.  They fail to focus on what’s below the waterline which includes culture, norms and status quo behaviors – all of that organization resistance that undermines and impedes our change effort.  Organization change is really just the sum of changes in individual’s behavior, and that is the neglected area of opportunity.

For most failed change efforts, there is a conspiracy of causes and few of us have a systematic way of even thinking about this fundamental challenge.  We identify one or two causes of resistance and look for a “silver bullet” to tackle them.  Change agents have their favorite strategies to combat resistance such as more communication or training.   The reality is that we typically underwhelm an overwhelming challenge.

For any change to take place an individual asks themselves two questions: 1. Is it worth it (motivation)? and 2. Can I do it (ability)?  Influencing Change training, based on the New York Times bestseller, Influencer, focuses on changing individuals’ behavior utilizing a systematic framework for first diagnosing causes of resistance, and then strategizing how to both motivate and enable change.  It also equips the learner with skills and strategies to be successful.  For example, we tend to rely heavily on verbal persuasion to spur personal motivation.  Unfortunately, this is notoriously ineffective.  When we encounter resistance, we often share more information, putting people into a PowerPoint coma where all they hear is “wha, wha, wha, wha, wha”.  It is the equivalent of talking louder when a person who speaks a different language doesn’t understand.  Instead, we should be seeking Direct or Vicarious Experiences which help people to connect to values they already hold to make change more appealing and sustainable.

Influencing Change employs all Six Sources of Influence™, which address motivation and ability as affected by Personal, Social and Structural forces.  Research proves that by employing four or more sources of influence against the desired vital behavior you increase your success tenfold.

How’s your change management working for you?  If it leaves you wanting, and you want to increase your success tenfold consider Influencing Change.

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For more information contact:

Barbara M. Ardell
Vice President & Influencing Change Practice Leader
Paladin Associates, Inc.
BMArdell@PaladinAssociatesInc.com
(770) 315-1581

Procurement Transformation -- Influencing Change

Procurement transformation is obviously a huge undertaking with significant risk.  Research actually shows that somewhere between 66% and 85% of organization change efforts fail!  Successful efforts require detailed project planning and a new approach to change management.  Traditional change management focuses on Strategy, Systems, Process and Structure.  While these are important, they are also insufficient.  What typically sabotages change efforts is the organization’s underlying culture and status quo behaviors.  These underlying issues need to be addressed as part of any successful change initiative.

Organization change is really the sum of individual’s behavior changes.  Start by defining how you’ll measure desired results.  For a procurement transformation, measures might include things like spend under management, contract compliance and technology adoption.  Next, you need to identify the vital few (high-leverage) behaviors that will deliver these results.  Vital behaviors can be found by looking at crucial moments -- the point in time when individuals decide to change, or not.  They can also be uncovered by studying positive deviance -- situations where there is unexpected success.  This might be a specific individual, business unit, location or company that successfully implemented change where others failed.  Finally, you should examine culture busters -- behaviors that are currently taboo or punished, or that challenge cultural norms.  For example, is it acceptable to speak up when management sets a deadline that everyone knows is impossible?  Overcoming this taboo might be the vital behavior that tips the scale towards success.

After identifying vital behaviors, you’ll need to develop a comprehensive plan defining how you’ll influence those desired behaviors.  According to the New York Times bestseller Influencer, influence comes from six sources which encompass motivation and ability from personal, social and structural forces.  Most change initiatives mistakenly look for the “silver bullet”, the one influence strategy that will drive change.  In reality, we need to overwhelm the challenge by using multiple sources of influence simultaneously.  Employing all six sources to support vital behaviors can increase success rates tenfold ((http://tinyurl.com/kg3hyjo)!

Below are some examples of the Six Sources of Influence™ that drive change.  Remember, the power comes in using six sources simultaneously to overwhelm the resistance.

1.     Personal Motivation

We typically rely on verbal persuasion to get folks on board with change.  Unfortunately, verbal persuasion is notoriously ineffective.  To gain support for a change, we need to tap into people’s beliefs and values.  Personal and vicarious experiences are useful for this purpose.  How can we provide our constituents with an experience that will instill the desired commitment?  Perhaps a benchmarking visit to a best-in-class company or attending an industry conference to network with peers would be more impactful.

2.     Personal Ability

Good training targeted towards individual needs is important when introducing new processes or technology.  However, we need to be sure we are really addressing the right need.  When implementing eSourcing software, we focus on the technology.  How do I create an item?  How do I register suppliers?   How do I create an RFQ?  However, as compared to traditional sourcing methods, eSourcing requires a much more methodical and rigorous sourcing process.  Perhaps our users aren’t skilled in strategic sourcing.  Training on the basic process may be a pre-requisite to technology training.

3.     Social Motivation

Conventional wisdom suggests targeting Innovators to drive change.  However, experience suggests that Opinion Leaders are better at providing positive peer pressure.  Innovators may not have the trust of the broader organization.  They’ll try anything!  Conversely, Opinion Leaders are independent thinkers.  They’re skeptical.  That’s why the troops respect them.  In any change initiative, Opinion Leaders will work either for or against you, so you better get them on your side.  Solicit their input and listen carefully.  Adjust as appropriate to address their concerns.  Once convinced, these individuals will become your biggest advocates and grease the skids for adoption among their reluctant peers.

4.     Social Ability

Do others enable or disable your desired change?  A process map highlighting potential failure points is useful here.  Who relies on whom, for what, by when?  Perhaps “resistance” is really a matter of someone not getting the information they need from someone up the line.  It’s ability rather than motivation.  We need to fix the process.

5.     Structural Motivation

Upper management support is critical.  They need to provide the resources to support the change initiative, and must help to break down barriers encountered along the way.  However, we often depend on upper management to allocate “carrots and sticks” in order to drive change.  Rewards as motivation are tricky.  We must be cautious to reward the desired behavior.  For example, if we reward individual results but want collaboration, we’ll be disappointed.  We should also be cautious about incentives that are too large.  Excessive incentives encourage any means to an end.  In addition, the incentivized behavior will be short-lived.  As soon as the reward goes away the desired behavior will likely disappear.  Structural motivation should be used after Personal and Social Motivation, and rewards should be used in moderation to avoid pitfalls.

6.     Structural Ability

We discussed training under Personal Ability.  However, training is only a first step.  As a professional trainer, I’m appalled that only 10% of what I teach is retained!  This means that ongoing support is critical because users will take the path of least resistance when faced with obstacles.  If there are structural issues (e.g. help and support are constrained due to physical distance, time zones or language barriers), users will just do what’s familiar and easy.  It’s important to consider how the environment (data, facilities, templates, tools, etc.) support or hinder our change effort.

Each organization is different as is each change initiative.  That means you must tailor the approach for every situation.  Chances are you won’t get it right the first time.  That’s why it’s important to continuously monitor progress and make appropriate mid-course corrections.  Don’t get discouraged.  Remember that disappointments aren’t disasters, they’re data.  We need to incorporate the learnings and adjust as appropriate.

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Barbara Ardell is VP at Paladin Associates, Inc.  To find out more about their offering Influencing Change – the solution to Procurement’s change challenges, please click here.

What Have You Got To Lose

Aberdeen’s recent report: “From Preservation to Prosperity; The CPO’s Agenda for a New Decade” ⁽¹⁾ identifies top pressures driving Procurement’s focus:

• Top down directive to cut costs 69%
• · Increasing supply risk 27%
• · Lack of visibility into enterprise spend 21%
• · Insufficient number of staff 20%
• · Insufficient skill of staff members to capitalize on savings opportunities 18%
• · Increasing globalization/supply chain complexity 18%

Bottom line: Procurement organizations are charged with doing increasingly more with existing or fewer resources. This pressure has rightly led to automation of many procurement tasks such as requisition and invoice approval, spend analysis, contract management, etc. However in the short run, automation initiatives often strain Procurement resources even further as they must continue to support the current processes while designing and implementing new, automated ones. There are uncountable examples of Purchasing organizations whose savings initiatives have come to a screeching halt due to an ERP implementation. Sound familiar? Further, as Procurement organizations transition from manual processes and a tactical focus to strategic organizations they also find that their resources lack the skills and business processes for the new era.

The pressure to deliver more with less, combined with skill and process obsolescence often drives Procurement management to seek outside consultants. While traditional consulting firms may help, they often leave the sponsoring organization with a huge bill for services and internal resources that are no better equipped than they were to begin with. Fortunately, there is a new breed of consulting firm that addresses this dilemma.

The “graying of America” and the corporate downsizing of the last decade have spawned “boutique” consulting firms comprised of highly seasoned Procurement professionals often willing to work on a gain share basis. Unlike traditional consulting firms who are highly protective of intellectual capital, these new firms typically encourage knowledge transfer and promote client mentoring. They don’t sell the “A Team” and deploy the “C Team”. Their highly experienced professionals work alongside existing resources helping to design new strategic processes coaching your team through implementation. They teach your people to fish! Simultaneously, they handle much of the “leg work” allowing savings initiatives to move forward at a more rapid pace. Importantly, their efforts are paid for out of actual bottom line savings with a guaranteed ROI leaving you with money in the bank and a better equipped organization.

Paladin Associates and other such boutique consulting firms can help you with technology implementations such as spend analysis and eSourcing as well as strategy development, sourcing process improvements, skill training and staff development while delivering bottom line savings with a guaranteed ROI. Your staff learns from industry’s best with efforts funded by accelerated bottom line savings. What have you got to lose?

⁽¹⁾ Pezza, Scott & Christopher J. Dwyer. “From Preservation to Prosperity; The CPO’s Agenda for a New Decade.” Aberdeen Group. September 2010. http://www.aberdeen.com/Aberdeen-Library/6355/RA-procurement-spend-management.aspx. (Registration required.)

Making Sourcing Savings Stick

As a sourcing professional, my most difficult negotiations aren’t with suppliers but rather with internal customers. Based on conversations with my colleagues, that experience is not unusual. One measure of this challenge is “savings leakage” (savings negotiated but not realized). Aberdeen Group reports average leakage rates of 21% as Purchasing strives to implement its sourcing decisions. Best In Class companies experience about 14% leakage whereas All Others see 24% leakage ⁽¹⁾. Small companies experience up to 40% savings leakage ⁽²⁾. Net, there is a huge payout for improvement.

There can be several reasons for leakage:

1. Communication. The using organization is unaware of the award and continues buying from the incumbent.
2. Inconvenience. The new supplier’s process is inefficient providing a negative incentive to change (e.g. a travel reservation website which is difficult to use).
3. Fear of the unknown. There may be a long-standing, positive relationship between the supplier and the user. Alternately, the internal customer may not be thrilled with their current supplier, but at least the incumbent is “the devil they know”.
4. Lack of trust. The internal customer organization doesn’t trust the buyer to properly address non-price criteria when making sourcing decisions.

Regardless of the reason, leakage represents innumerable hours of wasted effort and, more importantly, millions of dollars in missed bottom line profit improvements.

Communication breakdown is relatively easy to address, particularly with the use of eSourcing, eProcurement, Spend Analysis and on-line contract management systems. The other three reasons require a deliberate process and up-front planning. It’s all about effective change management! Successful sourcing managers don’t wait until after the award to sell their internal customers. This is particularly critical in companies where business units are relatively autonomous, and not subject to corporate edicts.

Effective sourcing professionals follow Stephen Covey’s advice: “Begin with the end in mind”. What does that mean? It means involving key stakeholders throughout the entire sourcing process so they will support implementation of the ultimate award decision

Specifically, what does this entail?

1. Ensure upper management support for sourcing initiatives and savings goals.
2. Initiate a comprehensive and methodical change management process early on.
3. Work with stakeholders to clearly define decision criteria with appropriate measures.
4. Conduct the RFP/RFQ with stakeholder input and involvement.
5. Gain stakeholder support for a comprehensive implementation plan and enforce accountability.
6. Monitor expenditures over time to identify any leakage.

Sound like a lot of work? It is. However, it often eliminates months of wasted effort on sourcing decisions that don’t stick. Why is it that we never have time to do it right, but we always have time to do it over? Is this formal process necessary for all savings initiatives? No, but the thought process should be applied to all situations. Thinking through this process allows you to determine the extent of the effort required. One size does not fit all.

Addressing stakeholder fear, lack of trust and potential inconvenience through a comprehensive change management effort and improved communication will have a tremendous impact on savings leakage.

Click here to access a more detailed write up or here for a podcast on the topic.

⁽¹⁾ Aberdeen Group. “The Advanced Sourcing & Negotiation Benchmark Report. January, 2007. http://aberdeen.com/aberdeen-library/3857/RA_AdvancedSourcing_3857.aspx

⁽²⁾ Aberdeen Group. “Sourcing Challenges for SMB”. August, 2007. http://aberdeen.com/aberdeen-library/4420/SI-smb-sourcing-challenges.aspx

This article was originally published on E-Sourcing Forum:

http://www.esourcingforum.com/archives/2010/04/13/making-sourcing-savings-stick/

Strategizing for Successful eSourcing Implementations

Your company has wisely contracted for an eSourcing solution. You are relying on it to deliver process improvements and sorely needed cost savings. You’ve trained your people, but you recognize that the challenge has just begun. Internal adoption is key to your success.

The challenge you face is culture change. It is the biggest obstacle in any software deployment. Less than 15% of your user base will be “early adopters”. The majority will take a “wait & see” approach, and 10% or so will be “foot draggers”. There will be resistance because the implementation requires behavior changes for all involved.

Experience across numerous customers representing a variety of industries has identified some levers which can help to accelerate user adoption. These are:

• Goals and Measures – Creating a “pull” enviornment
• Organization – the right structure, roles and responsibilities
• Processes – documented best practices

Leadership creates a “pull” environment by establishing Goals & Measures and holding people accountable. Since everyone has more to do than they can possibly get done, they must set priorities. So how do they decide what gets done and what gets left undone? It is human nature to seek pleasure and avoid pain. Therefore, what gets measured by leadership gets done! That’s why goals and measures are critical for internal adoption.

While goals and measures are important they must be supported by the proper Organization. This is not merely about structure – the boxes on the organization chart. You must also have clearly defined roles and responsibilities with the positions staffed appropriately. Key roles include:

Champion – He/she establishes and communicates goals and measures, provides necessary resources, breaks down barriers and holds people accountable.

Master User – This individual “puts the feet” on the implementation. Required skills include: Leadership, Change Management, Project Management, Sourcing & Communications. He/she is the liaison with the Champion and becomes the on-going center of eSourcing expertise. A strong Master User is a key indicator of success.

Super User – In larger organizations, the Master User can’t do it all. The Super User is typically an on-site resource who teaches tools and tactics, models best practices, coaches other sourcing professionals, shares learnings within and across the organization, and identifies barriers and improvement opportunities.

Sourcing Professionals – The sourcing professionals do what they’ve always done – apply sourcing expertise to deliver cost savings, cycle time reductions and process improvements. However, they perform these tasks with the assistance of an eSourcing solution supported by new processes and best practices under the tutelage of the Master and Super Users.

The third lever for internal adoption is Processes. A quality tool called the P-D-C-A cycle (Plan-Do-Check-Act/Adjust) is useful for this purpose.

Plan includes: creating an implementation project plan, user training and spend analysis which enables sourcing pipeline development. There is a tendency to shortcut planning and jump to action. This typically results in significant frustration and rework.

Do refers to the actual implementation. This involves the application of processes, best practices, templates and checklists to conduct successful eSourcing events. Most eSourcing solutions provide templates and allow you to embed processes and best practices into the project management feature of the solution.

Check relates to tracking your progress. Are you achieving the goals established on both a program and project basis? Your goals must be supported by specific measures against which you track.

Act/Adjust focuses on continuous improvement. This includes periodic reviews where individuals share learnings with each other, identify improvement opportunities, and develop an action plan. The cycle then repeats.

Using the three levers: Goals & Measures, Organization and Processes, helps to embed eSourcing into your organization’s culture. Ignoring these important considerations will impede your efforts thereby delaying the efficiencies and savings that are critical for survival in today’s economic climate.

Barbara Ardell - Vice President - Paladin Associates

This post was originally published on E-Sourcing Forum at: http://www.esourcingforum.com/archives/2010/04/01/strategizing-for-successful-esourcing-implementations/

Stopping Contract Leakage

You've invested countless hours and completed your strategic sourcing process. The resulting award will deliver significant and important savings to your company's bottom line. You're a hero, at least for now. But how do you ensure that the award is implemented as contracted so that the savings, in fact, accrue? And how will you know?

Contract leakage is your enemy. It includes things like:

• Buying from a non-contract source.
• Buying non-contracted items.
• Buying through the wrong channel (in store purchase or retail website versus "punch out" catalog)
• Paying a total delivered price different from the contract (including payment terms, freight, duty, etc.),
• Incorrect or missing contract reference which results in non-contract billing.
• Not getting rebates or other volume price reductions.

Most sourcing professionals face these challenges and have a difficult time plugging all the holes. This is particularly true for today's awards which often span vast geographical regions and numerous business units. Aberdeen Group reports average leakage rates of 21% as Purchasing strives to implement its sourcing decisions. Best In Class companies experience about 14% leakage whereas All Others see 24% leakage ⁽¹⁾. Small companies experience up to 40% savings leakage ⁽²⁾. The risk and the opportunity are huge!

To address this challenge, one needs to do the following for each potential leakage point:

1. Measure the leakage rate.
2. Understand the root cause.
3. Fix the problem – either the user behavior, vendor behavior or change the definition of "right".
   Most people don't even try to do #1, don't understand #2 and, therefore, are in no position to fix the problem. Let's examine each point in a bit more detail.

1. Measure The Leakage Rate
There is an axiom among business gurus that states: "What gets measured, gets done." So if it's important that our award gets implemented correctly, then we first need a way to track actual purchases and get visibility into all of the potential leakage points listed above. Also, measurement must occur on a timely basis so that any required corrections can be made before additional savings are lost, perhaps forever. You wouldn't drive your car by looking in the rear view mirror. You can't effectively manage your expenditures that way either. Fortunately, today's spend analysis solutions provide the functionality we need to efficiently monitor the various components of our business awards so that we can take the necessary action to forestall contract leakage.

For this purpose, it is critical that data be refreshed very frequently – at least monthly. A quarterly data extract leaves erroneous spend unchecked for 3 months draining savings that may never be recovered. Monthly extracts are actually more efficient. Once the queries are defined, they get put into a monthly schedule and can happen automatically. They become part of the routine. A monthly review becomes part of the sourcing manager's routine as well. With an effective spend analysis solution, he/she can quickly review contract performance. Some tools (such as BIQ) provide an interactive tool that facilitates period-to-period comparisons and highlights outages by magnitude. This makes it easy for the buyer to prioritize efforts to reign in maverick spend.

2. Understand The Root Cause
Now that you've identified the outages, what do you do? First, you need to understand the root cause(s). As stated in the article above "Making Sourcing Savings Stick", there can be several reasons including: communication, inconvenience, fear of the unknown, lack of trust and others. Quality tools such as "5 Whys" or a Fishbone Diagram can help you get to the root. Fixing symptoms alone results in unnecessary rework.

3. Fix The Problem
After identifying the root cause(s) you want to develop a correction plan. The plan should address management support and must involve stakeholders. It should include detailed actions with names and dates and, importantly, a means of accountability.

Accountability is key but can be tricky, particularly in situations where purchasing is seen as more of a support organization rather than a leader on the path to improved profitability. You must re-double your effort to sell your sourcing plan to corporate management as well as to internal customers. To do that effectively you must:

• Understand and explain the link to business objectives. How will contract adherence help stakeholders achieve their goals?
• Refine business processes to make doing the right thing easiest. Human nature follows the path of least resistance. How can you make it easy to comply?
• Speak like a CEO. The language of management is numbers. What is the impact of leakage on profitability and other financial goals?
• Be opportunistic. Look for "pain" you can relieve. What short or long term pain can be alleviated through compliance?

The preferred approach is the "carrot". Convince your constituency that compliance is in their best interest. Reward positive behavior. Publicize successes and share the glory! However, you must also be prepared to escalate if necessary. As Teddy Roosevelt advised: "Speak softly and carry a big stick". Most importantly, don't get discouraged. You must continually monitor the situation through your monthly reviews, and seek continuous improvement over time.

As sourcing professionals, our job is not done when the contract is signed. We must continually monitor and measure actual spend, identify root causes of leakage and implement effective fixes so that we don't leak 15% to 40% or our hard-earned savings. Spend Analysis solutions provide an effective and efficient means to achieve this.

¹ Aberdeen Group. "The Advanced Sourcing & Negotiation Benchmark Report. January, 2007.
² Aberdeen Group. "Sourcing Challenges for SMB". August, 2007.

Making Sourcing Savings Stick

Click here to listen to the podcast on this topic.

As a sourcing professional, my most difficult negotiations aren't with suppliers but rather with internal customers. Based on conversations with my colleagues, this experience is not unusual. One measure of this challenge is "savings leakage" (savings negotiated but not realized). Aberdeen Group reports average leakage rates of 21% as Purchasing strives to implement its sourcing decisions. Best In Class companies experience about 14% leakage whereas All Others see 24% leakage¹. Small companies experience up to 40% savings leakage ². Net, there is a huge payout for improvement.

There can be many reasons for leakage:

1. Communication. The using organization is unaware of the award and continues buying from the incumbent.
2. Inconvenience. The new supplier's process is inefficient providing a negative incentive to change (e.g. a travel reservation website which is difficult to use).
3. Fear of the unknown. There may be a long-standing, positive relationship between the supplier and the user. Alternately, the internal customer may not be thrilled with their current supplier.
4. Lack of trust. The internal customer organization doesn't trust the buyer to properly address non-price criteria when making sourcing decisions.

Regardless of the reason, this leakage represents innumerable hours of wasted effort and, more importantly, millions of dollars in missed bottom line profit improvements.

Communication breakdown is relatively easy to address, particularly with the use of eSourcing, eProcurement, Spend Analysis and on-line contract management systems. See article below for tips on "Stopping Contract Leakage". The other three reasons require a deliberate process and up-front planning. It's all about effective change management! Successful sourcing managers don't wait until after the award to sell their internal customers. This is particularly critical in companies where business units are relatively autonomous, and not subject to corporate edicts.

Effective sourcing professionals follow Stephen Covey's advice: "Begin with the end in mind". What does that mean? It means involving key stakeholders throughout the entire sourcing process so they will support implementation of the ultimate award decision.

Specifically, what does this entail?

1. Ensure upper management support for sourcing initiatives and savings goals.

• Review your corporate and/or business unit objectives, and be sure your sourcing initiatives support them.
• Communicate to leadership how your savings priorities support business objectives. Be sure to quantify and communicate specific goals and results. Enlist your management sponsor. Partner with Finance. Learn to talk like a CFO.

2. Initiate a comprehensive and methodical change management process early on.

• Identify Key Stakeholders. If the number is very large, look for the "thought leaders". These are the people who influence the rest of the pack.
• Identify potential areas of resistance and develop a plan to address. People resist change for a variety of reasons. Therefore, it is necessary to identify the issues and address them.
• Research customer business objectives and pinpoint those that can be fulfilled through your sourcing initiative.
• Have your project sponsor pre-sell the initiative to his/her peers, being conscious to link to customer business objectives.
• Develop a project plan that incorporates specific actions to ensure customer influence in the decision process. Communicate your objectives and project plan to internal customers highlighting their involvement.

3. Work with stakeholders to clearly define decision criteria with appropriate measures.

• Survey stakeholders to identify concerns, and to begin defining savings goals, award strategy (e.g. single source, co-source, etc.) and decision criteria. Decision criteria should include things like projected switching costs and non-price criteria (e.g. quality, service, etc.). Be sure to get agreement on the weighting of the various criteria.
• Summarize measurable decision criteria, and seek feedback from key stakeholders. If working with a subset of stakeholders, broaden the group for this step. Also, have your sponsor communicate this information to his/her cross-functional peers.

4. Conduct the RFP/RFQ with stakeholder input and involvement.

• Develop the RFP including survey questions which address the "must have" decision criteria. Identify survey evaluators. Validate the survey with key stakeholders. Listen to and incorporate feedback.
• Have evaluators score the surveys. Meet with stakeholders to discuss and resolve discrepancies, to identify the bidder "short list" and to determine how the RFP responses will be incorporated into the RFQ.
• Create the RFQ incorporating the RFP data and appropriate non-price decision criteria. Validate the RFQ with stakeholders. Confirm decision criteria and savings goals.
• Collect supplier responses and bids. If you're conducting an auction, invite stakeholders to participate in a practice auction and/or observe the live event. There is nothing like the excitement of a live auction to build enthusiasm and buy-in.
• Develop award recommendation consistent with pre-agreed decision criteria. Review with key stakeholders.
• Management sponsor should share the approved award decision, projected savings and implementation timing with his/her peers.

5. Gain stakeholder support for a comprehensive implementation plan
and enforce accountability.

• The plan should include actions, names and dates. Manage the plan holding people accountable for meeting commitments. Escalate outages through the project sponsor, if necessary.
• When the implementation is complete, CELEBRATE and share the glory! Acknowledge, publicize and recognize the cross-functional success.

6. Monitor expenditures over time to identify any leakage.

• You can't improve what you don't measure.
• Ideally, use a spend analysis solution to facilitate this process.
• Look for "root causes" of any leakage.

Sound like a lot of work? It is. However, it often eliminates months of wasted effort on sourcing decisions that don't stick. We recently followed this process at a client where there was great reluctance to formally source a spend category. The business owner valued their "partnership" with the incumbent and projected huge switching costs and disruption in order to move business. Why bother!?! By following this process, we identified important decision criteria and enlisted support of the business. They were 100% behind the ultimate award that delivered almost 25% savings with virtually no switching costs!

Is this formal process necessary for all savings initiatives? No, but the thought process should be applied to all situations. Thinking through this process allows you to determine the extent of the effort required. One size does not fit all.

Addressing stakeholder fear, lack of trust and potential inconvenience through a comprehensive change management effort and improved communication will have a tremendous impact on savings leakage. Yes, it requires an upfront time investment, but it also delivers a huge back-end payout!

Click here to read a more comprehensive article on this topic.

¹ Aberdeen Group. "The Advanced Sourcing & Negotiation Benchmark Report. January, 2007. http://aberdeen.com/aberdeen-library/3857/RA_AdvancedSourcing_3857.aspx
² Aberdeen Group. "Sourcing Challenges for SMB". August, 2007. http://aberdeen.com/aberdeen-library/4420/SI-smb-sourcing-challenges.aspx