Gym Class and Supplier Diversity -- Choosing the Right Team

Remember when you faced those horrifying moments in school when the teacher chose two kids to be the "team captains" and one by one children were picked. I remember standing there as the biggest, faster and more popular kids were recruited. I knew that I could contribute significantly to the success of the team, not in size, speed, and popularity but in agility, creativity, stamina and strategy.

Yet when you are young those things just don't seem to matter, and as the ranks of the "chosen" swelled, there were always those of us remaining who were praying to whatever god might listen to please have them "pick me" and don't let me be the last outcast standing!

Now, how is this related to Supplier Diversity? Because just like in gym class, it is not necessarily the biggest, fastest or the most popular that provide the formula for success.

• The biggest often takes for granted their position, with an attitude of entitlement: "Aren't you lucky to have me!" And when there is a problem encountered, it may be difficult for them to firstly accept responsibility and secondarily to really care -- because they know that regardless, they'll always be a top pick.

• The fastest may be able to provide everything you want right now and get to the solution immediately, without focusing on what is truly needed. "If it has worked before, it will work again -- it doesn't matter what your unique nature is -- because this will be done quickly". Remember the parable of the tortoise and the hare? The tortoise was in there for the long haul, always trudging forward and not "taking a nap". Fast may not mean longevity or stamina.

• The most popular gets chosen, just because everybody knows and likes them. They are recognized, perhaps charming, engaging and at one point in time, there actually may have been some substance. But when it comes time to show the mustard in the competition, they are often happy to just rely on their reputation, and not contribute any further. They feel comfortable with their popularity and don't feel the need to do anything else.

As time progressed in school, we came to realize that those that were the last or close to last picks, were the ones that often won us the game. They were driven to succeed, they had no laurels to rest on, and every time up, there was a requirement to prove themselves. They provided the loudest cheering and motivation to keep the team's spirit up and often suggested alternative ways of doing things to stymie their competition's defenses. And often we were amazed at their inherent abilities in the particular sport, because nothing was taken for granted and they spent more time practicing to hone their agility.

Corporations often make the mistake of picking the biggest, fastest and most popular suppliers, without giving due consideration to those who are smaller, more diverse and ultimately more capable.

There is continuously a call for corporations and the public sector to obtain cost savings, and the historical response has been -- "Reduce the supplier base and let's only go with the biggest, cheapest..." and so on.

Unfortunately this is a false economy, similar as in picking teams in gym class. Reducing the supplier base to only the "larger firms" ends up often times getting you the bigger, faster or more popular "classmate", but frequently not the most agile, strategic, or responsive one. Furthermore, just as in sports, there are times when the more diverse and/or smaller firm might be better suited to a specific project. Think of gymnastics, or the jockey on a race horse, where it is more appropriate to be of smaller girth.

Lowest price is also a misguided approach. The thought process should be focused on best value and total cost of delivery/ownership. Wayne Gretzky wasn't the lowest price for a hockey player -- but he delivered the best value and the teams that hired him ended up being more profitable than they would have without him. Based on the "lowest price" approach in the corporate and private sectors, Wayne Gretzky never would have been given an opportunity to play hockey, until he "sharpened his pencil" (or more appropriately his stick).

Smaller, diverse suppliers may not always be the lowest price, but if you look closely at value, they will most certainly win.

Canada has been slow of the mark to embrace anything related to Supplier Diversity. Oh sure, all companies have programs related to workforce diversity, and at a recent breakfast meeting two Presidents of the Canadian Subsidiaries of US based companies spoke extensively about their commitment to workforce diversity and the benefits that their corporations had gained from embracing this concept. However when I lauded them on this approach and then suggested to them that logically the same advantages could be derived from developing small, women and minority owned businesses within the corporation their mouths went agape, and it was suggested that only their US organization focuses on this.

These corporations were not unique in their stance in Canada. Yet it leads one to wonder why, if beneficial and adopted in the US, why isn't it in Canada. Let's face it, the US is a survival of the fittest culture and if there wasn't any clear and present profit motive met with Supplier Diversity programs, they would have long gone the way of the dinosaur.

It is time for both the private and public sector in Canada to actively adopt supplier diversity programs. It makes good economic sense, not just for the country and the GNP, but for the business as a whole, for all the reasons stated above.

This is not a band-wagon. It is sound business practice and it's about time that we start picking the right members for our teams.

Shakespeare, Ethics and Common-Sense

If Shakespeare was alive today, he would probably already have penned a tragedy reflecting the lack of ethics as continuously reflected in procurement activities world-wide.

"To take or not to take -- that is the question. If I get discovered, I might suffer slings and arrows, however I might have amassed an outrageous fortune. There may be a sea of troubles it may cause, yet I can always (with lawyers) oppose and thereby end them!"

In Canada we've had to deal with the sponsorship scandal, and the media is still reporting on issues related to activities in Ottawa. In Toronto, the MFP inquiry should have resulted in a stringent approach to procurement activities, and now questions are being raised about the TTC sole source to Bombardier.

The jury is still out on the most recent issues in Ottawa, as well as the TTC, and we all must realize that there are always two sides to every story, and the one that results in the best headlines usually wins; and this doesn't always mean its the truth!

But to paraphrase Dr. Phil -- "WHAT WERE THEY THINKING!"

Perception of reputation is the reality, and continuously individuals in both government and business flirt with the ethical boundaries. As Lady MacBeth discovered, there you can't wash away the taint that results when it is perceived that ones' "hands are dirty".

Ethics is not rocket science. In most cases it is common sense. If someone is faced with an "ethical dilemma", implies that a problem exists that seems to defy a satisfactory solution. Yet most often times the dilemma is created by pressure from an outside source, and the inherent knowledge that it is not necessarily the "right" approach.

Procurement professionals need to embrace a standard that is above and beyond reproach and act as a role model within the business communities that they serve. It take courage to be willing to withstand the slings and arrows of others, who may believe that cutting a few ethical corners is "expedient". In some cases in fact it may mean that you are willing to risk your job and position -- yet always remember if you lose your job because of an ethical stance, you have not lost your reputation or your career options in the procurement field.

Most of us will inherently "know" if something crosses the ethical boundary. The best question to ask yourself however is "How would this look as a headline in the news?" Headlines are taken out of context, so "reality" is irrelevant. If the answer to this question is "not great", then you know your direction.

If Shakespeare was alive today the denouement to his ethical tragedy would end thusly...

"Alas poor Yorick, I knew him well Horatio, a fellow of most infinite jest, of most excellent fancy, but we find him here after his misbegotten journey down the slippery slope of ethics -- alone, forgotten and vilified."

Follow the Yellow Brick Road to the World of "e"

"Dorothy - you are not in Kansas anymore"!

Many suppliers would prefer to stay in figurative Kansas and not embrace the utilization of e-tools in the procurement world. They lament the fact that only price is important now...not quality. It is amazing that after 10 years, the complaints are still the same and still completely inaccurate.

The story of OZ is about the pursuit of courage, intelligence and passion. It is about moving from a comfort zone....knowing that things may not be perfect, but nonetheless they are predictable. Suppliers like predictable, particularly if it leaves the buyer-supplier relationship in their favor.

e-negotiation is the electronic tool that gives buyers the greatest opportunity and from the perception of suppliers it is the greatest threat. Note, that the operative word is perception, because the reality is far different.

What started off as reverse auction (now called e-negotiation), can in fact be tremendously beneficial to suppliers. The fact is that a vendor will not even make it to the "auction" stage without the appropriate quality. Also, because of the fact that the process is done electronically, without manual calculations, etc., required, more suppliers will be able to participate, as the requirement to analyze 5 takes the same amount of time as to analyze 15. Opportunity knocks for those who have the intelligence to recognize it.

"That's the scary part. I don't know if I should smile, crack up, scream or run."

The biggest fear associated with "reverse auctions" is the driving down of "price" and the potential for exposure of the "price" to competitors. Again, there is a lot of perception here vs. the reality. Let's deal with reality.

Firstly, any worthwhile procurement professional focuses on total deliverable cost (also known as total cost of ownership), which considers both the tangibles and intangibles of a proposal. Pricing is only one component, albeit an important one, to the final consideration. Value for money, warranties, reputation, innovation, flexibility, etc., all plays an equally important role in the final decision making. So a supplier needs to understand how in the industry they rank against their competitors in these areas so that they can properly define their pricing strategy.

Secondly, there are many ways that a reverse auction can be set up. In some cases, the kimono will be open for all to see the actually pricing of competitors (although even in this instance the names of the vendors bidding are in most cases not viewable). There is also the potential for just having the rankings available -- that is are you number one or two etc., in the pricing -- without actually knowing the differential. This protects the confidentiality of the pricing; however, it also makes the bidding more difficult for the suppliers -- as they do not know how far they need to go.

When suppliers go into a high level face-to-face negotiation with a client they have their "A" team available and they have outlined their strategies and their bottom-line. Too often in an e-auction, suppliers have not strategized and do not have their key decision makers readily available, which makes failure all the more probable. Ensure you have a sound strategy with your BATNA in place, and always remember that the lowest price doesn't necessarily win -- decisions are made on both quality and quanitative aspects.

Relationships still matter -- even in the "e" world. I have never done business with a firm where I have not met the prinicples' and felt comfortable that they would work in concert with me to achieve my corporation's goals and objectives. Refusing to work with me when I've chosen to implement "e", which definitively saved my team significantly in cycle time and analysis, meant that this supplier did not understand the challenges that my corporation faced and as such I wouldn't want to do business with them.

As Dorothy said to Toto "I have a feeling we are not in Kansas anymore!", suppliers should help buyers and step up to the plate. Otherwise they might very well have the same ending as the Wicked Witch of the East.