Negotiation Plan: Kris Kringle

Negotiation Date: December 24, 2008

Parties to the discussion: Me, Kringle, eight tiny reindeer, The Universe.

Elves are expressly prohibited after wreaking havoc at the negotiation table in years past. Receptionist has been advised not to badge any elves and to send them away if they arrive. Kringle as been advised of this requirement and isn’t expected to ignore it.

Objective: To obtain a pile of shiny wrapped presents under the tree on Christmas morning.

Challenges: Kringle and Co. keeps a detailed list of who has been naughty and who has been nice. In 2008 there were at least three episodes filed under my name that could be classified as “extremely naughty”, fifteen “mildly naughty” and 20,846,237 incidents of “only slightly naughty”.

Team will ask Kringle and Co. to present supporting evidence including dates, times, and parties involved for the three extremely naughty incidents. We believe that “I see you when you are sleeping, I know when you are awake” isn’t sufficient evidence to agree to the classification of the incidents.

Negotiation Goals:

• The negotiation team feels the mildly and only slightly incidents are within the acceptable range for obtaining a pile of presents.

  Goal One is to secure Kringle acceptance of this supposition. Team feels this shouldn’t pose a problem as Kringle has agreed on such issues in the past.

• Goal two is to discuss and mitigate the details around the incidents classified as “extremely naughty”. We believe two of the three, with heavy negotiations, could be downgraded to high-mildly naughty and thus fall within acceptable ranges for a pile of gifts.

  The third extremely naughty incident is tricky, and we believe it cannot be mitigated. The team will make best efforts, but worse case position is to accept this one extremely naughty incident and allow for it in the allocation of presents.

  Worst case if the other two incidents cannot be downgraded, it will severely impact the present allocation on Christmas Day. Team feels that this would be a walkaway issue.

• Goal three is the discussion of allocation and distribution of presents.

  High goal: 50 gifts, 15 “substantial” including at least one from Tiffany’s, 25 “pretty damn good” and 10 or less “amusing but useless.”

  Probable: 20 gifts, 5 “substantial” including at least one from Tiffany’s, 10 “pretty damn good” and 5 or less “amusing but useless.”

  Worst case (without walkaway): Five gifts, 1 “substantial” and we would forgo Tiffany’s, 3 “pretty damn good” and 1 or less “amusing but useless.”

The inclusion of a Tiffany’s blue box is negotiable but highly desirable. This should be a “last resort” give in order to get the deal done.

A different allocation of numbers among the three categories is also reasonable, but in no case should the “amusing but useless” category be the majority.

Anything below the probable allocation cannot be agreed to without executive buy in.

Ah yes, this is why SOX matters

Remember in my post yesterday I mentioned how every company has a horror story that illustrates their need for Sarbanes-Oxley controls.

Today, we are watching the story that will be told by eons of Fry’s Electronics employees play out in the press.

Quoted from the article found on SFGate:

“Ausaf Umar Siddiqui is accused by the IRS of concocting an incredibly profitable scheme in which he cut side deals with some of Fry’s suppliers, buying their goods at higher prices than they would normally get, and buying more of them than he normally would, in exchange for kickbacks of up to 31 percent of the total sales price.”

Ah yes, kickbacks. What fun! Cutting side deals with suppliers. Good stuff. This was done to the tune of $65 million dollars in the pocket of the corrupt procurement agent. On top of his annual salary of $225,000!

Shame on the Procurement executive, but shame on the suppliers too. Fry’s should cut off every single one of those suppliers who made shady deals and place them on their disbarred list forever. Because as the old saying goes, it takes two to tango.

I’m guessing what got the procurement guy caught, just as I discussed yesterday, was his greed. The numbers kept getting bigger and bigger until the indiscretions just could no longer be ignored. This guy sounds like a real winner anyway. He was embezzling the money to pay off enormous gambling debts. Not exactly the kind of guy you want running your procurement organization.

Ok, ok, so I’ve been whining about SOX audits lately…maybe the really are a good idea. Maybe we really do need to keep an eye on where our money is going. Reluctantly, I dive into the deep end and audit lists and lists of purchase orders. But I’ll keep Mr. Siddiqui in mind as I do.

Hope this guy does time for his crimes. And also for besmirching the good name of Procurement professionals everywhere!

It takes one guy to ruin it for the rest of us

So the SOX education and audit has begun in earnest in my new role.

Today’s topic: Separation of duties

I’ve come to find that every company has the one story to illustrate this one. The one person who blew it for the rest of us.

The one guy who made SOX a reality. Sure Enron has their own story. So does WorldCom.

At my last company it was the guy who was a buyer that got caught funneling purchase orders (that he created) to his brother-in-law’s business. He was also doing the receipt of goods in the system, thus generating payment.

See, them that create the PR and them that select the vendor and place the PO and them that then pay the vendor on the PO need to be different people.

At my new employer, it’s the lady who discovered a loophole in the purchasing card process and exploited it.

Issue here is when someone (like, say, Finance) says they are going to audit something, someone actually needs to audit it. This wasn’t happening…

In both cases, what got the person caught is that they got greedy. Just a few small purchases here and there go unnoticed. But when it turned into big sums, someone paid attention.

You know, they start small, test it out. A minor indiscretion to see what happens. When it works, the purchasing begins ramping up in earnest.

And we ALL have to hear, “Well you remember when [fill in the name] got caught! We have to put these eighty-two controls in place to be sure THAT never happens again!”

That fun ol’ pendulum swings way too far the other direction and everybody is arm flapping like a Muppet on speed.

And then someone like, well, me, has to step in again and say, “Let’s be reasonable here, people.”

Because I don’t want to have to audit eighty-two different controls for only one work process.

‘Tis the season to take kickbacks, Fa la la la la

So let’s say a vendor sent in a really spectacular box of chocolates. To someone who is not you and is not in your organization.

And let’s say the whole box was placed in a public area and you had to walk by said chocolates several times. Before finally succumbing.

Does that make you complicit in receiving the kickback? Even though you would have NO impact on the supplier or the people who make decisions regarding the supplier?

And does one two three four pieces of high-end chocolate from a well known and quite fancy chocolatier bring one over the threshold for such accepting gifts from a vendor?

Ah, these are the moral dilemmas one must wrestle with during the holidays.

Crunching the digits

Just got back from a two-day training session on presentations skills. One day was devoted to making a pitch to C-level and one level below executives. Something I’m likely to be doing a bit more of in my new role.

To emphasize their training, we watched several clips from a variety of high level folks at well known companies. The head of the training company had interviewed some power players and put together their thoughts for our benefit.

The one thing I heard time and again was that high-level execs don’t want a story, they want the data. Tell me what you want. Bottom line it. Don’t give me a pretty story arc with a surprise ending. Make it clean. Make it clear. Let me decide. Then move on.

Ok, so fine. I can *do* analysis. I can crunch the numbers, bash the calculator and roll around in the Excel spreadsheet.

I just don’t wanna.

Sssh, let that be our little secret.

Right now, I’ve been tasked with analyzing about 1200 lines of data. It is comprised of trouble tickets. I’m supposed to make some strategy conclusions by staring for days at lines of black numbers in white columns and rows.

Ugh. And I will.

But I’d much rather tell the story of *what I know* about the call center. That we’re overworked. That we do too much of the job of a sister organization. That phone calls are a horribly inefficient way to provide support.

I know all of this to be true. But no one will buy my schtick if I can’t show them the data. Pretty pie charts and graphs. Neatly lined up digits.

And so I crunch.

It had to happen sometime

In these very pages I’ve spent some time railing against the absurdity of the haphazard implementation of the Sarbanes-Oxley Act of 2002.

Sarbanes-Oxley was formed in response to the WorldCom and Enron scandals.

Basically, SOX says any company should have controls and that they should adhere to those controls. Simple, right?

And suddenly, SOX has become the catch all for all the “I don’t wanna” situations from everyone from Procurement, to Finance, to Treasury, to just about every Sales Weasel you can get your hands on.

Because all someone has to say, “It’s a SOX compliance issue,” and everyone will draw back, as if burned, and concede the point.

This makes me angry.

And I holler about it every chance I get.

And karma has turned her ugly wheel of fortuna my way…

In my new gig, I am now in charge of the internal SOX compliance audit.

Oh the misery.

Opportunistic

Yes, folks, it’s that time of year where opportunity in the form of many a Sales Person, will come a’knockin’ at your door.

It’s the end of the calendar year, and for many, the end of the fiscal year. It’s also the Holidays. I know some folks who need to up their commission check to help pay for all that the holidays entail.

What this means to you, Oh Hero of Procurement, is that you have the opportunity to make some smokin’ deals if you are prepared.

But be advised, this can also be a time when you make bad deals just because you are under pressure to go fast. The Client wants to spend their budget. They want their stuff. They want to leave for holiday break and not worry.

And the pressure is on.

Going fast should not mean that you don’t vet the details of the deal and make sure it makes sense.

I’ve seen many a year-end quote that looked great and in the teeny tiny small print at the bottom had a gotcha that the procurement rep totally overlooked.

Or the old “we’ll do the contract in January” routine. Just don’t. You’ll NEVER get the concessions you need if the deal is already done and the supplier has all the money.

And have the courage and self-awareness to stand up and say “this isn’t a good deal, we shouldn’t do it” if that’s really the case. Don’t do a deal that doesn’t feel right, doesn’t pass your procurement “sniff test” and it just plain bad business.

I’ve been fortunate that only a handful of times have I had to stand up in the face of furor from supplier and client and say “we are not going to do this deal.” Thankfully in each instance, I had enough of a reputation with my client that they listened to me.

So all of that said, with all warnings firmly in mind, it can also be a heck of a lot of fun to negotiate when both sides are really, really incentivized to get the deal done.

Eye on the news

The news, it’s wonky these days. Market is up. Market it down. Market is sideways, off the rails, headed for disaster. Bailout. No bailout. More bailout. Taxes? More? Even more?

Today I attended a pretty good training course with the Finance organization. They were leading up a new program here for assessing the financial stability of our vendors.

“But…but…” you might say, “don’t you *already* do that?”

Well, yes and no.

When we’re looking at a deal with a new supplier, sure, we run D&B and look at financials and make our assessment before signing the contract.

We pull a nice D&B. We do the deal. We file the contract. We forget about it.

But we all too often forget that a D&B is backward looking. And reflects only that moment in time.

It was brought up that Lehman Brothers had a very high D&B rating just the day before they collapsed.

It’s not about what happened yesterday. With this wildly swinging market, it’s about what is happening NOW. And predicting what’s happening next.

And it’s about pulling out the files on those Tier 1 and Tier 2 suppliers and pulling the D&B’s again. And looking at the financials.

About talking to your supplier representatives about the health of the company. About making sure that you will get what you need, especially if you have a sole source vendor for a critical product.

As a procurement and sourcing professional, it doesn’t pay to get lax about ANY supplier. Good, up to date data is just a Google away. Don’t forget to use the resources easily at hand.

It’s about being able to reassure yourself and The Client that you not only did your due diligence, but that you keep refreshing it to avoid any uh ohs.

Rock on, Procurement Heros! With a calculator in one hand and your preferred T’s&C’s in the other!

Lightbulb moment

I was at the pump today filling up my car on the way to work.

I was pleased to see the cost of fuel is now well below $2 a gallon. Very nice on my already strained pocket book.

So as I drove along, I got to thinking about this new low cost gas and…a lightbulb went on.

I remembered all of those deals I’d negotiated with vendors where I allowed them to raise shipping rates for “fuel surcharge” when gas was tap dancing around the $5 mark.

My phone was ringing off the hook then. Wailing and gnashing of teeth about the costs, oh the costs, and I had to grant them relief.

Funny. My phone’s not ringing now. People aren’t begging me to let them lift the surcharge. Nope. They’ll gladly continue to charge me extra on every order for fuel that’s now quite low cost.

This ticked me off. So now I’m going to hit all of those people back for the money. Yes, it’s extra work on me, but they shoved me, threatened me and cajoled me to get the raise in price. They’ll get nothing less from me in return.

grr!

A gap so wide you can drive a truck through it

Yes, I have to report today on a topic that has suddenly become near and dear to my heart.

Contract employees.

In my new role, I have about ten of these good people on my team.

They are quick labor, sure. Some see contractors as cost savings over regular full time employees (fte’s). And that’s true, in the short run.

Over the long run, not so much.

But I’m not here to talk about retention rates or about tax implications. There are a lot of folks far more well versed in this area.

My concern today is that it is nearing the end of the year and the ever present holidays are looming. As is the end of The Company’s fiscal year.

This is usually a time of both hard work and celebration…for the fte’s. Contractor folks get left out of the party lest we treat them like regular employees, and get ourselves in a bind.

Plus, they work for a supplier. Technically, anything we might provide them is a ta-da!!!….kickback.

Fine, fine. But these people run a call center. They are the first line, front line for the procurement organization. They are our face to The Client and how they interact sets the pace for the corporate view of all of Procurement and Sourcing.

If I know one thing about a call center, it’s this:

Burnout is the main factor to be managed.

And giving people a little year end “something nice” and a thank you sure goes a long way towards keeping people wanting to put up with the kind of things these folks put up with every single day.

But I can’t. I have to defer to their “employer” to bonus and gift them. And I know their employer. They won’t. They are cheap company.

Wanna know how I know they are cheap? I *negotiated* the deal with them. I know what they are paying people and I know their markup.

But I’m severely limited in what I can do to take care of some of the finest employees, ahem, contract employees I’ve ever worked with.

This is frustrating. And it drives a wedge in my team between the fte’s and the contractors. The ever expanding gap between The Haves and the Have Nots.

And so now…I have to mind the gap.