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How To Avoid The Tombstone Effect In Business Relationships by Andy Akrouche

Welcome To Tombstone 

Whenever there is instability and divisiveness in the buyer-side internal relationship framework, this dysfunction is ultimately extended to include external stakeholders such as vendors.

Think of it as the wild west town of Tombstone and the famous battle at the OK Corral.

What would it have felt like for an outsider to ride into Tombstone during the OK Corral gunfight? If you were that outsider, would you try to step into the middle of it and restore peace or, would you run for cover with your own pistol drawn?

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For those of you who have followed my Relational Contracting Intelligence Blog, and/or have read my book Relationships First, you are already very familiar with my areas of expertise and focus.

As you know, far too many business relationships are actually compromised well before a vendor, a service provider or a partner is introduced into the equation.

This is why it is critical to establish and operationalize a relationship management framework (Relationship Charter) before engaging service providers or the vendor community through an RFP, and ultimately a contract. The fact is that without a Relationship Charter, you are inviting your prospective vendors into a Tombstone-like situation. This not only distracts them from their intended purpose, it forces them into a survival mode in which their own survival agenda becomes the primary focus.

Under such circumstances, even the best crafted contracts will not enable you to achieve your objectives.

A collaboratively developed and operationalized Relationship Charter would help:

  • Align internal stakeholders with the organization’s objectives while clearly demonstrating everyone’s gain both individually as well as collectively.
  • Establish a collaborative as opposed to a subordinate communication mechanism that is viewed as being inclusive as opposed to exclusive (Dale Neef talked about the problems of the latter in his 2000 book e-Procurement: From Strategy to Implementation).
  • Employ a collaborative joint governance and alignment framework for managing and controlling the initiative from concept to contract and subsequent fulfillment or execution).

Adopting The Right Mindset (The eVA Success)

Understanding and properly engaging the diverse internal stakeholders within an organization is critical.

In his seminal 2007 post Yes Virginia! There is more to e-procurement than software, Jon Hansen observed the following relative to that State’s successful eVA initiative:

“The recognition on the part of Virginia that government goes beyond a mere org chart but is actually comprised of Higher Education, K-12, Corrections, Public Safety, Transportation, Health, Social Services and Construction etc. meant that they really understood the “special needs, special rules and special challenges” associated with the procurement practice of each entity both individually and collectively.”

This, according to Hansen, was a key to their success – a success that continues even today.

Virginia understood the make-up of their broader government enterprise, and actively engaged all buyer-side stakeholders, aligning their objectives into a coordinated strategy that eliminated barriers to adoption.

In other words, they got their own house in order, before inviting external stakeholders into the relationship.

As Hansen would go on to write; “Unburdened by the misguided belief that tighter controls produce desired results, the Commonwealth brought a service mentality or attitude to the project.  While there is almost always varying degrees of skepticism whenever . . . “big brother” initiates a program, the genuine effort to communicate with individual departments was invaluable in achieving the necessary buy-in for eVA’s success.”

While participation as Hansen put it was not voluntary, the right measures of flexibility within a centrally established framework addressed any potential issues of compliance.

The Relationship Charter focuses on the very elements that Virginia brought together, to create a working relationship between different stakeholders within the buying organization. It is based on a collaborative interaction with stakeholders as opposed to subordinate response to a centrally driven edict, thus creating a stable environment into which a vendor, or an internal service provider can be easily integrated.

Or to put it another way, the Relationship Charter eliminates the likelihood of a Tombstone environment emerging. It enables the buying organization to straighten up its own house before opening the door to external stakeholders or partners.

guns hung up

To learn more about Relationships and Relationship Charters refer to my book Relationships First or read my blog Relational Contracting Intelligence

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partnership

Can you commission success? by Andy Akrouche

“The act of granting certain powers or the authority to carry out a particular task or duty.” – definition of commissioning

There is – at least in the world of complex project contracting and management, a fine line between the delegation of a project’s lead to a more experienced third-party, and the abdication of responsibility for its success.

With the former, the buyer is looking to leverage the expertise of a third-party to accelerate the implementation process to achieve a desired outcome faster and on a cost efficient basis.

In the case of the latter, this objective is often lost by an overriding desire to transfer risk and ultimately responsibility to a third-party. Ironically, this reflects a similar mindset that one would usually associate with the traditional outsourcing model. It will also produce similar results for the same reasons.

The results to which I am referring are the high rate of outsourcing initiative failures.

The fact is that whether you call it outsourcing or commissioning, adopting an approach that is centered on using contracts to legislate performance through onerous terms and conditions, has never made sense.

However commissioning, if introduced as part of a collaborative or relational framework, has the potential to finally deliver on the promise associated with Public Private Partnerships on a scalable as opposed to circumstantial basis.

Scalable Versus Circumstantial

In the past, I have made reference to the successful rebuilding of the I-35W bridge that collapsed in Minnesota.

The project was an incredible success largely because of the circumstances and urgency to get the job done, while being sensitive to the  needs of the community.

Unfortunately, successes such as the one in Minnesota, remain elusive because the circumstances were so unique. When I say unique, I am referring to the exceptions that were made on the part of all project stakeholders to get the job done. This included operating at a level of transparency that is rarely part of the normal complex contracting process.

This raises the question, do exceptional circumstances or situations provide the only opportunity for stakeholders to truly collaborate?

My answer would be a definite no.

This is where commissioning – if introduced and managed correctly, represents the bridge between an ineffectual Public Private Partnership past, and the realization of the promise that comes from a relational approach going forward.

The Road Less Traveled

It is at this point in time that we have to look at commissioning in the context of a new beginning.

When I say new beginning, I am not talking about the introduction of previously unknown or unproven methods. What I am talking about is a different way to look at relationships based upon the values and methodology that can (and has) consistently produce the best results.

Or to put it another way, the I35-W bridge project, and those like it, no longer have to be the exception to the rule.

Scalability is not only possible in terms of achieving consistently successful outcomes, it is guaranteed through a relational approach that is governed by the creation of a Relationship Charter.

In the coming weeks, I will be sharing case study excerpts from my book Relationships First: The New Relationship Paradigm In Contracting, that will provide you with a roadmap to complex contracting success.

In the meantime, we are on the cusp of a very exciting and productive time, as long as we view commissioning through a revised lens of relationship-driven collaboration and transparency.

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Check out the second edition of my book Relationships First: The New Relationship Paradigm in Contracting . . .

Andy New Book Cover

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The Truth About Public-Private Partnerships

“The fact is that the majority of all long-term complex business arrangements underperform or fail because they are structured as a deal or a transaction as opposed to a strategic relationship between key stakeholders. Whatever name you give it, a transaction or a deal is still a deal.” – The (Real) Art of the Deal by Andy Akrouche, Relational Contracting Intelligence Blog, December 23rd, 2013

When I considered the response to a recent Toronto Star newspaper article that talked about the myth of Public-Private Partnerships or P3s, the only surprise was that many people were . . . well surprised.

In calling into question Infrastructure Ontario CEO Bert Clark’s position that P3s are an ideal way to pass off some of the risks associated with complex projects to the private sector, the article while accurate in terms of outcomes was technically incorrect.

What do I mean?

The promise or potential for P3s to deliver significant savings and improved outcomes for governments and the citizen’s it serves is in fact very real. Therefore the myth is not in the possibilities in terms of deliverables, but is in the areas of expectation and execution.

It is this latter point that requires closer examination and the development of an implementation process that is based upon open communication and collaboration.

Communication – More Than Just Talking

In an article written by IACCM’s Tim Cummins he has made reference to the paper “A Conspiracy of Optimism,” by the International Center For Complex Project Management.

The paper identified what it called “the conspiracy that leads executives on both sides of the table to lie to their trading partners and to create a combined version of the truth that leads to mutual delusion over what they can achieve, by when and for how much.”

This I believe forms the basis for the conclusions reached in the Star article, including the misguided suggestion that P3s are “against the public interest.”

The idea or premise of the P3s is not the culprit here, but the way in which we do business.

In his paper titled How to make your outsourcing & PPP initiatives successful, Jon Hansen made reference to the “transactional mindset” associated with most P3 initiatives.

While I will let you read that paper at your convenience, the key take away is that a transactional mindset means that the relationship between the primary stakeholders is viewed as one time interaction. This leads to what Hansen called a “win the business first, worry about making it work afterwards” approach, that ultimately undermines the relationship and eventual outcome.

To move beyond the misconception of P3 promise, we have to change the way in which we approach complex projects. In short, we have to adopt a relational as opposed to transactional mindset. This means that the public sector can work with the private sector to better manage certain risks, however said risks cannot be totally transferred or allocated to the private sector as the public sector ultimately remains accountable for outcome realization. There instead must be a sense of shared risk ownership and reward when working towards a mutually desired outcome. In other words, we must view our interaction with key stakeholders from the standpoint of embarking on a new and long-term relationship, in which all concerned parties work towards an outcome that is rewarding both individually and collectively.

It is only within this framework that open and honest communication can take place.

Collaboration Is An Act Of Will

In his book The Procurement Value Proposition, Robert Handfield wrote “integration across the business is not the responsibility of a few but rather a challenge that must be embraced company-wide.”

These are incredibly powerful words as they speak to the fact that collaboration takes a conscientious and concentrated effort on the part of all stakeholders both within and external to the buying organization. Or to put it another way, one cannot simply hope to become collaborative. There has to be a tangible and coordinated effort to create the means by which stakeholders can work together towards a shared outcome.

P3 connectthedots

This is where the creation of a Relationship Charter comes into play.

The Relationship Charter provides the strategic and operational framework for working together. It is within this charter that metrics, timelines and financial obligations, as well as quality are jointly managed.

Consisting of three parts: Shared Mission and Purpose, Joint Governance, and the SRS Open book financial management framework, the Relationship Charter is based on six foundational principles, which are as follows:

  • Act of Relating – and this is where “relational” comes from.  Connecting and linking in a naturally complementary way
  • Mutuality – Having the same or similar view or output each to the other
  • Respect – Recognizing each other’s needs, requirements, contributions, abilities, qualities and achievements
  • Innovations – Use of combined strength and synergies to deliver improved outcomes
  • Continuous Alignment – Making necessary adjustments to improve and achieve relationship objectives
  • Empowerment – Introduction of Joint management structures and processes at the strategic and operational levels to manage the realization of relationship objectives.

As highlighted in the above text, there is a methodology through which a P3 project can be effectively managed towards the desired result.  A vehicle if you will that enables stakeholders to proactively deal with both known and unknown variables that ensures the project remains on track and meets stakeholders expectations.

The creation and introduction of a Relationship Charter, will eliminate the purported secrecy and lack of public accountability, higher financing and consulting costs, and implied profit making on massive scale that was bemoaned in the Star article.

The introduction of a Relationship Charter also makes far more sense than the suggested throwing out the baby with the bathwater abolishment of P3 projects.

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Turning Good Relationships Into Great Relationships by Andy Akrouche

“Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great. We don’t have great schools, principally because we have good schools. We don’t have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life.” ― James C. CollinsGood to Great: Why Some Companies Make the Leap… and Others Don’t

Good-is-the-Enemy-of-Great

During a recent discussion following one of my seminars I was asked the following question; “If we are 2 years or 5 years into a 10 or 15 year transactional arrangement, can we still become relational and take advantage of the relationship-based paradigm.”

I thought it was a great question for many reasons.

To begin, when one thinks of defining the parameters of doing business, they usually think of it at the beginning of a new relationship.

This is of course logical in that when we build new relationships, we normally spend a great deal of time and effort to establish a framework for how individual stakeholders will work together.  This includes understanding individual stakeholder capabilities in relation to achieving a desired outcome.

Once that new relationship has evolved to the point that it seems to be up and running smoothly, we tend to turn our attention to other areas in which there is an immediate need.  After all, if it isn’t broke as the saying goes, why fix it.  Everything is good!

However, could it be better, or even great?

In this regard, I have always viewed relationships as an ongoing work in progress in which one never arrives but is in a state of constant progression.  This is a critical point to consider because change is truly inevitable.  What works today may not work tomorrow, and therefore you must always look for ways to improve upon the status quo, or the good.

That is why when I was asked the question “can we still become relational” – even after many years of working together, I said yes.

How To Make Good Relationships Great

So, how do you turn a good relationship into a great relationship?

It all begins with the collaborative convergence process through which stakeholders develop and operationalize the Relationship Charter.

The Relationship Charter consists of three main components: shared mission and purpose, joint governance and transparent financial management.  This last element, which I refer to as being the Open Book Framework or “OBF”, is critical.  Without financial transparency the viability of the relationship becomes impossible to assess, and therefore becomes vulnerable to competing agendas.

As a point of reference Jon Hansen, in his executive paper How To Make Your Outsourcing and PPP Initiatives Work, cites the U.S. Navy – EDS case study as an excellent example of what happens when competing agendas occur as a result of a lack of transparency.

A lack of transparency represents just one of many possible gaps, which can also include; differences or changes relative to client outcomes, changes in vendor business strategy or core capabilities, and misinterpretation of assumptions and contractual text relating to service levels and KPIs.

As a means to both identify and address these as well as other gaps, I utilize a Strategic Fit Assessment.

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What Is A Strategic Fit Assessment or SFA?

As part of the process for developing and operationalizing a sound Relationship Charter, the Strategic Fit Assessment leverages the Diamond-E Framework concept.

The Diamond-E Framework, which was originally proposed by Joseph N. Fry and Peter J. Killing in 1986, focuses on the internal group (organization), and the external components or elements of a relationship, in an effort to identify their alignment with the organization’s overall strategy.

My Strategic Fit Assessment, goes one step further than the Diamond-E Framework. When there is a misalignment or gap, otherwise referred to as a deficiency, the SFA can identify it as well as assess the impact of said gap on the Relationship outcomes.  The Stakeholders can then make the decision to either address the gaps while maintaining their adherence to the original objectives, or establish a new strategy through which alignment can be achieved.

Experience has shown that true alignment, is a multidirectional collective analysis that ensures that all stakeholders both internal and external to the buying organization are in sync with one another relative to the three main components of the Relationship Charter.

In this regard, the Relationship Charter serves a dual purpose as both a guide or reference point in terms of creating the needed alignment between stakeholders, as well as ensuring that said alignment is maintained in relation to achieving the best outcome.

When ongoing alignment is achieved good relationships, will become great relationships.

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Cronyism

While familiarity purportedly breeds contempt, it certainly doesn’t lead to procurement fraud

I read with great interest Colin Cram’s recent post regarding both the prevalence and significant impact that fraud within the procurement process has beyond the original transaction itself.

While the Cram article focuses on how fraud and corruption are badly damaging the economies of many African countries, there is no doubt that its overall effect from a global perspective are also significant. In essence, and to varying degrees, no country is immune in terms of vulnerability to fraud – Canada included.

Before I get into the specifics regarding the origins of the fraud problem, and how to effectively deal with it, we have to address a long standing myth.

The Myth of Familiarity

Many organizations – especially those within the public sector – equate the familiarity of building a close working relationship with supply partners will somehow undermining the integrity of the procurement process. In short, and in a misguided effort to ensure purported fairness, a transactional approach to business relationships is pursued.

The transactional orientation of our business relationships and the subsequent oversight models we use to manage them, actually creates a greater opportunity for fraud, as opposed to preventing it. The reason is simple . . . a transactional mindset leads to a myopic focus on the bid and acquisition process. This includes our methods for assessing and managing risk, as well as value for money accounting, which in my view are pre-procurement incubators for potential fraud schemes.

Once the deal is done, the oversight model then narrowly seeks to enforce compliance with the terms of the contract, while ignoring the underlying elements that would raise the red flags necessary to both identify and deal with fraud before, as opposed to after the fact.

Within this context, familiarity is not the culprit in terms of creating an environment for fraud. It is instead the starting point that leads to the level of transparency and ongoing collaboration that is necessary to combat it.

This is a critical point in that research clearly shows that 90 percent of reported fraud occurs after contract award. This includes:

  • False or Inflated invoices through layers of subcontracting
  • Kickbacks subcontractors to contractor employees
  • Change order process
  • Undisclosed payments

Therefore, when a relational as opposed to a transactional approach, is incorporated into the initial procurement process, the framework for complete visibility is established right from the start. This includes the creation of a governance model in which stakeholder interests are identified, understood and proactively managed as part of the acquisition, versus outside of it.

The Relationship First Approach

With the Relationship First approach, complex business arrangements are structured and managed as a highly collaborative, adaptive system that leverages change as a strategic advantage.

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Not a game of Battleship . . .

What this means is that the process of implementation or execution is jointly managed through the operationalization of a Relationship Charter that provides accurate insight and intelligence into the relationship from both a strategic and operational level. The Charter’s mechanisms for continuous examination of the underlying process for planning, deliverable generation, performance management and continuous improvement are what makes this possible.

When the inevitable changes occur such as shifting objectives based on previously unknown or unanticipated factors, there is now an opportunity to see it and address it, in a open environment of mutual understanding and shared interests. In essence, everyone operates under an open book framework.

An Open Book Framework

As the name suggests, the open book framework is a transparent model for ascertaining the derivation of price at any time during the course of an extended or long-term relationship. It is based upon a true insight into real-time costs, cost objects and incentives, all of which are managed on a joint “team” basis involving all stakeholders. (Note: With the Relationship First approach, the joint team to which I am referring is actually called the Joint Integrated Team, as it consists of individuals from each stakeholder.)

Full Transparency

Full Transparency

Summary

Taking a relationship first approach to complex business arrangements does more than just provide the tools to gain needed intelligence into the quality of business processes and pricing.

Unlike audits and fraud investigations – which are always after the fact – the approach about which I am talking actually prevents fraud before it occurs. This is achieved through increased client – vendor collaboration (and familiarity) within the procurement process itself.

 

 

To learn more about my University of Ottawa Telfer Seminar click on the image below:

Tefler

Also, check out my book . . .

Relationships First (Mar 2015)

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smoke and mirrors

The Myth Surrounding Executive Buy-In

I recently came across an article in IndustryWeek titled The Politics of Improvement: The Challenge of Getting Company Leaders’ Buy-In.

While there are obviously certain degrees of politics in every facet of everyday living – I have never been a fan of the term “buy-in”. In fact I have a strong distaste for its implications, as it suggests that to get what you want, you somehow have to resort to a slight of hand con game, in which you manipulate someone into doing something they would not otherwise be inclined to do.

I am talking about buy-in in the context of complex program and contract management where, more often than not, significant time and money is spent massaging business cases and business arrangement constructs so as to secure acceptance.

This is the antithesis of true communication and collaboration. In other words, and contradictory to a battle of strategic wills in which one convinces another that theirs is the right way to go, in a relational approach to forwarding an initiative idea, transparency between all stakeholders is the key.

Now some of you might shake your head at this point and acknowledge that while honorable, my thinking is more reflective of a non-existent Utopian world. You might even go so far as to suggest a degree a naivety in relation to how the real world operates.

Fair enough, but here is one reality that no one can afford to ignore; approximately 90% of all complex contracting arrangements fail to deliver the expected outcome. So while adept strategic positioning and negotiation might get you to the starting line, it rarely if ever results in the combined teams winning the race.

Unfortunately, when initiatives go off the tracks, the focus is often on purported breakdowns at the execution stage, and the subsequent assignment of blame.

Like Building A House On Quicksand

Think of it in these terms; if tradesmen build a house on a foundation that is set on quicksand, and the house sinks, is it the fault of the tradesmen who did the work? Did they somehow use improper building techniques or substandard materials? If you bring in a new set of tradesmen and switch to different materials, will the ultimate result change?

The fact is that the failure of the house (or initiative) had been determined long before the building or execution phase began. It started on the architect’s drafting table.

This is the point that brings us back to the buy-in deception as I will call it.

In a true relational approach, in which there is a mutual benefit that is both recognized and agreed upon by all stakeholders, you begin to lay the solid foundation for future success. The ultimate success to which I am referring is not based upon a onetime political mastery or slick negotiation technique. It is about structuring the relationship based on a continuous process of convergence created by an open and logical structure progressing through 4 critical stages. These stages are as follows:

  1. Harness or Capture True Knowledge and Insight of all stakeholders positions, needs, interests and priorities
  2. Filtering the Captured Knowledge to create a baseline of joint objectives
  3. Structuring the Relationship Framework through a collaborative convergence process
  4. Executing the Program

In both my book and upcoming seminars I talk about each phase of the above relational approach. With this model, buy-in is a natural as opposed to artificial progression of a collaborative process, leading to a mutually beneficial outcome.

This being said, over the next few posts I will provide a high level overview of each of the four stages referenced above.

In the meantime, to learn more about my seminar click the Telfer image below:

Tefler

Also, check out my book . . .

Relationships First (Mar 2015)

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strategic-sourcing

Strategic Sourcing And The Road To Transformational Leadership

In his recent post titled Who Are Procurement’s New Leaders, Jon Hansen referenced a reader comment that “business strategy and traditional procurement strategy are often misaligned.” As a result, “necessary leadership talent must synthesize the best . . . and discard the obsolete to create something new.”

In my experience the “new” to which the reader referred must be centered more on mindset or rather organizational culture, and the related change in approach it can bring about in terms of strategic relationships.

Let’s look at the purported transition to a strategic procurement practice.

Being strategic has taken on an added new dimension of importance. However, most people who have made or are making the transition to “strategic procurement,” have done so within the framework of the very same adversarial models that have undermined supplier relationships in the past. So, just because there is a new awareness of importance, does not mean that one becomes strategic from a practical execution standpoint.

The same can be said when it comes to relationships, or being relational.

To become truly relational, an organization has to do more than talk about it. It has to extend itself beyond the T&C’s of a contractual enforcement model. When one is relational, the usually inward focused strategic thinking, is actually extended to include the vendor or vendor community through a continuous system of relational governance. Unfortunately, this type of engagement has been limited to a select few.

If we are to see real traction in terms of the transformation of the overall procurement practice to one that is based on being truly strategic, the catalyst for change has to go beyond a response to exceptional circumstances or rare “one of” scenarios. In other words, the procurement practice has to become relational.

The Minnesota Bridge Project

While the approach to rebuilding the collapsed bridge in Minnesota a few years ago is a great example of relational thinking, it was induced under circumstantial pressure, and therefore hasn’t become a scalable model or standard by which all complex acquisition are guided in the state. Despite its success, the apparent lack of scalability in terms of the approach or model that was used in this instance is noteworthy, because it is not viewed as being an adoptable standard across the board. Therefore it is what I refer to as being a model by exception.

The real question is why?

Once again, and in principle, the Minnesota bridge project incorporated a number of important elements that focused on a collaborative approach to meeting a challenging objective. Unfortunately, it was viewed as a process that fell outside of the accepted norms that has traditionally governed complex procurement acquisitions. This meant that the circumstances dictated its use as opposed to representing a real transformation from the standpoint of the state’s overall procurement practice. Or to put it another way, the model used to successfully drive the Minnesota bridge project was transactional as opposed to being relational. It simply incorporated relational elements into what was ultimately viewed as a special transaction.

As a result change – real change, has not occurred. This means that the state has not become strategic or relational in its procurement practice, and therefore has not been transformed.

For a real transformation to take place, leadership must first recognize that a change is needed. Then, leaders must assume the lead role in making the transition from a transactional model to one that is relational.

For this to occur, the ability to standardize the relational approach beyond a transactional event requires a clearly defined road-map.

The road-map to which I am referring, will provide the leadership team with a clear outline as to how they can move complex acquisitions from the intended objective stage through to a successful outcome.

In my next post, I will go into greater detail as to how this standardized road-map can be created and implemented on a large scale, industry-wide basis.

Transformational Leadership

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