Predicting relationship failure

John Gottman’s research on predicting interpersonal relationship failure should resonate with vendor managers. Gottman’s team, profiled in the Australian Financial Review and Malcolm Gladwell’s Blink, has identified four traits that, if present, indicate that the relationship has an 85% chance of failure. The odds of failure increase to 97.5% if one party's attempts to repair the relationship are not reciprocated. The St Cloud St University website describes the traits as follows:

1. "Criticism: Any statement that implies that there is something globally wrong with one’s partner. Usually starts with “you always” or “you never”
2. Defensiveness: A general stance of warding off a perceived attack. Unfortunately, defensiveness usually includes denying responsibility for the problem, and this fuels the flames of conflict because it says the other person is the guilty party.
3. Contempt: Any statement or nonverbal behavior that puts oneself on a higher plane than one’s partner, i.e. mocking. Another example would be correcting someone’s grammar when he or she is angry with you. (There is a universal facial expression for contempt) …
4. Stonewalling: Occurs when the listener withdraws from the interaction. Stonewallers look away and down, maintain a stiff neck, vocalize hardly at all - in effect, convey the presence of an impassive stonewall."

Gottman describes contempt as the “Sulphuric acid of love” and its presence is the single best predictor of relationship failure.

So, the lesson: If you see these traits, particularly contempt, in one of your vendor relationships, you should start hiding your assets!

Blue Ocean Strategy and The Tawny Scrawny Lion

I’m at home this morning looking after my 2 year old daughter who’s too ill to go to child care. My wife will be spelling me off this afternoon whilst I go see a client.

Inspired by Justin Sullivan’s article on benchmarking diapers (Thanks for pointer, Jason), I’ve decided to share the Blue Ocean Strategy lesson contained in the Golden Book, the Tawny Scrawny Lion.

The Tawny Scrawny Lion, originally published in 1952, tells the tale of a lion whose ferocious appetite results from having to chase his prey. He suggests a deal with the animals where they allow themselves to be eaten thus reducing his calorie expenditure and minimising the number of animals he’ll need to eat.

The animals (monkeys, kangaroos, zebras, bears, camels and elephants – the story must take place on Gondwanaland) are not particularly happy about this but see no other option, so they trick a rabbit into being the first meal. The rabbit entices the lion back to his place by describing his five fat sisters and four fat brothers. Upon their arrival, the rabbit and his siblings feed the lion carrot and fish soup with berries for dessert. The lion is so full after eating the soup and berries that he doesn’t eat the rabbits and comes back to their place every day for his meals rather than chasing and eating prey.

In this story, the rabbit's innovation changes the value proposition for himself and for the lion, dramatically improving both their outcomes as well as the outcomes for the broader market. Now there’s a happy ending!

RFT drafting: balancing consistency and innovation

Vinnie Mirchandani, in his terrific deal architect blog, points to a video interviewing system called HireVue that allows employers to view videos of candidates responding to set interview questions. Mark Newman, VP of Operations, has told Vinnie that "they expect to be running 4,000 interviews a month at the end of the year".

I'm going to gloss over many of the subtleties of the system and use it, probably unfairly, as a mechanism to discuss the dangers of prescriptive RFT drafting. My apologies to HireVue in advance.

All sourcing activities, whether procuring a vendor or hiring an employee, are undertaken to solve a business problem. Effective sourcing requires you to gather the maximum amount of relevant and accurate information from as many respondents as possible.

My concern with the HireVue approach to employee sourcing is that it is too prescriptive and reduces the scope and accuracy of respondent information. Now don't misunderstand me … I am a huge fan of standardised methods of collecting respondent information but sourcing staff must ensure that they balance the need for consistency with the opportunity for innovation.

Regarding the scope of information, as far as I can tell, HireVue values comparability of candidates over the candidate's ability to provide innovative responses. Whilst being able to easily compare respondents is critical to a successful evaluation, it should not come at the expense of drawing out unique perspectives on the issues confronting your business.

Regarding the accuracy of the information, I wonder whether the majority of candidates will be able to guess the standard questions an employer will ask and provide ideal, nearly identical, responses during the video interview, regardless of whether the ideal response accurately describes them.

I'm reminded of David Foster Wallace's description of the death of the video phone in his near-future novel, Infinite Jest. In the novel, the video phone is killed by constrained requirements. Once people started using the video phone, a market developed for software agents that made you appear as if you were dressed in a business suit when you were actually wearing your bathrobe. Next, you upgraded your agent to display yourself without bags under your eyes or unsightly blemishes that had arisen in the night. Soon after, you bought the upgrades that made you appear younger, more beautiful and appearing to adopt an interested, active listening pose when in reality you were sitting in your living room, unshaven, wearing nothing but an undershirt, watching an Oprah re-run. Eventually, everyone on the planet adopted the same ideal video agent and, soon after, stopped using video phones because the video signal carried no truth.

RFT drafters must ensure that they are not so prescriptive that they force the vendors to appear identical even though in reality they are very different.

Drafting a good RFT, like conducting a good interview, is part science and part art. The responses need to be comparable, but you will only achieve the best result if you let the vendor, or the candidate, spread their wings a bit.

Outsourcing trends according to Google

Google now allows you to compare the frequency of multiple search terms. Here's the result for Outsourcing and Vendor Management .

The top line (red) shows the frequency of searches for "outsourcing" and the bottom line (blue) shows the frequency of searches for "vendor management". Two questions arise from this: 1) Why has the frequency of "outsourcing" searches halved from its peak in April 2004 and 2) why did I call my blog "Vendor Management" when no one searches for the term?

Technorati Tags: outsourcing, vendor management

Service Provider Panel Management

An article I've written on panel management is appearing in the next edition of a LexisNexis publication, Contract Management in Practice. In the article, I discuss how a fictional insurance company, ABC Insurance, manages their panels of doctors, lawyers, assessors and medical service providers. The following is an extract from the article:

Best practice panel structures and management

ABC, as a skilled panel manager, realises that the starting point for effective panel management is ensuring that each panel member receives enough work to keep them interested in remaining on the panel. The maximum size for any panel equals the total number of jobs available divided by the minimum number of jobs required to keep members interested. For example, if ABC annually sends 1000 work requests out to solicitors and each law firm requires 100 jobs per year to view ABC as an important client then the maximum size of the panel is 10 firms.

Once the panel is established and ABC starts allocating work to the panel members, they can then begin letting the naturally competitive structure of panels work for them. To do this, they will compare each panel member’s performance against the other panel members and occasionally bring in an outside supplier to assess the competitiveness of the panel members against the larger market. Ideally, they will collect and analyse this data using a commercial panel management system.

Once performance data is collected, ABC provides incentives for panel members to improve their performance. Incentives can be positive, such as increasing the volume of work allocated to the high performance providers; or negative, such as removing the poor performing providers from the panel.

Making the rubber meet the road

Once the panels are established, claims officers allocate work to the panel members, and an appropriate incentive system is put in place and communicated to the panel members. ABC must then ensure that their claims officers utilise the incentive scheme. This is not a trivial matter. ABC Insurance may have 1000 claims staff located across the State and Territory capital cities. Without a method of constraining the allocation of work to the panel members, ABC would be unable to offer to the panel members any effective incentives for good performance.

To address this situation, insurers can use commercial allocation software or they can take the decision out of the hands of the individual claims officer by using a centralised allocation department to allocate work.

Either way, the successful management of providers relies on each provider believing that ABC will reward them for good performance and punish them for poor performance. Without this belief, the entire panel management system falls to pieces…

Technorati Tags: outsourcing, vendor management