It probably won’t surprise you that the Consigliere loves mob movies, and The Godfather series in particular. Sure, they’re powerful and intensely dramatic stories about honor, loyalty and family ties. But they can also teach us excellent strategies for IT sourcing and supplier relationship management.
Take two of the Corleone Dons, Michael and Sonny. Talk about two different temperaments and management styles! Sonny is very passionate, has a short temper, and usually acts purely on emotion. He believes in doing things the way they have always been done. Sonny does not think through the consequences of his actions or the strategies of his opposition. For instance, he issues an ultimatum to the Tattaglias to turn over The Turk Sollozzo or face war in order to exact revenge on the attempted assassination of his father, without considering any of the possible consequences.
Michael on the other hand is reserved, cunning and always thinking two moves ahead. He controls his emotions (rather than vice versa, like Sonny), though they are both passionate about the family business. Before choosing a course of action, Michael takes a logical approach, thinking through the likely consequences, weighing potential reactions of friends and enemies, and devising ways to mitigate negative impacts. For example, realizing that The Turk’s next move has to be assassinating the Don, Michael understands that he must take out his rival. Similarly, he rationalizes taking out The Turk’s bodyguard too, Captain McCluskey, and figures out how the Family can use its contacts in the press to cool some of the heat that is sure to come.
So what does all this have to do with sourcing? The big idea is to follow Michael’s approach. In your contract negotiations and relationship management framework, identify your objectives, recognize the risks and obstacles, and then formulate the best way to get there.
And don’t be a Sonny. Don’t obsess on revenge and settling scores. Don’t do things just like they’ve always been done and expect better results. And stop applying allegedly tried-and-true approaches without considering your unique situation, or thinking through the objectives and capabilities of your opponents and allies.
Let me be more specific with three examples from the RFP process, showing you how and why to be a Michael, not a Sonny.
How many RFPs have you seen go out with a laundry list of documents vendors must provide – financial information, operational statistics, and sample case studies? The Consigliere has seen a million of them. But only rarely have I seen a client use this information as part of their evaluation and selection criteria. And what vendors submit is mostly a waste of time, anyway – reams of canned marketing materials and financial statements. So why do we do it? Because we can and because it’s always been done this way. (And it’s always been done this way for CYA reasons and the mistaken belief that piles of paper equal a due diligence process.)
But Michael would figure out his decision making criteria first and then seek only the information the family required (recognizing the rest as a distraction). He would also request it in the best format for him (e.g., easily digestible). Michael would validate that all his information was correct and seek additional data to fill in any gaps. In the end, he’d make a better decision more efficiently than Sonny. Certainly Michael wouldn’t let his suppliers wear him down with hundreds of pages of useless documents or put himself in a position where he had to make a decision based on gut feel, a la Sonny.
Michael wouldn’t make another classic sourcing mistake – exposing his decision making process and timing to vendors within formal RFP documents. Remember the scene where Sonny rushes to his sister’s aide, after he learns her husband Carlo had been beating her? In doing so, he tipped his hand about his decision making process and motivations (e.g., emotional and vengeful). So when the Tattaglias and Barzinis decide to take out Sonny, they played to his weakness and lured him away from his bodyguards by having Carlo beat Sonny’s sister again. That’s how they got him alone by the toll booth.
If you tell your suppliers your first selection will be after business leaders evaluate capabilities, they won’t provide any commercial or financial terms. Likewise, if you tell them there will be three rounds of information or proposal requests, they will withhold information during the first two rounds, knowing they must maintain something competitive to offer in the third round. Keep your suppliers on a need-to-know basis and don’t tip your hand. Yes, it will make them feel slightly uneasy, but it will also force them to be more transparent, complete and competitive at every step. Remember, you’re the capo and call the shots – vendors need to bring you the information you want, not the other way around.
Lastly, no self-respecting Don would ever select a vendor without receiving written commitment on the material commercial and financial terms. This is one of the most painful worst practices the Consigliere has ever seen. Gives me heartburn to even think about it. Oh sure, the company has to start the project by a certain date, so they pick the vendor. But in doing so, they give away all of their leverage as they enter the “negotiation phase.” Why would the vendor negotiate now? They’ve already won the work!
This would be like Michael, in the famous scene, telling The Turk and McCluskey that he was going to the bathroom to get a gun and then still expect them to be sitting there at the table relaxed and eating dinner when he returned. Would Michael give his blessing to a deal without a clear understanding of all the key terms of the deal? Not a chance. I doubt even Sonny would be so rash!
You do not necessarily need a fully drafted agreement with every little detail, but all the material commercial and financial terms that frame up the deal should be committed to by the supplier in some sort of written document (not even signed) prior to making a final selection. An added benefit is that both negotiation teams will then be working towards the same goal – drafting language that accurately captures the agreed terms, rather than trying to slip language past the other side to achieve some sort of windfall benefit. That never works and only delays the process, forcing companies to sign poor deals because they have a start date for the project that the supplier already knows. Talk about a lose-lose.
So to recap – define your decision making criteria; request only relevant information based on that criteria; do not share any strategy, decision making process, or other information with suppliers that they don’t need to know; and maintain your leverage until you have written commitment on all the material terms and conditions.
When in doubt, ask yourself, what would Michael do? And don’t be a Sonny. We’ll save Fredo for another time, but let’s be honest, he’s wasn’t exactly Jack Welch material, if you know what I mean.