Pain Point # 1 – ROGUE INTERNAL CUSTOMERS

1. “THE Godfather of Negotiation Planning” ~ Intel Corp Omid Ghamami PURCHASING AND NEGOTIATIONS EXPERT Pain Point # 1 – ROGUE INTERNAL CUSTOMERS

2. The Frustration Cycle

3. Company Policies on Rogue Purchasing Behavior • How many Fortune 500 companies have a corporate POLICY (not guideline) that states that • Customers MUST involve purchasing up front for all transactions over $_____? • Failure to do so may result in personal legal liability? • Failure to do so will result in performance review consequences? Answer: ZERO!

4. How Other Service Organizations Roll Out Policies: • HR: “Starting Monday, the new tool employees must use for interviewing external candidates is __________” • Finance: “Starting Monday, the new expense report policy is _______” • Accounts Payable: “Starting Monday, we will no longer accept supplier invoices that ___________” • Corporate Travel: “Starting Monday, this is how you must book flights and hotels __________” • Security: “Starting Monday, all employees wanting to access facilities after hours must __________”

5. How Purchasing Rolls Out Policies 3) Get approval from other purchasing organizations & commodity teams 1) Create justification models, root cause analysis, benchmarking, and set of alternatives 2) Get approval from purchasing management chain 4) Make presentations to finance to get support 7) Guidelines are sent out by email and presented in customer staff meetings instead of blasted on front page of intranet 5) Make presentations to all major customer groups; dissent needs to be handled on case by case basis; changes made to accommodate concerns 6) Policy verbiage is finalized, but corporate refuses to call it a policy, so it has to get rolled out as a purchasing “guideline” 8) Purchasing goes through frustration cycle to try and enforce 9) Customer views purchasing as roadblock; customer is frustrated, purchasing is frustrated

6. Trickle Down From “After the Fact PO’s” • Career and Income MEDIOCRITY!!

7. AMERAExecution Model

8. AMERA Execution Model • Analysis: Pareto top non-complying customer groups by spends & savings opportunities • Motivation: Develop & present “Key wins” presentation • Execution: Ensure better, faster, & lower TCO • Reward: Visibly reward customer in front of peers • Aversion: Develop “Walk of Shame” for non-compliers

9. Step 1: Analysis • Perform data analysis on customer groups that DO work with purchasing • Expenditures, $ savings, % savings • Do Pareto analysis of top customer group opportunities • By spends or by known savings opportunities • Calculate expenditure volume for next 12 months with top customer groups • Extrapolate same savings % across these customer groups and forecast opportunity • Present these findings to finance representative for that group • They are your ally in this process • Do not “report” this group to finance; focus on collaboration opportunities

10. Step 2: Motivate • Gather key success stories from best customers • “Big Win” negotiation results, benefits to the customer, along with enthusiastic customer quotes • Couple this with information from Step 1 • Sell to both heart (compelling testimonials) and minds (compelling data) of customers • Set up 30 minute meeting with customer group manager, invite finance as well • Walk manager through presentation, and ask for their support based on benefits to customer • Request staff time to present, invite finance, and secure minimum commitment to ONE big deal

11. Step 3: Execution • Review success indicators with customer, so that there is a common definition of success • Double-up efforts to ensure a GRAND SLAM • Keep customer representative actively involved in process • Give customer specific and defined roles • Make them feel like their inputs are critical to the process • Make them excited about the results and review post-mortem success indicators

12. Step 4: Reward • Take post-mortem success indicators to customer staff • SURPRISE your customer representative with a reward in front of their peers & manager • Reward can be small, but the story needs to be big • Make a BIG deal about their efforts and results, and make sure their manager is there to hear it • Can be a $25 - $50 certificate, or can even be a color certificate in a cardboard frame • No budget for awards is no issue! • The goal is to develop customer ambassadors of the purchasing department

13. Certificate of Customer Achievement The Purchasing Department would like to recognize Steve Johnson (Date) For his OUTSTANDING work in helping reduce total cost Sample Recognition Template

14. Step 5: Aversion • Assumption: Corporate will not support implementation of purchasing policies • Get purchasing and finance support to develop a “Walk of Shame” • Walk of shame entails putting ATFPO* on hold and having offending customer take their ATFPO to a designated senior purchasing manager (Director or above) and explain why they skirted the purchasing process and what they will do to ensure it never happens again. (hint: it never does) • This measure should be used less than 1% of the time *After The Fact PO

15. Sample “Walk of Shame” memo

16. Call to Action • Analysis: Pareto top non-complying customer groups by spends & savings opportunities • Motivation: Develop & present “Key wins” presentation • Execution: Ensure better, faster, & lower TCO • Reward: Visibly reward customer in front of peers • Aversion: Develop “Walk of Shame” for non-compliers

17. “THE Godfather of Negotiation Planning” ~ Intel Corp Omid Ghamami PURCHASING AND NEGOTIATIONS EXPERT Thank you for watching!www.PurchasingAdvantage.com1-888-TCO-4889 1-888-826-4889