by David Thornewill
(FeatureSource) - In negotiations, there is an axiom that goes something like this: “In the absence of information, the only answer you can give is, ‘Yes’.” This fact becomes crystal clear when you are faced with a vendor invoice for services for a greater number of people than you have people working in your shop. While you know the total number doesn’t make sense, you can’t identify exactly which people on the list are legitimate and which aren’t. Since you can’t be sure which services to either suspend or refuse to pay, you grind your teeth and release the check.
Quietly grumbling to yourself that “something should be done about this,” you turn to the task of deciding how to allocate the excessive invoice across your cost centers so that the department managers don’t get too irate. Insiders know this as “butter-knifing.”
This was precisely the scenario I faced with vendor invoices at a large ($2 billion) manufacturing company. Invoices covering services for pagers, mobile phones, PBX maintenance, calling cards, dial-in charges, long-distance charges and more would hit my desk each month. The PBX invoice would have me believe that we had doubled our planned headcount. The pager invoice suggested that half of the workforce carried two pagers. And as for trying to find laptop computers whose leases had expired - well, it was simply cheaper to pay the residual and hope that at least someone somewhere in the company was making good use of the assets, since we had no idea of their whereabouts.
Having spoken with many colleagues about this, I know that that many organizations face these issues. So where’s the problem and what’s the solution?
It is important to recognize the problem generally isn’t one of theft or malicious malpractice. Addressing it with a series of threatening edicts and onerous, draconian security checks will not improve the situation; indeed, such tactics may make matters worse, as people often circumvent rigid rules simply to get their jobs done. In my experience, most people are painfully honest; given adequate tools and training, they will bend over backwards to do the right thing and to do things right.
In fact, once we addressed the problem in a systemic way in my old company, we were able to save over $1million in reduced invoices within a year, which more than covered the costs of the solution we put in place. We also gained significant, though less tangible, productivity-related benefits and reduced the need for capital expenditures either to replace lost stuff, or to unnecessarily increase capacities. But as we all know, when seeking project funding, real dollars speak louder than “funny money.” A cost-savings program targeting actual invoice reduction offers a far more potent argument than vague promises of productivity benefits, which are hard to realize and even harder to measure.
Fundamentally there are two simple questions that companies need to answer to solve the problem. These are, “Who has what?” and “Who needs what?” Once you can reliably answer these, the rest is simple spreadsheet work. Asset Management, HR and ERP systems can provide some of the data needed. But the real challenge here is defining a reliable and consistent “Who.”
Companies routinely reference people as their most important asset. In most cases, this is interpreted to mean employees, or the people on the payroll. This equation is false. Today, for a variety of reasons, companies furnish equipment and services to contractors, vendors, customers, board members, consultants, and even family members.
As a result, an aggregated list from the HR system(s) isn’t sufficient for the purpose of tracking and allocating assets and services. We need to combine information from, perhaps, the purchasing system for contractors, the building access system for vendors, and the CRM system for customers.
At first, this may appear to be an insurmountable obstacle. However, technology exists today to help address this problem - namely, Directory Services such as Novell’s eDirectory, Microsoft’s Active Directory, or iPlanet’s Enterprise Directory. These tools are repositories that store identity information and pointers to objects associated with various identities. Just like telephone books, directories don’t need to store all the data about an individual or object, but just pointers to where more information can be found.
Not surprisingly, in most cases, technology contributes only part of the solution. The other part is the often emotional negotiation around data ownership and administrative processes.
A prevalent fallacy holds that data should be changed only by a “system of record.” This is a common misinterpretation of the more reasonable proposition that data changes should have a single source of authorization. Historically, it has been simpler for IT to enforce data input and authorization at a single point, leading to the “system of record” myth.
Once again, developments in technology can help by allowing data changes to be submitted wherever a data element is used, by whoever is using it. Workflow systems pick up on that event and communicate with the authorizing system to determine whether to permit the change, and whether the change should be propagated to other systems containing that data element. Products such as Metastorm’s eWork, MaxWare’s EMS, and Radiant Logic’s RadiantOne offer such solutions. These tools can concurrently monitor multiple systems, watching for changes in data elements. When changes occur, a central directory is updated and the changed data is distributed to other systems on a need-to-know basis.
Here again, technology provides only part of the solution, and much of the time is spent mapping data elements and cleaning up existing data, which often is in a serious state of disarray.
This brings us to another axiom, which states, “The half-life of data accuracy is directly correlated to the ease of access to and frequency of usage of that data” - simply put, “That which gets used, gets updated.”
One of the cardinal sins of data accuracy is to make a single person responsible for keeping data up-to-date. Even in a small company, a single person can’t keep track of every change; and data maintenance personnel are seldom dedicated solely to that task.
In order for data to retain a high level accuracy, you need to enlist the help of every person who has access to the company network. Who is the first to know when one of their telephone numbers changes, or when their department changes, or when they get a new supervisor? The individual, of course, or perhaps his/her supervisor, or HR, or Customer Service, or someone in Accounting.
The point suggested here is that any one of the above can submit a pending change, but perhaps only one of them can authorize it. The key to success depends on all data changes being submitted into a formal workflow in the timeliest manner possible.
Analogously, by using a central directory to associate people with cell phone numbers, laptop serial numbers, etc., and by making this information visible in a user-friendly manner (e.g., via a Web-based portal), the people within an organization can be leveraged to help correct errors in a timely fashion. Again, “That which gets used, gets updated.” This is not a pipe dream - it works! When you make people accountable for keeping their own data up to date and provide them with a usable vehicle for doing it, they actually do it.
There are secondary and tertiary benefits from improving the quality and management of your people information. For instance, you can drive consistency of tools and services across similar job types. You can check service provider rate plans and tailor them to individual needs. Further, cost allocation is no longer a nightmare and can be largely automated. And, perhaps the greatest money-saver of them all, you can effectively automate termination of access and services for people when their relationship to your organization changes or ends.
At my former employer, while still in the data cleanup phase of the project, we discovered cell phones and pagers across the country in companies that weren’t even in our industry - for which we were paying the bills! In one particularly egregious instance, we found an ex-employee for whom we had been paying a not inconsiderable cell phone bill every month for nearly four years! Our cleanup efforts also were rewarded by the avoidance of an additional $100,000 investment in PBX expansion when we determined that we weren’t short of ports, but had almost 1,000 lines (20%) assigned to people no longer associated with the company.
In summary, by following these steps, you will have all the data you need to do battle with your service providers: -Recognize the role of people data in cost savings efforts -Use Directory Services to improve visibility and management of people-related data -Clearly identify data ownership and administration processes -Use automated workflows to route data changes with proper authorization -Distribute responsibility for data maintenance via user-friendly, Web-based tools -Getting control of your service invoices is a worthwhile task and provides a financially beneficial vehicle for building the people information infrastructure critical to successful eCommerce.