Rule #5 – The 3 Shares

As a customer, I would categorize my vendors into those two segments right off.

A commodity vendor (ex. Paper, toner, etc…) were valued based on price and delivery. Therefore, I could minimize their impact to my bottom line only.

A strategic partner (ex. Developer, marketer, etc…) were valued based on their direct contribution to my top and bottom lines.

As such, the strategic partner is called into a meeting to discuss the 3 shares.

Shared values – partner understands your goals, their role in achieving your goals and their overall mission is to support their customers goals.

This goes beyond just going, ‘yep sure, we want the stuff we work on with you to help you grow or save you money’. The vendor’s own mission or value system must be to directly support their customers growth plans.  It not be prepared to walk away.     

  • Not a supporting value statement – Our vision is to be recognized as a global services innovator, helping customers realize the best results.
  • Supporting value statement – we focus on superb delivery of solutions that achieve business result

Shared benefits – As that partner, if I am impacting their growth the effort I am engaged with the customer must delivery 10 times or more the expenditure my customer is paying out. If it is impacting the profit line, then at minimum 2 times that expenditure. If both, well you all can do the math.

As a customer, I can breakeven on these projects, engagements, initiatives by using my internal employees. The direct benefits must be measurable impact on my growth and/or profit.

On the other side of that coin, I as the customer must understand that you are NOT a commodity vendor. You are a partner and as such price is not the top priority in our relationship. Impact is, right!. Therefore, I as a customer should acknowledge that I need to be a profitable customer to my strategic vendor partner.

This provides two direct benefits.

  1. No other way of saying it. As a vendor, I know which customers drive my profit and whether I state it or not, those are preferred when I have to decide between satisfying one of two customers.
  2. Also, you want your partner to be healthy with a strong bottom line. If they are pinching penny’s (okay dollars now) they will be distracted from you and if they suddenly close up shop that can be very painful if you are in the middle of projects.

* tip – not safe for work if you search for bottom line images on Google.

Shared riskcustomer and partner share the risk of an endeavor.

This is where the vendor partner has to put money in the game. Often in an engagement, project or other activity once you move past 25 to 33% of the project, the customer now has all the risk.

However, if you balance the risk, by contractually agreeing that payments will be based on deliveries and tie the project plans to ensure that at each project gate there is a deliverable that is valued by the customer to be worth 75% of the current payments to that gate.

And of course, the big part of this is the hold back at the end of the contract, to ensure that the deliverable delivers a measurable impact which is normally 30 to 90 days after completion. The hold back should be substantial enough to have the partner in the game through the end gate and not just up to it.

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Rule #1 ask forgiveness instead of permission

Attributed to Rear Admiral Grace Hopper, amongst other grand achievements is a pioneer in the programming world starting with COBOL creation.    

In short, the key to high performing teams is following this rule.

There are two sides of this rule. The employee side side should understand that when when you are asking management to grant permission you are asking them to accept partial responsibility for your specific actions the permission is granting. Now, you might say, that a manager is always responsible for an employee’s actions. Very true, yet by asking for permission your are forcing a manager to be comforted with that reality. Somewhat similar to a person realizing they are a Dad or Mom the first time they here a baby crying and realize they are in responsible for soothing their baby.

Up to that point the manager/Dad or Mom always knew they were responsible, but suddenly it is real.

Whereas, asking a manager for forgiveness actually caters to their ego. For asking for permission is requiring them to accept responsibility, asking for forgiveness allows them to be benevolent and merciful. You, in effect are bowing to their hierarchical power over you. Feeding the ego strongly this does.

This is all well and good, but a manager can use this rule to a more important end then stroking their ego. It can support a culture change from risk avoidance to smart risk taking.

The rule of ask forgiveness, instead of permission is an incentive for staff to overcome a fear of failure. Part of staff’s fear is having to ask permission and defend verbally to a superior why they want to do something. No matter how warm and fuzzy a boss you may be, having to defend course of action in a culture of risk avoidance is scary and along with risk, avoided.

So that is the first part of fear, is having to go ask the boss about it. The second part is the fear of taking action. Covering yourself by having your manager approve your actions slows down execution and can be a killer when you are dealing with customer problems, product/service launches or testing new ideas.

For a manager who wishes to have a high performing team, you need team members who you can delegate responsibility too and a key to developing that capability is that the team feels safe and free to take action. You need a culture of risk takers to have that high performing team.

Yes, you will have those staff who abuse the rule. You should be corrective actioning those members off your team as they are counter productive in other areas as well.

The one codicil    to this rule is the magnitude level. If a team member performs an action and said action has a large NEGATIVE dollar impact to the bottom line, say 6 figures or more, than realistically they are gone. Make the team aware of this codicil.