When debating policy and strategy within firms for instance, the debate takes place as if the discourse will get us to truth or falsity. In fact our decision making is riven with biases, so an alternative to this would be to look for one’s biases and to try to counteract them – to try to guard against stupid decisions. Still, as Robert Solow might say, such an approach lacks strength of character (before he concludes “sometimes I think it’s only my weakness of character that keeps me from making obvious errors”.)
Anyway, this is relevant to a particular kind of dysfunction that takes place within large organisations. Large organisations try to get the best deal they can from their suppliers in terms of price and quality. That’s as you would expect. But they also take this too far for their own good by privileging their own convenience ahead of the smaller organisations.
A relatively trivial example that springs to mind from my own experience is the requirements for putting in a tender for work for governments. They often require it to be physically lodged and then lodged in triplicate. But until you get the job, your tendering for a job is doing the government a favour (unless they’re paying you to tender which happens to short-listed firms for really big jobs like building freeways and so on).
As Warwick Cathro of the National Library says “Collaboration requires effort, and it also requires a change of mindset. In particular it requires a willingness to examine services from a perspective which does not place one’s own institution at the centre.” And like Warwick is implying in that quote, big organisations are not good at that.
I’m wondering if, and how organisations have dealt with this problem?
When I heard of the term “developers’ advocate” within Google and other large software companies I imagined it to be a position that exists advocating within the large buyer organisation for the interests of (usually small) developers outside it and thus seeking to stop the kind of thing I’ve mentioned above by ensuring that small outside firms have an advocate within Google. Having read the description of the position here, it seems that the position is mainly an outward looking role – towards developers and their markets. Yet one of the responsibilities is to “Influence Google developer product strategy by working with product management, engineering, marketing, business development, and operations.”
So can anyone enlighten me in my search for ideas and precedents in the empirical world for finessing this problem of large firms interacting with small firms in such a way as to optimise the balance of their respective convenience?
The problem of tendering for government work comes in diverse forms, many of them oppressive, as you correctly say.
I have not seen a satisfactory answer–from the point of view of the small contractor, that is. The closest is when someone in the bureaucracy has a big problem, no time and access to more than a bit of money. That’s when the first one to answer the phone gets an open ended letter of engagement and a wave through of daily fees that cause no pain to anyone until the next tax year.
More seriously, about 10 years ago when partnering was all the rage in social services in UK, Demos did some work on the role of brokers. Brokers were to help small authorities, NGOs etc put together credible bids to provide services. The bloke whose name I remember is Ben Jupp.
The work did not go on for long. But at the time it struck a chord with some who had experienced the burn/churn of small operators tendering for contracts during the Kennett years.
Look forward to further reports from the front on this one.
Best wishes
Bob Smith
Nicholas – try this for one solution: http://www.icnvic.org.au/icn_services_and_programs/regional_industry_link.html
Thanks Phil, but it’s not much of a solution to the problem I’m looking at. There are lots of government programs and indeed regulation responding to people’s frustrations, but I doubt governments can do much about it.
Not a solution to the problem but some posts on related issues, including the decentralisation of decision-making in Google.
http://organizationsandmarkets.com/
Nicholas,
I think that it’s really important to differentiate between government organisations and large organisations. Government organsations are constrained by an almost paranoid approach to propriety and governance (generally), while private organisations, even very large ones, can choose to develop trusting relationships in order to pursue long-term benefits.
In terms of private organisations, the literature on lean manufacturing and lean supplier relations puts a huge amount of emphasis on developing long-term relationships with suppliers, investing in them, etc. etc. Any textbook on operations management will have a chapter or two on it.
Second, it is possible to contract for particular trusting relationships, so as to favour a long-term benefit over a short-term one. I wrote a case about the development of the extended wear contact lens by Ciba-Vision, Novartis Central Research, and the CSIRO. In that case, the project would have failed without high levels of trust between the parties (rather than traditional relations between Novartis and suppliers which were much like you describe). In order to achieve this, they put a number of measures in place to facilitate trust. Some were explicitly contractual (e.g. CSIRO received its royalty share on any product produced, irrespective of whether CSIRO was an inventor) others were more behavioural (e.g. looking for opportunities for project leaders to demonstrate trust to employees of both organisations).
In terms of government, I think you’ll find there are programs here and there that quietly relax the contracting rules to create better relationships. For instance, the Victorian Government’s Smart SME program, while having an open tender process, is set up in a way to favour one tenderer.
An important question that needs to be contained within a discussion on Government procurement is the role of Govt in promoting innovation through its procurement practices. Too often Govt will eschew the expression of interest pathway in favour of a tender process because of a beief within Govt that only Govt can fully and adequately scope their project. All to often poor scoping promotes mediocrity and delivers out of date solutions which fail to deliver any flow on benefits to industry in terms of increased capacity and competency. Combine this with a general lack of broad strategic insight and the process delivers blessings that are mixed at best. A very simple example of this is the decision by most of Govt in the 90s to use LotusNotes(R) rather than either a bespoke product or Microsoft Outlook (R) which could integrate with office software. The result is that the cheapest solution at the time promotes and perpetuates inefficiencies in data management and is certainly more expensive when these inefficiencies are accounted for.
WRT procurement from SMEs Commmonwealth procurement guidelines do not have as a principal the promotion of innovation but do say that “5.6 The Government is committed to FMA agencies sourcing at least 10 per cent of their purchases by value from SMEs.”
Open Govt could give an opportunity for industry to pitch productivity improving projects to Govt in a whole range of areas, it will be interesting to see if the procurement practices can cope.
Well I have found one such organisation. The IBM Procurement Ombudsman.