Posts Tagged ‘corruption’

T2-5 Sensing of Client Issues during Contract Negotiation: Some Practical Tips for KM Consultants

February 7, 2010

The previous blog post is about knowledge of what works during contract negotiations. Knowing what does not work (or what are the risks) is also useful knowledge. After going through scores of KM contract negotiations, some successful and the others unsuccessful, let me share with you some of my experiences on what does not (or what may not) work and what are potential risks in contract negotiation.

  • Find out who is the manager authorized to make scoping decisions? cost decisions? the final decision? At the start of the negotiation, ASK WHO are authorized to make the above decisions. (a) If no one in the organization is sure about the answers to the above questions (i.e. their contracting process is not yet standardized), you are in for a difficult and surprise-full negotiation process. (b) What is the INTERNAL POLITICS between them? You may be wasting your time while the managers perform their “power plays” during the negotiation process. If you are able to talk to the TOP EXECUTIVE or whoever will approve the contract, these risks can be better managed. KM projects not supported by the top executive are risky projects not worth going into. (c) If the manager who invited you to submit a proposal and the executive who will approve the contract are not the same person, find out if the latter is aware of the proposal invitation. If not, you can have a problem in your hands. Do not proceed any further until the latter not only knows about the invitation, but is also open and willing to consider your proposal.
  • A client is after a desirable outcome, but you can only guarantee to deliver a set of outputs which contributes towards (but does not assure) that outcome. If the client wants his desired outcome to be your contractual deliverable, then propose instead that you GUARRANTY ONLY THE DELIVERABLES but not his desired outcomes.
  • A client may keep asking details and more details about project methodology, or may want you to specify them in detail in your proposal. Beware: it is possible such a client may not be intending to award you the project or to hire you; he may be intending only to use your proposal to STEAL your methodology and do the project himself without you.
  • If the client is not very definite about what he wants, or if there are differences in understanding of deliverables among the managers in the client organization, or between you and the client, then the deliverables must be specified clearly, CONCRETELY and in fine DETAIL. Avoid general terms with unclear or varying referents, such as “KM system”, in the description of deliverables.
  • Do you have doubts about the way the client perceives and defines his problem? Is the client seemingly fixated in a solution, or seems to have jumped to the solution without being sure what the problem is? Do you sense a risk that the client underdefined or misdefined his problem? If this is the case, propose a two-phase project and commit only to the first DIAGNOSTIC PHASE, the purpose of which is to cleary define what is their problem.
  • There are instances when the success and appropriate scope of a project depends on a decision the client has YET TO MAKE. If so, do not accept this project; propose instead another project to assist the client make that decision.
  • There are instances when the outcome and appropriate scope of a project depends on factors or events that are outside the control of the client. If so, propose instead a RISK ASSESSMENT project, the output of which will be the basis of the client’s next actions.
  • If project tranches are predetermined in amount and paid in a foreign currency, while project expenses are incurred in your local currency, then you shoulder FOREX RISKS. Study the fluctuations of the exchange rate over the last few years. Is it going steadily up or down? Is it steady or does it wildly fluctuate? What is the worst-case scenario during the project duration? How much contingency fund shall you set aside to cover such scenarios? Add this contingency fund in the project cost. Or, propose that the project is denominated in your local currency.
  • There are projects whose scope is not easy to define or anticipate. There are clients who (from past experiences) have a tendency to stretch the scope of the deliverables or to change their authorized sign-off officer to someone who has a different or broader interpretation of deliverables. In these cases, the risk of “SCOPE CREEP” during project implementation is high. Some solutions are: propose to divide the project into smaller-scope shorter-duration phases whose deliverables are easier to define or anticipate, and define the deliverables in a clear, concrete, detailed and unambiguous manner.
  • In a training project, there are clients who will pay you for delivery of the training course, but who also wants to OWN THE DESIGN of the training course and its learning materials. If you are willing to sell your IPR (intellectual property rights) on the design and learning materials, then separate the pricing of the delivery from the pricing of the design. If you are not willing to sell your IPR, then either back off from the contract or incorporate a contractual provision that you retain ownership over all IPR. You can then offer a licensing agreement whereby the client can use your IPR and pay you a per use fee (difficult to monitor use frequency) or an annual fee (a simpler arrangement).
  • If the project is full or partial computerization of a business process which includes financial transactions which are vulnerable to CORRUPT PRACTICES, then suspect that there could be staff members within the organization who will resist or sabotage the project if they are in fact involved in corrupt practices. Project non-completion risk will be high. Perform your due diligence processes more thoroughly before committing yourself to this kind of project.
  • There are organizations whose administrative unit (or whichever unit is responsible for the contracting process) like to take their sweet time nit-picking the details of a contract, wasting much time as contract versions go back-and-forth between you and them. Ask your client what is the typical or average length of their contracting process. If it is unusually long, beware. Ask in advance what are the REQUIREMENTS of the administrative unit. Ask for a SAMPLE CONTRACT and study its terms and conditions. It happens often that the technical people involved in scoping negotiations are ignorant or unaware of the contract requirements from their own administrative unit.
  • Be sensitive to signs that there is FACTIONALISM among the managers. If one faction will engage or hire you, it can happen that the rival faction will not cooperate or support (or may even sabotage) the project.
  • A technically good project proposal may be turned down because its cost is deemed too high by the client. Avoid wasting your time by asking the client beforehand what is his approximate BUDGET for the project (some will tell you but other clients won’t).
  • Schedule of payments of tranches is often flexible and negotiable. The ideal PAYMENT SCHEDULE is one that will not leave your project cash flow negative at any time during the project. A client organization may have a policy of remitting the final tranche 30-90 days after the accounting unit receives the payment order or payment clearance from the unit that receives the final deliverable. If so, add the cost of money and administrative costs of advancing the amount for fulfiling your payables before the receipt of the last tranche.
  • Success of project implementation can depend on COOPERATION of some key staff members of a client. If they are informed about, and better if they are engaged during the project scoping and procedure formulation, then chances of project success is better. If key staff are engaged and interested, but do not have enough time to support the project, then project success can be enhanced by a contractual provision where the client must assign specific staff to devote specific hours per week to perform SPECIFIED TASKS in support of the project.

If you wish to add your own experiences of what does not work or what are the risks during KM contract negotiation, please use the “Leave a Comment” link below.

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More Power to Glocals!

April 23, 2009

Corrupt leaders, terrorists, nationalistic actions of superpowers and “gnomes in Zurich and other financial centres” (a term coined in 1956 by former UK Prime Minister Harold Wilson) share something in common. The reach of their influence and power far exceeds the extent of their beneficiary group:

Scope of power > Scope of benefit

“Scope” can mean geographic or demographic scope. Using the language of extended benefit-cost analysis, they generate private benefits for themselves and their small group at the expense of inflicting social costs on the larger public.

In Q23 on “Know-How without Willing-To” I wrote about organizational energy and showed that

Know-How X Willing-to = Effective Action.

which is a reformulation of

Capabilities X Intentions = Potential Action

in “Cutting the (Complex) Gordian Knot.”

If we add the geographic or demographic dimension to the above formulae, we see that the geographic reach or the public scope of an actor’s capabilities is different from that of his intentions. For example, the scope of interest of a corrupt president includes only himself and his immediate family, while the scope of his power and influence is the entire government bureaucracy and the nation. A nationalistic superpower pursues only its national interests, yet its power is global. The “gnomes in Zurich” or “gnomes in Wall Street” are profit-seeking actors working for their personal or corporate interests, yet the impact of their actions is global.

Narrow interests drive their global actions.

At the opposite end is glocality (from “global” and “locality”), a new word that has gained currency among development and civil society sectors, and among expat professionals who frequently move around the globe. The word captures the essence of the injunction: “Think globally, act locally.” A glocal person is one whose area of power and influence is confined only to her immediate small locality, yet her local actions are informed from her global perspectives and interests. Glocals are opposite to corrupt leaders, terrorists, nationalistic superpowers and “gnomes in Zurich and other financial centres.”

Global interests drive their local actions.

glocal-person-and-couter-glocal-person

The dysfunctional situation where geographic or public scope of power and influence of an actor exceeds the scope of his perspectives, interests or intended beneficiaries, is met across a wide variety of circumstances:

  • a virus creator introducing his creation into the Internet,
  • a corrupt public official using his powers for his own or his family’s benefit,
  • a terrorist motivated by a particularistic ideology,
  • a factory discharging wastes in a nearby stream,
  • a psychotic with a gun in a large crowd,
  • a nationalistic action of a superpower,
  • a resource cartel such as OPEC,
  • a swimmer who secretly pees in a swimming pool with many swimmers
  • a conspiratorial group of shadowy foreign exchange traders with controlling market share in a country,
  • a government-sanctioned monopoly
  • a protectionist domestic manufacturer bribing a government official to keep tariff levels high against competing foreign products,
  • pirates operating near Somalia,
  • a smoker-turned arsonist who throws his cigarette butt and starts a forest fire.

I introduced the above concepts in a paper on “Relevance of Values in the Management of Corruption” which I read at the Conference on Integrity in Governance in Asia, Bangkok, Thailand, June 1998 and in another paper on “Information Technology and Security in the 21st Century” at the Asia-Pacific Security Forum Conference in Taipei, Taiwan in December 1999.

Counter-glocal persons spend their lifetimes “climbing the ladder” whether in business or in politics, but as their power and influence expands, their interests remain narrow. They learn to become masters in manipulating the external world around them. They seek Power of the First and Second Kind (see blog posts Q9 and Q10). The world becomes a riskier and poorer world as counter-glocals attain greater power.

To become a glocal person, you do not have to travel around the globe or get appointed to a high position. All you need to do is stay where you are, expand your perspectives and take the interests of Planet Earth as your own, and express these in whatever work you are doing now. Glocals are masters in broadening their own internal world of perspectives, motives and aspirations. They practice Power of the Third Kind. The world becomes a safer and happier world as more glocals attain greater power.

May their tribe increase!

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Towards a Global Balance Sheet

April 5, 2009

I compiled various estimates of entries in the expanded KM framework towards a global balance sheet.

Negative side (see diagram below):

minus-side1

Positive side (see diagram below):

plus-side

What do we notice?

  • Total US federal debt exceeds the wealth (GWP) created by the world economy in one year.
  • The world is drawing from its natural capital at an annual rate about equal to the 2008 Wall Street meltdown.
  • Knowledge is our biggest and growing asset for creating wealth.

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Q19- Negative(?) Metacapital #2: the Threat of a Nuclear War

March 17, 2009

Our research at CCLFI discovered that most successful community development projects are those that leverage on the intangible assets of the community. I introduced the more generic term “metacapital.”

When applied to communities, their metacapital can be positive or negative. I reproduce below a table from one of my KM conference papers. The entries in red italics are negative metacapitals – they can destroy value (market or social value) of the community or frustrate value creation that development projects seek to achieve.

negative-metacapitals-in-community-development

In my judgement, some negative metacapitals are very serious. I indicated four of them above in bright red text. Do you agree with my choices?

If we translate these four at the global level, these great value destroyers are, starting with what I think are the most serious:

    1. Threat of global nuclear war
    2. Corrupt, egotistical or trigger-happy leaders
    3. Global environmental crisis
    4. Destructive syndicates: criminal, banking-financial, terroristic.

These are the common threats to wo/mankind. Compare this with the “15 Global Challenges” according to the Millennium Project.

What is your view?

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Q18- Negative(?) Metacapital #1: Corruption

March 8, 2009

To say that human capital consists of skills, experience or knowledge is correct but grossly incomplete. Yes, skills do contribute to effective group action. But other, and I believe even more important, things also do.

In April 1975, the most powerful nation on earth — economically, politically, technologically and militarily — was defeated by a much smaller, poorer and technologically inferior nation. I refer to the hasty and humiliating retreat by the American forces in the fall of Saigon to the northern Vietnamese army with the aid of the Vietcong southerners. How did it happen?

Leading towards 1975, many American citizens have ceased to believe in the moral rightness of waging war in Vietnam. Hundreds of thousands have been demonstrating in Washington D.C. and many U.S. cities. Maimed American soldiers were coming back home only to face a lifelong agony because their own country men and women doubt or criticize the value of their personal sacrifices. The national will behind the Vietnam War became more and more divided and eroded.

On the other hand, Vietcong guerillas remain committed to their cause — despite the devastating effects of superior American military technology: carpet bombing by B52 bombers, Agent Orange defoliants, etc. Vietcong guerillas, upon waking up in the morning, would embrace each other and say in Vietnamese “One heart, one mind, one mission.” Vietnamese are a proud people (in the 13th century, after China succumbed to the Mongols under Chinggis Khaan, the Mongols under Kublai Khan failed to occupy Vietnam despite three attempted invasions). Vietnamese national will behind the Vietnam War remained strong.

Will is the more important ingredient in human capital. I keep saying in this blog, KM is not enough, because “know-how” without “willing-to” will not result in effective group action. That is why most KM initiatives must incorporate elements of change management; we described our experiences on KM+CM in our website (click the change management block at the bottom of the CCLFI homepage).

Unwilling-to or anti-group-willing-to can frustrate effective group action.

In one of my KM workshops, a participant asked, “If people are our best assets, can people also be our worst liabilities?”

“Definitely”, I answered. A willing skillful person is a big plus, but an unwilling or counter-willing skillful person is a big NEGATIVE (I wrote an article for the next issue of KM for Development Journal where I propose the model for effective action: Know-How X Willing-To = Effective Action). It is all about intent.

Let me give a real world example.

In the 1990’s I was Chair of the National Committee of the UNDP GEF Small Grants Programme in the Philippines. Among the grants we approved was one for a micro-hydropower project for a small community. The project was a failure. The reason is: the community leader who was responsible for the project spent the grant money for his election campaign. His intent was not for the community; his intent was for his personal political gain.

Corruption is a skill that destroys group effectiveness and frustrates group value creation. It happens in small communities as well as in big nations. Corrupt national leaders amass ill-gotten wealth (personal value creation) and hide them safely away in Swiss banks — which in turn use Swiss privacy laws for their corporate value creation through secret bank accounts.

From Economics 101 we learned that there is no such thing as “negative human capital” or even “negative capital” because the factors of production — land, labor and capital — in the production function are always positive. And so we turn to the Accounting 101 framework, where an entry can be an asset (positive) or a liability (negative). In this sense, we can say that corruption — or unwillingness or anti-group willingness — is a “negative metacapital” (see previous blog post on metacapital). It is negative because it destroys group value and frustrates group value creation. Corruption is the use of knowledge that results to costs to the group.

What do you think?

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