21.8.07

Self Funding

So, I had an idea the other day – It may in fact have been given to me, but it’s hard to say. Me and one of my guys were talking about a way to build a contract, where we got a pro-rated discount, to be credited at the end of a billing cycle, so if you had 50 people on staff, you’d pay $x, and if you got to 60 people, the vendor would give you a credit for the next month, of, say $12,000. 80 people gets you $25,000, etc. It comes in as a credit.

The clever bit is that you can use this to build an incentive structure for your global sourcing team – the guys who run the program. If you set up the vendor partnerships with this in mind, you can create a system that self-funds growth. The lines of business will pay a set cost, get labor arbitrage, and all the goodness of the “program”, and the program folks will have incentive to grow the team, in order to get more discount funding, so they can implement new programs. You’d probably have to give the program seed money, but you could get scale that would spin off “profit” internally, and use it to fund more global heads, fund more programs, pay T&E, etc., or eventually, spin discounts back into the business.

It’s perverse, but big corporations breed perversity, so it’s really just a clever adaptation to a perverse environment.

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