MGT 254. Contracts and Procurement Assignment 7 XYZ Company’s Customer Relations
ID: 410310 • Letter: M
Question
MGT 254. Contracts and Procurement Assignment 7 XYZ Company’s Customer Relations Management (CRM) Project Six months ago, the Executive Committee of XYZ Company made a decision to install a Customer Relations Management (CRM) system to streamline its operations. Specifically, XYZ expected that the CRM project would enable it to integrate its order fulfilling and sales and marketing processes that had always operated as separate functional units. As a result, communication between these units has regrettably been minimal. For example, the order-fulfilling unit did not have any information about the customers whose orders they fulfilled. Similarly, the sales and marketing unit could not answer customer inquiries about the status of their orders because they did not have the information from the order fulfilling people. The Executive Committee assigned responsibility for the project to the IT department, which in turn appointed Steve McMahon as the focal person for the project. The Executive Committee also decided that the project should be outsourced to an outside contractor with a good track record in implementing CRM solutions. Steve developed the initial requirements for the project. He then called a focus group meeting to review the requirements statement he had developed. The group consisted of middle managers from marketing and sales, IT, operations, finance and engineering. The meeting improved upon Steve’s requirements statement and developed the business requirements for the project from it. The focus group later became the project’s steering committee. A Statement of Work (SOW) and then a Request for Proposal (RFP) were developed based upon the business requirements. At the end of the solicitation process, Computer Software Solution, Inc. won the contract, and started implementation of the project as defined by the SOW. Two months later, Steve was sitting in his office reviewing the latest status reports on the project the contractor had submitted. He was satisfied with the project’s performance so far. At that moment, Roger Smith, the Vice President (V.P) for marketing and sales phoned Steve and asked for a briefing on the project. At the end of the briefing, the V.P told Steve that he was distressed about the suitability of the final product. He protested that there was by far too much emphasis on order fulfillment instead of customer profiling. He bluntly told Steve “the product, as you have described it, would not be an effective market research tool as I expected it to be”. He then hung up. Moments later, he was on the phone again, but this time with Francis Gray, the contractor’s project manager. Roger told Francis that what he expected to see at the end of the project was a product that would enable his unit to undertake effective market research. He therefore specifically gave Francis the go ahead to make changes in the product’s features to include customer profiling that would enable him to achieve his goals. Francis politely told Roger that the prototype of the product was 40% completed and that his request would require a major redesign of the product. This would extend the project by another two months and would result in budgetary overruns. Francis also told Roger that before he (that is, Francis) could make any design changes, he needed to consult with Steve and other members of the project’s steering committee. This was more than Roger could take and he quickly shot back: “I am the customer. I demand that the product include the customer profiling features, period”. When Steve learned of Roger’s demands on the contractor, he grew confused. He didn’t know what to do. Questions: 1. Marketing Vice President Roger Smith angrily states: “I am the customer”. As such, he expected the contractor to follow his request. What are the merits of Mr. Smith’s assertion? To what extent is the contractor obliged to do what the customer orders? 2. How should Francis handle the unexpected request from Roger Smith? 3. How can effective change control procedures help Steve and Francis deal appropriately with this situation? 4. If Francis accedes to the request of Roger Smith, what would be the possible consequences?
Explanation / Answer
(1)
The only merit of Smith's assertion is that as a customer or end user, he is taking every possible way to fulfill his function's requirement. Ideally speaking, this is essential to project's success even when we realize that there must have been gaps in the process of preparing the SOW or requirement statement. It seems that Smith is jeopardizing the contractor's plan and the overall project but without this, the ultimate objective of the project will not be achieved. Though from the contractor's side, it is not obligatory to entertain Smith's proposal as to him, the customer is the Steve and he (Francis) needs only to abide by the contractual obligation (i.e. whatever is defined in the SOW), it is worth for him to discuss the matter with Steve before proceeding with the project any further. The contractor should understand the requirement of Smith and inform Steve regarding his estimated variation in the baseline if the proposal is entertained.
(2)
Francis should discuss the matter with Steve before proceeding with the project any further. He should understand the requirement of Smith and inform Steve regarding his estimated variation in the baseline if the proposal is entertained. If still, Steve confirms the present SOW with no amendments, Francis should follow the earlier plan. Otherwise, he can expect to receive a modified project plan after another round of discussion and modification of requirement statement or SOW at his client's end.
(3)
Some of the essential attributes of a successful change control process is that a) the process requires the change to get notified to all stakeholders of the process, b) allow parties who will be affected by the change to modify or provide feedback for modification, and c) a final approval from of the proposal by relevant authority. If these things were followed in this case, Smith's issue with the system could not have been remained hidden by the time the SOW became final. The requested change could have been implemented at any stage including focus group discussion, notification to all stakeholder, or approval from the top management ot project sponsor.
(4)
Fulfilling Smith's requirement will need additional cost and time as already indicated in the case facts. So, if Francis does this modification without proper consultation and approval from the appropriate authority (Steve), it will lead him to either budget overrun or completion delay. In both the cases, his company will lose out either in terms of cash outflow for the extra work or penalty payment for completion delay. So, this is not advisable to go for the modification without proper change control from the contractor's side.
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