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Saturday, 5 April 2014

Auctions III: The Black Hole of RFPs

This is Part 3 of our series about auctions. This one is probably viable as a stand-alone article, but you'll benefit more if you read the previous parts first (I: Auction or Reverse Auction. Introduction to Auctions; II: Reverse-Auction Setting Is not Optimal for You). The most important thing to find there is that reverse auctions are not designed with your benefit or a mutual benefit in mind. They are designed solely with the buyer's profit in mind, and profit pursued even in self-destructive ways.

If you represent a translation agency please do not presume I'm some sort of a fierce freelance warrior on a crusade against you and yours. On the contrary, if you work at a small or medium agency, you'll likely benefit from this text than most freelance translators will.

Let's start off with some quotations to set the scene, and it won't be pretty:

By doing RFP work, you’re running on a hamster wheel instead of building value.[John Warrilow, Death by RFP: 7 Reasons Not To Respond, Inc. 2013; for more hamster wheel see J. Warrilow, RIP to RFPs: Why You Should Stop Chasing Bids for Business, 26 August 2010]
Recently a member of the LawMarketing Listserv asked how her firm could get more RFPs for legal work from corporations. My reaction was, "why would you want to go to Hell?"[Larry Bodine, Why go to RFP Hell?, 24 December 2005]
Law and business bloggers are sometimes witty people and imaginative writers, but they don't use that type of language every day! If I wanted to quote all of their memorable juicy lines (especially Bodine's), I'd need to copy their entire articles over. There's apparently enough disappointment out there that people no longer make an attempt to hide it. Tom Kane stays remarkably temperate and patient but still notes, in an article titled Avoid Client RFPs, that:

You shouldn’t have to compete in this manner, if you are doing your attorney-client overall job properly. [Legal Marketing Blog.com, 2 November 2012]

So it's basically client acquisition failure if a lawyer needs to rely on answering RFP's. Let's take another quote, from Larry Bodine's article, describing a large bid for legal services held by a global corporation. Do note that legal services and the various brands of translation and interpreting or similar services are among the closest-resembling professional fields.

Everyone was so nervous that they didn't touch anything on the food table.

And that's it, you may ask? Now, he's talking about a ball room full of lawyers from 103 firms feeling soft in their knees! You wouldn't think those firms sent rookie associates there, right? Something of that calibre requires people with serious job titles and names that ring a bell. To leave no doubt, we're talking here about a number at least in the low hundreds of experienced, powerful legal eagles and sharks being made so nervous they can't get the food down, a couple dozen of them probably legal stars. If they acted together, there'd be a full batallion of them there. Possibly a company of partners.

At any rate, Bodine's rounding-out thought is that:

an RFP is an invitation to put your head into a noose and go through the client's procurement system. (We usually talk about hoops and jumping through hoops among translators.)

RFP regime promotes useless bureaucracy and spoils your potential clients. People's personalities vary and there are also some who simply can't help spawning those long tracts of bureaucratic requirements if your don't keep their full optimisation tendencies under control. Bureaucracy rarely optimises anything, anyway, and the reality is that it resembles writing a letter to Santa. Given, however, the advantage strength and leverage typically enjoyed by an RFP'er, few people will have what it takes to cry out that the emperor is naked. Or, in some cases, even an unwitting emperor is sometimes compelled by legislation handed down by someone else, someone who just might have been playing armchair general.

Speaking of clothes, anyway, at Versa Studio's, they call it laundry list, noting that:

Respondents must laboriously address each item, even when it's inappropriate for the client, for their response to be complete. [5 reasons why RFPs are a bad idea]

If you have any serious experience with the recruitment and procurement procedures of the translation 'industry', then you must have noticed, by now, how out-of-place some of those things are, sometimes displaying a markedly clear lack of understanding of what translation is about. And sometimes even a lack of understanding of business considerations.

For the record, I didn't go to business school, but I went to law school and I can tell you that one just can't make magic happen by handing down a decree and expecting that life will conform. May I recommend the story of Cnut the Great trying to command the waves back in 11th century.

Due to the increasing power to dream and decreasing need too keep it real:

RFP customers no longer need to have any particular industry knowledge or business smarts or even to exercise their common sense. A lack of knowledge about the details of a specific industry is not a problem in a company which only rarely has to procure any goods or services relating to that industry. Missing business skills are more of a problem, though sometimes businesses can function relatively well without them. However, it's quite onerous when ideas that just don't work get formalised and become the letter of the rules you're going to live by.

Smart people — and smart organisations — know their limitations and ask for assistance from consultants and other specialists when they need it. Those had better not exclusively be procurement consultants, though.

Even in a successful and thus presumably business-smart company (or how else would they be getting results?), the procurement apparatus may be totally disconnected from the recipients or users of your translations, such as project teams, client-care specialists and marketing departments. The failure of imagination to see problems occasioned by this disconnection is astonishing in the light of how far some companies' imagination can stretch when inventing hoops for you to jump.

(For the record, the hoops may be designed by lawyers who are so obsessed with protecting and enforcing their clients' interests that they fail to realise that it takes two to tango and the client's terms still need to be agreeable to a fellow human being for this to work.)

What is worse is that the commoditised procurement model has the potential to make even professional, industry-specific companies take after consumers and behave accordingly. In which connection:

RFP customers no longer need to be responsible or friendly or respect your time. Many RFP'ers will cancel the whole thing some time into it, impose additional requirements without prior warning, even sometimes cut the budget down, or perhaps — after receiving your translation — ask a myriad questions and complain about some perceived non-conformities. Since they no longer really need to have a strong idea of what they are talking about.

In an environment controlled by an undisciplined buyer who combines the privileges of a sophisticated customer with those of a consumer you stand to waste a lot of your time, and possibly your sanity.

Plus, especially when the recruitment or procurement is not a strictly regulated RFP-driven procedure, the client can merely be price-shopping or conducting general vendor research to begin with.

Make no mistake, RFP's are a huge waste of time and resources (Avi Dan from Forbes explains why, from a marketing client's perspective, Why The RFP Is A Waste Of Time, 19 February 2014), and the costs of that Byzantine bureaucracy are paid from the same budget where your pay comes from, which is another cause — apart from the effect of competitive bidding — why that pay is so low.

To be clear, RFP clients are acting in their own interest, not yours, and they won't feel a need to use it judiciously or sparingly, since, according to their understanding, the whole system focuses on them. And they got that part right. In their mind, you are participating because you chose to, and volenti non fit iniuria — a consenting party is not being wronged. If you didn't want to be part of their RFP procedure, then you wouldn't be — right?

Your own benefit from participating in the RFP-driven procedure is supposed to be the chance — to be assessed by you yourself and consequently either braved or not — of winning their contract and earning its price, of which the profitability to you is something else up to you to decide on your own. Your concerns and the welfare of your business are not the buyer's concern.

Take a look at Jonathan Wold's story at Smashing Magazine (Stop Writing Project Proposals, 17 February 2012). Now take a look at the lovely comic at Bart Aalberts's (Pitches can be Bitches). While RFP'ing actually can in some cases lead to relationships, and some procurements for long-term services seem to have some such thing in mind (e.g. 20-year warranty obligations by necessity impose some sort of relationship, however stiff and formalistic it can be), RFP'ing is basically the essence of 1) an arm's length setting — where both parties theoretically work for their respective maximum benefit, except the bidder is not quite in position to — and 2) which is totally buyer-centric by design and by definition.

Even informal RFP-like settings concentrate on meeting the buyer's buying needs, not your selling needs. In other words, it's about what the buyer wants to get, not what you offer or want to offer or can offer, or anything else to do with you. And, for the record, yes, needs are not the same as wants. Strict RFP'ing does gimp the buyer by restricting incoming information about what the buyer could benefit from doing differently. Logically, people who need experts are not normally capable of making the optimal decision on how those experts should do their jobs. Does a GP leave a cardiologist or an orthopaedic doctor detailed instructions what to do? Nope, a GP decides that hey, by the look of things we need a cardiologist or an orthopaedic doctor to help treat the patient further.

RFP takes your brand away and nullifies your unique experience and vision (and anything else unique), reducing your purpose and value to just meeting the decreed specification, and meeting as cheaply as possible much if not most of the time. Again, like Warrilaw says, in the RFP-driven model you don't get to promote your personal vision or your company's vision, at best you get to participate in executing the buyer's vision, if the buyer has any particular vision at all. Alternatively, you may end up chasing the RFP drafter's fuzzy ideas like a child in the fog.

In any case, your role is execution, and not the kind of execution that makes you an executive. Your client is the legislature and the executive, your role is more like the bailiff's, or reduced to compliance and carrying out. Except for those cases when the RFP'er sets you to do the footwork of fleshing out the details — which is actually somewhat smart for the buyer to do whenever it can be reasonably expected that your relevant knowledge exceeds that of the buyer's.

Consider also that you are working with a client who prefers to feed that huge costly and inefficient monster apparatus rather than coming up with a smarter thing to spend money on. Or the client would that the client could, but the client can't take the liberty to be smart because of being tied up in some sort of regulation or contract, almost certainly one that originated with an RFP. Can you really expect rational decisions in that kind of setting?

The translation agency's RFP misery (translators also please keep reading, lawyers also want to)

Now, if you, my Dear Reader, are a project manager or an agency owner or employee, or if you simply talk to them a lot, chances that are you are already acutely aware of what it takes to win a procurement bid in the translation 'industry'. Namely, the rates which agencies — other than yours, I hope — quote if they seriously want to pull off the win. For example €0.015 per source word complete with proofing, redaction and native speaker review. Which is about a half of what an affordable translator with some standing charges in that same market. Legally, such a bidder should be thrown out of any public procurement proceeding!

An incentive to bid low may be even easier to find where failure to find translators for any concrete job requirement submitted by the buyer results in no particular penalties. If they won't be penalised for failing to guarantee translators for the job, then what stops them from quoting prices very few translators — or possibly none — would accept? At worst they just won't get the job.

An example scenario could look like this: Several winners are selected. They are allowed access to an electronic platform where they can bid. The lowest bidder will win. The non-winners don't get the job, so they don't get the money for it, but that's it. Even if the buyer sustains damage, causation may be tricky to prove and attribution tricky to establish.

The link between low bids by agencies and low pay for translators is inevitable. This is because the most important cost driver is (to simplify things a bit) labour, i.e. the translator's pay. Once agency bids in client tenders get to the point where they are lower than what translators are normally paid — and the agency still needs to cover overhead at least, even if it's not making any major markup on that particular deal (e.g. because the business purpose of it is only to earn referrals from the client and meet the experience requirement in more lucrative tenders) — then it simply must cut into the translator's pay.

To put it as directly as we need if we want this 'industry' to get any better — translators cannot indefinitely continue to bear the burder of too risky bids, or business development strategies based on not making much income because of e.g. working for referrals only (selling at cost in order to earn testimonials, meet experience requirements etc.). There needs to be a different way, a different business model.

Moreover, however bad an agency and its staff may feel about RFP's — and I think there's a strong chance that it's quite bad — translators feel even worse. I don't presume to guess what your background is as agency staff are a varied community and not just one sort of people, but there's a good chance your translators' background includes less business, management and administration than yours. Consequently, they will likely have even less heart, or stomach, for procurement hoops than you do.

In fact, they already complain about hoops all the time on message boards, in Facebook groups and other outlets. Many have already resolved to ignore any jobs involving an RFP.

Almost one last thing: Just to be sure, good translators will eventually change careers or focus more on acquiring their own direct clients instead, or at a minimum restrict themselves only to the highest-paying agencies. Paul Sulzberger discusses this in more detail in his interview with Luigi Muzii (Are bad translators driving out the good, 24 September 2012). If you have unfriendly work and working conditions, then you'll be stuck with bad translators eventually. Perhaps not now, not tomorrow, but eventually. But chances are your existing portfolio of translators is not quite exciting.

Finally, do you know (e.g. by keeping a record — and if you aren't keeping one, you should give it a try!), how much time the procurement hoops consume cost you and your employees? How often do you win? Even if you win, is the pay worth it? What is the return on that investment?

What could the alternative be, if you gave up on chasing tenders that award huge volumes of work in one swoop but were instead free to deal more at ease with inquiries and requests coming from your non-RFP potential clients?

Perhaps read Survey says – RFPs increasing, but process improvements needed by Ryan Bowers @ RFP Attorney, 31 October 2012. Our 'industries' are very similar to each other, and a lot of their experience is transferable. The survey itself is available online, free of charge, at LexisNexis, and is a short and handy PDF file. You may also want to know that a somewhat dated but still not ancient survey showed that

72 percent of Fortune 500 companies admitted they had sent out RFPs even though they had already selected the vendor they were going to use (Ann All interview with Tom Searcy, ITBusinessEdge, 15 October 2009).

The translator's RFP misery (still useful for agencies and clients to know)

Agencies can't use magic to pay translators more than they are paid themselves by their clients, or give longer deadlines than the client gave to the agency. Sometimes agencies take a short-term loss for the sake of a long-term gain or to avoid a looming loss, but they can't do that too often or they will go bankrupt.

While huge Mega Language Vendors and Multi-Language Vendors rake in millions, with huge bonuses for management (possibly the same guys who require more and more concessions from translators), most agencies aren't that happy. And agencies are paid little because of the competition model they're set in, i.e. buyer-dominated procurement.

The problem will exacerbate on each additional tier of procurement, especially any one which was not expected at the stage of the original tender. Deadlines will become shorter and cheques thinner as both time and money are divided among more and more intermediaries between the client and the translator.

Next comes the problem that if translators keep being making this sort of price-driven competition possible, allowing the problem to deteriorate in small steps (in frequency or size of impact or both) they will sound less credible when they do finally try to make a stand, and agencies will have much less incentive to do something about the current model and the current structure of this 'industry'.

Additionally, if you participate in the same tender together with a number of agencies, those agencies will effectively be competing for the privilege of offering your services at the lowest price possible. You'd actually be better off bidding on your own if you were eligible. And you won't be eligible to bid on your own if you sign non-competition clauses and if your non-disclosure agreements prevent you from proving your previous experience in handling similar work.

Furthermore, participating in the RFP game in tandem with agencies is risky for you on a different ground: uncertainty whether you will actually be chosen for the job if the agency wins. Not always the translators whose CVs and diplomas (copied or scanned and sent by e-mail or even physical mail) win the tender for the agency actually are chosen for the job. Sometimes the job goes to cheaper translators instead. There are sometimes loopholes which prevent that sort of thing from being inconsistent with the terms of the contract.

Finally, Remember that agencies don't exist to bring you profit. They aren't there to jump through all the hoops, take all the risks and leave the pay intact for you. And why should they? If you want someone else to work for you in some sort of dedicated way (e.g. find you profitable jobs), you should expect to need to keep that person or company in your payroll. So even then, there'd be not intact pay, anyway. It's actually both unrealistic and unfair when translators think agencies are or should be charities for translators' benefit. Agencies won't normally be playing the RFP game with a specific resolve to ensure good pay for you. Rather, it will be a question of can they expect you to work within the resulting budget or not.

You also need to realise that — by now — some agencies have adapted to the new reality and become commodity resellers. Things won't be getting better from there. Just like good translators get squeezed out of the market, good agencies will be driven out of business in a world where clients care mostly about the price or expect quality but also have unrealistic ideas of the price of getting it. Or they don't care because they just need to push it on someone else or push it out.

Added misery in a multiple-vendor chain (whether translators or small agencies)

One of the consequences of the financial and time constraints of long procurement chains is that QA is likely to be impacted by the savings. Proofreaders, editors and reviewers are becoming rarer and rarer. Even where there are still some on the payroll, the rush they face and the tiredness are going to take their toll, leading to more slips (failure to detect problems and avert risks) and the unnecessary flagging of things which aren't errors (loss of time, conflicts), possibly largely due to the fact that a reviser (or some other QA'er) spends 10 seconds making a guess on something the translator spent 30 minutes researching carefully, worse still if the reviser isn't as qualified as the translator.

And the small budget may indeed result in underqualified QA professionals being hired, or semi- or non-professionals used, or even nobody at all. Absence of QA exposes the translator or the agency down the chain to greater risks than normal, especially where they expected the higher-ups would handle the QA, and especially where what the bottom of the chain is doing is not exactly what the top of the chain originally had in mind.

On the other hand, while one or two underqualified QA people are still better than none, even though dealing with their flags and queries may prove taxing, a large number of underqualified people in the QA chain increases the potential for questions arising from ignorance. Ignorance either of the language or field translated, or of the job requirements agreed up or down the chain. This can lead to huge loss of time, and time is how a professional makes money.

Plus, a QA chain with multiple redundant steps leaves more room for subjective disputes and multiple reversals and reversals-of-reversals, e.g. when QA'er 4 agreed with QA'er 2, who agreed with the translator, while QA'ers 3 and 1 were of a different opinion.

Things get worse where the various links on the QA chain are actually competitors, hoping to get translation rates next time.

RFP misery comes from the idea that if a business executive decrees high requirements and a low price life will obey

… Which is too smart to be true in real life, as we discussed in the beginning. The truth is that contractors will cut corners when they think they are forced into that position. Even ethical people will cut corners when they really have no other choice, as in it's either that or die (e.g. get a foreclosure on their house, lose the office, lay off their employees, go bankrupt etc. or literally die of a heart condition after putting in 100-hour weeks on a constant basis).

As a minimum translators — and possibly agency staff also — will need to work at a faster rate or work for longer hours, or both, resulting in hasty translations, uninspired writing, more errors and QA issues. Which will, in turn, seem to justify whatever low opinion the disconnected people higher up the chain may have of translators and their work.

Worse still if deadlines are cut even shorter by the time it takes an agency to find someone who 1) meets all of the mandatory requirements, 2) will still accept the low rates and submit to the onerous procedures imposed by the procurement system. In such a situation the translator — even if somehow not unqualified — will be working in suboptimal conditions, even perhaps contrary to the end client's original intent and contrary to the client's wishes if the client actually received full information about the process and the consequences of its shortcomings.

Moreover, knowledge of human nature dictates that nobody likes to set to work by having his rates driven into the ground, being effectively told on the onset that profit is not for him to make on his own work but for someone else. Especially if that someone else is a for-profit corporation. Personally, if I had to drop my rates like that, I'd seek out a hospital or school or an armed service or even a government agency but not a for-profit enterprise. And if a for-profit enterprise, then at least a struggling one and not one which publicly takes pride in the profits it makes when it's not complaining to me about how tough the market is.

'Okay, you can set to work, but it's important that you only make a minimal profit, just enough to survive. And you need to give your everything, nothing less will do,' — this is basically the message sent when prosperous and powerful companies leverage their position to get the lowest prices possible. That message can't really work.

Finally, agencies will hire cheaper and possibly underqualified translators, dispense with proofreading and editing, take liability risks, take other desperate steps. How else can they charge the low rates it takes to win a (local) government bid? The RFP regime already makes it really hard in the best situations to pay decent rates to translators and finance the QA at the same time. And cover the overhead. And make even on the costs of bidding.

RFP'ing are a lot like online dating

People somehow manage to fall in love, date, get engaged and married, if they have enough exposure to the opposite sex in natural settings in real life. They don't actually fuss so much over details or keep moving on so dispassionately spending 10 seconds on a profile like a recruiter on a CV.

By contrast, in online dating, wading through dozens and hundreds of preselected profiles with no pre-existing interest or particular feelings encourages them to dissect and calculate, and they just can't connect, and things don't work — unless by some chance they do (e.g. because someone proposed meeting up offline at the right moment, not too early and not too late). So one's never really satisfied. There are very fields to fill on but precious few distinguishing factors, forget a compelling incentive to pick any one of the 200 pretty faces ahead of the others. Even if the seeker's focus is somehow drawn to a single specific person at a time, then there can always be someone better, now or in the future, at least theoretically. Chances are the beauty contest will never end, no wonder if the judge doesn't know where to start and the participants typically neither. It's difficult to establish relationships in such circumstances. Sound familiar?

Barring some responsible uses of it, RFP'ing is going to be a neverending race to the financial bottom, and sometimes financial bottom and QA peak, at the same time. That's not so bad in products or services that can be automatised, but in professional services it benefits nobody.

I don't want to blast RFP's totally, not even in professional services such as translation. Perhaps there are non-harmful uses. As far as translation goes, I can't really think of any other than patriotic service providers empathising with their government's need for thrift or some semi-charitable applications.

Recap

Now let's take another look at the comic at Bart Aalbert's again. So how about we just eat an apple instead, next time an RFP comes?

RFP-driven procurements are going to be harmful to you, unless, somehow, you thrive in the setting. They cut into your profits, set you up for losses, tie you up in a bad job and commoditise your profession. They make you dance to the buyer's tune, which may put you at odds with the standards of your profession or in some cases legal or regulatory obligations. This also promotes irresponsible or otherwise unwelcome attitudes in your potential clients.

5 comments:

  1. I have one customer who is required to subject almost all outsourced work to a bidding process. The only way to get out of that requirement is to show that the services in question must be provided by a particular specialist. And of course the contract is written to include an affidavit on the specialist's part that s/he possesses appropriate qualifications, which are described in detail. At least that's how it has been in the past. The exact rules change every few months. At any rate, everything else has to be subjected to bidding, and they are required to take the lowest bid. The result is that they can end up with a different provider every year, and questionable quality. So you are quite right: no one really wins.

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    1. Yes, it's the silly magic-wand presumption. Like decrees can shape reality. Nope. Handing down the specs and driving down the price can't make miracles happen. And, yes, some companies have no choice. It's difficult for public spenders to avoid the public procurement regime.

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  2. Please take notice that this post was edited heavily after posting. Consequently, it is almost a new article. I apologise for the inconvenience and hope it reads better now.

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  3. Additional read, covering many of the things I mentioned here and very illustrative:

    http://www.inc.com/magazine/20070501/salesmarketing-pricing.html

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  4. Our only hope may be to take a leaf out of the books written by other, more successful professions, by differentiating the 'profession' from the 'industry'.
    I have come to the 'profession' from a management background and and MBA, and I've looked at some of these aspects from a strategic point of view at: www.doubledutchtranslations.com


    ReplyDelete