Collaboration, teamwork, alignment Gregg Barrett

KPMG recently hired the Economist Intelligence Unit to conduct research on the state of procurement and the findings do not all add up to good news.

Supply Chain Digest’s interprets it like this: “Barriers remain to procurement moving up on the corporate ladder . . . [based on] disconnects in perceptions between procurement execs and other company managers. Procurement-related staff think the biggest barrier to procurement becoming more strategic is the lack of understanding or interest by other functions in that evolution. Conversely, executives outside of procurement think the biggest barrier is that procurement managers don’t understand the business well.”

Although I don’t think this comes as much of a revelation, it does reaffirm the fact that little has been done to overcome this disconnect despite the procurement transformations so many companies have gone through.

This suggests that better internal marketing, communication and change management needs to be on the radar screen of procurement considering that “53% of non-procurement executives agree with the statement that the procurement function is too focused on cost and not enough on value. Another 40% say the same about the focus on policies versus innovation.”

Procurement clearly has its work cut out.

If we dig a little deeper into the policy side, strategic sourcing has become entrenched as a primary policy and process inside global procurement organisations for several years now.

However, when procurement is asked about the alignment mechanisms being used to align sourcing strategies with enterprise strategies, the question is usually met by silence.

Why is there still a disconnect between sourcing strategies and enterprise strategies? The answer offered usually relates to “strategy ownership”.

The procurement department usually owns the sourcing strategy while responsibility for enterprise strategies usually resides with others. Unfortunately, these two functions are often disconnected from each other and the chasm results in neither strategy being optimally realised.

Jim Bergman from the IACCM recently highlighted two examples that underscore this point. “We recently witnessed a large technology firm develop and roll out a ‘green strategy’ related to its procurement function. This strategy included asking the supply base to commit to ‘green products’ that the suppliers would sell to the firm.”

As the supply base was introduced to the new policy and strategy, a few suppliers questioned the firm about why it had no overall corporate “green strategy” regarding the products and replacement parts it was marketing and selling.

“Failure to be consistent in strategy between the procurement, business development and sales functions led to diminished credibility and reputation with the supply chain. While difficult to measure, the costs associated with this inconsistency were noticeable.

“Second, a large equipment manufacturer decided to focus on achieving a key financial ratio as a corporate metric. The strategy was laid out by the corporate strategy development group and procurement was involved early in the strategy development process to ensure the target was realistic.

“Procurement was subsequently engaged throughout the process and became a strong advocate of the strategy. Certain measures and mechanisms were woven into the sourcing agreements developed, including KPI’s, and proactively managed by procurement.

“The key financial ratio targets were hit. The company’s stock price rose and its market capitalisation increased.”

The differentiating factor in these two examples lie in the ownership of the strategy.

With the technology company, there was no joint ownership of the strategies. With the equipment manufacturer, there was joint ownership of the strategy and an alignment between the sourcing/contracting strategies and the broader enterprise strategies. This occurred by building a collaborative climate which was an essential precursor to the effective implementation of the strategy and attainment of the key financial ratio. Building this collaborative climate is critical and takes teamwork.

Tim Cummins, chief executive of the IACCM, recently noted that “a lack of trust inevitably leads to exclusive, rather than inclusive, behaviour. Groups like procurement, legal and commercial/contract management are frequent victims of exclusion or seek to exclude themselves believing they are in some way ‘special’ or ‘too busy’ to be part of the core team. As a result, ‘We were involved too late’ is a frequent cry or ‘We could have warned them about that if only management had included us.’

This point was emphasised recently by Tammy Erickson in a Harvard Business Review blog. She said: “Increase your firms ‘collaborative capacity’ by building relationships and encouraging knowledge exchange . . . Find ways to help your organisation become more spontaneous, innovative and reflexive. Pass the ball.”

Tim notes that “the development of powerful teaming instincts and methods will increasingly be a key competitive advantage bringing speed, quality and agility to business operations. It is an area in which we can bring leadership (for example, in designing negotiation or post-award contract management methods) but whether as leaders or participants, the critical issue is that we must exhibit collaborative behaviours. Enjoy and contribute to all that is special about being in a team. In other words, recognise that teamwork is not a threat to our power or authority – it is, in fact, a prerequisite – and in addition to that it can be fun.”

As procurement professionals strive for the development of technical skills such as negotiation, contract development, RFx development and supply chain design, less emphasis is being placed on developing “soft skills” and non-technical skills.

When given a choice of training on the topics of change management, communication or strategic sourcing, many procurement professionals opt for the latter. But, why limit yourself to one of these options? It’s time to start focusing on the soft skills.

)  Special thanks to Jim Bergman and Tim Cummins from the IACCM