procurement.

How leadership repeatedly under-mines their most valuable procurement asset

At a recent conference in which my Dangerous Supply Chain Myths seminar was introduced to a new audience, I was related a story that was both compelling and disconcerting. Compelling in that it clearly demonstrated a lack of stakeholder collaboration, disconcerting in that it is an occurrence that is played over and over again within public and private sector organizations throughout North America.

The TJ Max Mantra

Like the large U.S Retailer T.J. Max whose slogan is “get the max for the minimum,” many procurement professionals see themselves as giving a maximum effort for a minimum return relative to job satisfaction and senior management recognition.

Don’t get me wrong this general malaise which is accentuated by an increasing level of apathy has little to do with a maladjusted ego or an over-inflated sense of self worth. Quite the opposite in fact!

It has everything to do with the belief that one is hopelessly trapped in a position in which their opinion matters very little in the overall scheme of things. What’s worse, organizational leadership hasn’t even made the effort to communicate what the overall strategy actually involves.

The case in point

Real life experiences are often the best way to illustrate a point, elevating mere opinion from the usually myopic realm of personal perspective to something with a much broader scope of both understanding and influence.

As alluded to earlier in this post, a senior procurement manager with more than 20 years of experience found himself in (for lack of a better word), a rut.

Motivated over most of his career to strive for excellence in terms of delivering value to both his organization and the taxpayers as a whole he is now reduced to a role of playing out the string so to speak as a result of what could best be described as a demoralizing episode.

Overseeing the central procurement arm of a government agency, he was given the task of procuring the latest and greatest technology in terms of the quantity purchase of photocopiers.

After considerable research coupled with the knowledge that their IT Department was also in the market for a significant quantity of printers, he took it upon himself to do an analysis. Specifically, what would the cost to the taxpayer be if the photocopiers and printers were purchased separately, or if the latest and greatest technology afforded them the opportunity of combining the purchases into a single unit (re a photocopier with full printer capabilities)?

He soon discovered that the combined unit capability possessed a significantly superior capacity in terms of quality, reliability and consumable usage (i.e. price per page output).

Furthermore, it would eliminate the need for the IT department to replace the printers they were looking to acquire today, 2 to 3 years down the road.

It is important to emphasize the fact that this was not a junior or novice procurement professional fresh out of school. This was a senior manager who also had the benefit of overseeing another area of the organization’s operation for a portion of his 20 years (remember my post on the CPO Agenda Roundtable in which participants expressed their belief that the best procurement leaders come from outside the ranks of the purchasing department?).

This individual clearly knew his job and had the experience and expertise to properly analyze the situation from multiple points of view.

Armed with this information, he approached the Director of Finance with his findings. Keep in mind that this was not a matter of a few measly percentage points in savings, nor did it involve a contradiction or compromise of the technical specifications associated with the IT Department’s intended purchase. In fact it made more sense from a technical standpoint for a variety of reasons including that of standardization. However, the reaction to his work was anything but enthusiastic.

Rather than applaud the initiative of not only meeting but exceeding the requirements of the task that he had been assigned, the Director of Finance felt that the recommendation was an indication that he (he being the Director of Finance) had somehow not done his job when he approved the IT expenditure. The Director of IT took it to the next level by complaining that the procurement manager had somehow stepped on his toes.

Instead of welcoming the input of a seasoned professional, the recommendation was quietly scrapped. Here is the rub, word got back to the procurement manager that when the IT department goes to purchase their next group of printers within the next 24 to 36 months, the combined photocopier/printer proposal would be incorporated into the IT department’s budget.

As a procurement professional, how would you respond to the above scenario? Would you be more or less inclined to take up the mantle of going that extra mile to do your job in the future? Or would you follow the path of one senior procurement executive who worked for a major energy company?

Recognizing that he was within approximately 2 years of retiring, and despite his belief in the enormous benefits of a new and innovative technology, this individual made the decision to quietly champion the concept from “the shadows.” When asked later if he felt that the approach he had taken represented the optimal route for introducing the technology into his company, he said no. However, given that his retirement was so near, and taking into account the “political” landscape of his organization at the time, if he had openly championed the concept and for whatever reason it did not pan out, he did not want to end his career on a sour note. Alternatively, even if as he had expected, the technology did prove to be everything it was cracked up to be and more, he would not be around to enjoy the fruits of his labor. Sort of a heads you win, tails I lose proposition.

Procurement Success has little to do with technology!

The moral of the story is that there is nothing that any technology, no matter how heralded or cost effective (think SaaS) can do to overcome a lack of communication between key stakeholders within a practice.

In the first example, a deliberately cultivated and strategically managed collaborative mandate could have removed the territorial partitions that separated the IT Department from the Procurement Department. This in turn would have fostered an atmosphere of cooperation based on shared interests versus territorial protectionism. The manager in this instance indicated that it is unlikely that he would stick his neck out again in the near future. Especially given his expectation that the Director of IT will likely take the credit for the future “strategic” purchase of combined photocopier/printer units.

Over a period of time, the erosive effects associated with occurrences similar to the photocopier/printer illustration are consistent with the position ultimately taken by the individual in the second example.

No wonder one of the most interesting observations from the CPO Agenda Roundtable (see the PI August 3rd post – Procurement’s expanding role and the executive of the future) was the belief that there is a benefit in the “increasing number of CPO’s that are coming from outside the procurement world.”

However, this lack of confidence in purchasing professionals is more than likely the result of a deflationary practice, resulting in a self-inflicted wound that originates at the most senior levels of an organization. (For those of you who are interested in delving further into the highly political (nee touchy) but undeniably interesting area of executive competence the book Unstable at the Top by Manfred F.R. Kets de Vries and Danny Miller is a definite read.)

Success begins and ends with effective communication

I have always believed that sound communication practices leads to true understanding, and that true understanding is the cornerstone of effective collaboration.

Undeniably, communication begins and ends at the most senior levels of an organization (whether it is a public or a private enterprise). Far too often however, senior executives who are by nature vision versus detail oriented fail to establish the streams of communication that ensure a collaborative delegation of responsibility within the existing organizational framework. Instead, and has one study asserted, leaders are mostly governed by fear, and as a result tend to surround themselves with past or known associates who are more inclined to share the “same” view of the world. This of course does not lead to collaboration, but instead to assimilation. No wonder procurement professionals (as well as employees in general) are left with the feeling of looking in from the outside.

What is a Procurement professional to do?

A healthy percentage of the procurement professionals who attend my conferences indicate that they feel a sense of powerlessness in terms of their organization’s procurement practices. Statements such as “the parent company made the decision to go with the SAP application even though it doesn’t suit our company’s needs” to the ubiquitous “the train has already left the station so we are just hoping for the best,” give testimony to just how ineffective senior management has become in terms of establishing a strong communications network both internally as well as externally.

That said the most frequent question I receive next to the one surrounding the pitfalls associated with the flawed “vendor rationalization” strategy is what can we do about the perceived disconnect within our own company.

My answer is always the same.

Step one, do not assume that senior management isn’t competent and isn’t aware of the problems within the organization’s procurement practice. Often times, their seemingly detached or disinterested demeanor is the direct result of being bombarded with complaints rather than solutions.

With this understanding, approach senior management with thoroughly researched facts and case histories. Ask questions such as if the current strategy hasn’t worked in certain historic instances why do we believe that it will work in our case?

Rarely will a true executive (let alone an accomplished one), not welcome a “non-accusatory” approach to a challenging situation. In fact you may find that you have established a long hoped-for rapport that can open the door to an ongoing and productive dialogue. As a Procurement Professional it is your responsibility to do everything possible to try and establish such a link.

The logical progression of the above conversation leads to the query, what if I do this and they still won’t listen. Well you have a decision to make. Either stay - and like the purchasing manager at the energy company play out the string to a full pension. Just make certain that your enthusiasm for making a difference in the world is checked at the door.

Alternatively, and this is important given the increasing rate of reported burn out in the purchasing ranks, make the decision to move on to an organization in which senior management possess the qualities that stimulate rather than stifle meaningful dialogue and collaboration.

In either instance, you will at least know the lay of the land, and be able to govern yourself accordingly.

Author:.

Personal Profile: http://www.linkedin.com/in/jwhansen

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