Secrets of building an agile and future-proof procurement function
We have heard so many times that change is the only constant and that business environments have become dynamic like never before. Topics like transformation and change management are commonplace on meeting room whiteboards and presentations. In most organisations, such programs are deemed complex and difficult to execute and typically communication and training are considered the key foundations of such programs. However, there is a new breed of organisations that are building a procurement function which is ever ready for change and transformation is a part of everyday life. Observing some of these organisations, it emerges that there is a design and plan which is enabling them to build such a culture. Let us look at some of the key initiatives that they have adopted:
Active awareness of best practices and new ideas in procurement, from both within and outside the industry
It is well-known that exposing individuals and teams to best practices and new ideas motivates them to think on similar lines for their organisations. This can be done by:
- participating in procurement conferences/ seminars with a large cross-section of the procurement team being present and not limited to token participation. The procurement team has a budget for such participation and this is done as a program rather than on an ad-hoc basis.
- holding workshops with consultants and service providers to keep abreast of new developments in strategies, processes, tools and technologies
- subscribing to various procurement journals/magazines online and off-line and having a mechanism in place so that the relevant content/articles from thought leaders and other companies is made available to the procurement team across all levels at periodic intervals
- institutionalising formal discussion groups which meet at periodic intervals to brainstorm on best practices and ideas emerging from the above. This ensures that it doesn't get limited to only a few individuals who are interested but rather the entire department is involved and discussing these at various levels
Ongoing evaluation of activities associated with roles and responsibilities
In most organisations, there are periodic assessments on the roles and responsibilities of individuals and teams. However, in almost all cases there is no elaboration of the activities associated with those roles and responsibilities. Organisations seem to miss out on this important aspect which determines whether individuals and teams are able to direct the right focus on value adding and core activities. More often than not, when individuals and teams complain about challenges in meeting objectives, it is more to do with their preoccupation with non-core activities than lack of skills or capabilities. An annual exercise to evaluate the activities associated with roles and responsibilities of individuals and procurement teams and enabling them to focus on core and value adding activities helps in building a culture of transformation.
Periodic comparison of existing versus available tools and technologies
For the procurement function to be best in class it is essential that it leverages the best tools and technologies that are available. In the last several years, procurement tools and technologies have rapidly and radically improved to be almost called revolutionary. In fact, leading organisations are now collaborating with technology providers to develop procurement platforms of the future. These organisations review the procurement technology landscape every 2 to 3 years to explore the possibilities of adopting new tools and systems towards transforming the function.
Benchmarking- to know what needs to change
If you don't know where you stand in comparison to your peers, it is quite likely that there will be no imperative to think about change. Best in-class organisations benchmark themselves annually. Benchmarking is done across regions, across business units and using internal as well as using third-party benchmarks like Hackett, IQPC and others. This exercise also reveals whether the right metrics are in place and are comprehensive enough to align with the procurement function's objectives.
Introspection based on feedback from internal and external customers to provoke the change agenda
One of the key drivers for building a mind-set for transformation is feedback from stakeholders. At an individual level it probably does get addressed in performance appraisals but more importantly it needs to be done at the team level. On an annual basis, the procurement function takes feedback from its internal customers and external customers like suppliers on areas of improvement and change, and, targets are set for improving the feedback scores. This motivates a positive thought process towards change.
Knowledge of the organisation's competitive business environment
Providing the procurement team with visibility to the macro business environment of the company so that the imperative for change is clearly understood by everyone in the light of competitive pressures being faced by the organisation across the globe or within particular regions. Knowledge of the product and service strategies being deployed in the market by competition helps to build a better appreciation of the need for change in the procurement function and the roles that various teams would play in that.
Would you like to share any secrets from your organisation?