Top down vs Bottom up. Four simple things to consider.
In this blog I have listed four elements that decide which implementation approach would be more effective when an organization is looking for procurement --or any other business function -- outsourcing.
What implementation approach would you consider to be the most successful for procurement outsourcing -- top-down or bottom-up? We get this question on a regular basis in discussions with top management on the potential outsourcing of procurement related activities. It is a tough question to answer and despite the fact that they are looking for single word answers or a crisp piece of advice, my response so far has always been "It depends".
The answer as to which is the preferred approach depends on a number of factors.
First, what processes/activities are being impacted and are in scope of being outsourced and to what extent have these processes already being centralized within the organization. The higher the number of interactions required with the retained organization and/or suppliers the higher the impact and thereby the bigger the change requiring a more delicate approach which would favor bottom-up.
Secondly, what is the culture within the organization? How is and how has the organization been treating significant changes in the past and how successful have they been? If top-down didn't work before, why start now? And vice versa as well of course. So, the current or desired organizational culture can lead to either a bottom-up or top-down approach.
Thirdly, how much time is available or allowed for the transition? The assumption is that the bottom-up approach requires more time than the top-down approach. Bottom-up may require more time but due to the higher involvement of the employees throughout the organization it has a better chance to be sustainable. CFO's, CEO's and shareholders on the other hand require quick results pushing for shorter implementation timelines which would flip the coin to top-down.
Finally, what is the preferred style of the top management, but more importantly, how receptive to change is your middle and lower management? Like it or not but that is often where the real power sits within the organization. Middle and lower management can make, slow down or break the whole transition. What has been their level of involvement in going for the decision to outsource in the first place? If they haven't been involved then, as top management, be mindful of the fact that people simply need some time to get used to the idea of a third party stepping in to take over some of their responsibilities. At the end, you as top management did also not make the decision to outsource overnight, did you? Just as with the organizational culture factor, the preferred style of the top management could lead to either the top-down or bottom-up as the preferred approach.
In this blog I have just listed four elements to be taken into account deciding which implementation approach would be more effective when an organization is looking for procurement --or any other business function -- outsourcing.
Let me also share from my experiences as a former CPO. I ensured that my initial germ of going for outsourcing was seeded into my direct reports and then together with them we let the tree grow by defining what could be outsourced and what we should retain in-house. By doing so the actual belief that outsourcing could work started to grow. Once you have gained their trust they will be your biggest change agents and help you in driving the change throughout the organization. At the same time ensure you have gained buy-in from your top management so you can leverage that in case it is required as well.
Curious to get your views and thoughts on what you would consider to be the most effective implementation approach!!