Most of us understand the importance of Governance and Process in effective procurement – but there is a third factor that is often overlooked.
By Tony Gargan
Most of the clients we work with at Procure Spot have a firm idea of how to make procurement decisions and run procurement processes. While there are challenges that may arise in every significant procurement process, our experience is that it is most often a third factor that leads to poor investment decisions and ineffective outcomes.
That third factor is: Culture.
Most organisations recognize that culture plays a role in the success of their business. Culture – which we can define as the mindset, habits, beliefs, and relationships that occur within the workplace – can affect how our businesses run and how successful they are. Some organisations even prioritise the development of a healthy culture within the workplace environment.
But what is less well recognised is the way that culture can affect specific functions within a business. That is why, at Procure Spot, we believe that “Procurement Culture” needs to become a major consideration for organisational investment programs.
Do you have a culture of evaluation?
Most successful businesses have a positive and supportive attitude towards their projects and procurement teams. On its own, that supportive attitude is healthy. However, there are potential downsides to this, as organisations are at risk of developing default positive assessments of projects and procurements.
Every procurement outcome has positive and negative features.
But every outcome has an impact on downstream stakeholders. Every outcome – and the process to achieve that outcome – will in some way reflect the decision makers, project management team, technical staff, and anyone else involved.
That is why many businesses develop a “Pollyanna Incentive” to positively, if not enthusiastically, report on the processes and outcomes. Cultures of positivity are important, but the teams involved are often incentivised to report on every process as a success in a way that can be detrimental to the ability to procure in the future.
This is why we absolutely must have a proper independent evaluation of any significant procurement or project implementation process. That doesn’t mean that we have to engage in excessive criticism of procurement staff. Yet it does mean recognising what works and what doesn’t. It means identifying weaknesses and repeated errors in our planning or execution, and finding ways to integrate solutions to those findings for future procurement objectives.
Do you have a culture of procurement inclusion?
In modern businesses, inclusivity and equity are becoming not just a buzzword or a legal protection, but something that is seen to have real benefits for the businesses that prioritise them. Workplaces that have a culture of discrimination, harassment, or homogeneity of thought tend to find that their businesses suffer as well. Inclusive businesses tend to be more successful.
Within the context of procurement, inclusivity means something slightly different, but is still very important. Too often, we come across procurements and implementations that have not sought to ensure that everyone affected by the outcome has a say in decision making and implementation. This hurts future procurement capabilities, and the people that are involved in them.
We advise the following rule: Every group whose work will be affected by a procurement decision should have involvement in the decision making, the testing and the implementation of the end product. This won’t only ensure effective sourcing of user inputs into the procurement decisions – it will also be the first step in recruiting user support for the implementation and change management.
Do you have a great relationship with your suppliers and partners?
Striving to build great relationships with suppliers and partners should be a goal for all organisations. Every business relationship is a combination of the contractual and the discretionary. There is no question that we can leverage additional and practical value from our supply relationships with a positive and cordial mindset.
As important as this mindset is, we need to have clear limits in mind about our existing relationships and our procurement processes. Many organisations have clear probity guidelines in management of significant procurements, but in our experience, most struggle with the objectivity of their approach between existing and potential new suppliers.
This is concerning. Familiarity with your organisation and their account executives does have its own positive advantages for existing suppliers. But it also creates a sense of social obligation that can filter into decision making, and biases that prevent organisations from evaluating and re-evaluating their relationships.
Existing suppliers are also adept at throwing in the proverbial ‘steak knives’ with existing services and contracts. This packaging of additional products and services may sound intriguing but is frequently a disadvantage for businesses that accept the offers – particularly in IT procurements.
What looks like a significant discount on a secondary product is most often a discount on a poorer quality, less competitive alternative. Often the secondary product is dressed up to look like the product you are actually looking to buy – for example a Collaboration tool is dressed up as a Knowledge Management tool – despite clear categorical distinctions in the use cases and the product requirements.
So, while effective partner and supplier relationships are essential we need to make sure that these don’t bias our procurement decisions in the wrong direction.
Do you have a culture of expertise and ownership?
In many businesses there is a lot of demarcation between business areas and technical teams, and in particular technology teams. This creates many of the issues seen in the analysis of poor outcomes. Those on the business side can essentially seek to engage in but then duck responsibility for involvement in technical decisions, owing to limited confidence, and technology teams can fail to properly consult and involve business and user teams in decisions.
The outcomes created by the failure to properly integrate expertise and decision making are setting up an opportunity for future procurement and project failure, and creating a culture without ownership, expertise, and collaboration.
Every procurement decision should ultimately be driven by the strategic plan of the business with involvement of those that have expertise. This connection must be authored, tested and verified by the business as a whole. Beyond the technical specifications of planned procurement there must be clear use cases outlining how the business process and the user experience will be impacted by procurement and implementation.
We have seen major IT procurements conducted without Business or User requirements. We have seen so called “Agile” project methodologies put straight into critical workflows without fully tested outcomes and accuracy. Similarly, we have seen occasions where technical teams have struggled to get support and involvement of business teams and where an effective partnership for implementation has proven impossible to achieve.
Organisations must ensure that the accountability mechanisms in their businesses and the relationships they foster support the reality of shared and integrated accountability for procurement, project and implementation processes.
Create a procurement culture and success will follow!
The idea is not that there is one way to create a procurement culture. The idea is that Procurement Culture matters, and the people that engage fostering it are the most likely to be successful.
One organisation we used to work with used to run very many unsuccessful procurement projects. There was no track record of success.
But what caused the most damage, was that there was no culture in place to address and identify how to improve procurement processes. This resulted in situations where each change management requirement that flowed from a new procurement or implementation was greeted with profound scepticism and occasional direct opposition from end users. It’s one thing to struggle with procurement. It is quite another for the processes to get worse as a result.
This is where none of us really want to end up, and it is only by paying attention to and fostering a healthy Procurement Culture that we can avoid this fate.
Start today:
- Ask to see the evaluation or project closure reports on your last few procurements and implementations. Do these look complete? Do they fully account for the impact upon users? Do they track the Benefits realisation to ensure that the business case was landed?
- Look at a current procurement project. Are your technical and business teams aligned? Does the business case align to the overall business and operational context?
- Call us at Procure Spot for an obligation free discussion about your Procurement needs.