Hackett Group: Overcoming barriers to change in procurement
Generally speaking, humans aren’t massive fans of change. A 2009 study in the European Journal of Social Psychology suggests it takes 66 days for a new behaviour to become automatic.
So when it comes to instituting enterprise-wide change across an entire function - such as procurement - it’s easy to see why it can be difficult to embed new initiatives and ways of working.
Yet change has rarely been more necessary in procurement, thanks to ongoing disruption caused by the Covid pandemic.
There are seven generally recognised obstacles procurement teams face when looking to make strategic or operational changes. We sought out two procurement specialists, for their advice on how procurement teams should approach transformation projects.
One is Nic Walden (NW) Senior Advisor, Procurement Advisory Membership Programme, for the Hackett Group, a digital transformation consultancy. The other is Chris Chadwick (CC), Senior VP Procurement and Customer Engagement with Tada, a company that offers an enterprise-wide tech platform connecting people, products and processes.
Below are the seven barriers, and Chris and Nic’s insight on ways to overcome them
Barriers to procurement change: Stakeholder resistance
NW: I regularly run events, round-tables and workshops where executives say they have a vision but that they struggle to make change happen.
The question is, do the people working on change projects have the skills and training around change practises and certifications, and the psychological process of change?
Resistance is also common when there’s a lack of clear communication around that change. Every business needs ‘change champions’, and they must use them properly.”
CC: No one likes change forced on them, so it’s essential to have goal alignment before the process begins. You have to know what’s most important? Is it assurance of supply? Cost reduction? Cost mitigation? Reduction in lead times?
“The C-suite also has a big role to play in holding the entire business accountable for delivering on those goals. It can’t just be procurement led.”
Barriers to procurement change: Skills deficiency
NW: Procurement can be very strategic. There’s third-party risk management, collaboration with suppliers, sustainability objectives. Where does all that knowledge come from? Quite quite often people are just told to get on with it.
Businesses need a blended approach to training: move people around, build skills internally and bring skilled people in from outside.
External bodies can provide training, such as The World Commerce And Contracting Association in the UK, and the Institute of Supply Management in the US.
CC: Automation has eliminated a lot of routine operational work,and this can leave skills gaps. Mostly, staff want to learn new skills. I’ve often been surprised how people blossom when given more-strategic work.
Also, hire staff who are digital natives, and hire both for current and future needs.
Barriers to procurement change: Structural complexity
NW: We have one procurement client that has 2,000 people, and they work with thousands of suppliers across different regions. There are also geographic and cultural boundaries. One way to overcome such complexity is to use an agreed operating model, and manage any deviations against that standard. So it's one size fits all, and you only allow the most critical deviation.
CC: Procurement is both a team sport and a contact sport. You’ve got to get in front of business leaders - ideally face to face. Meet the team’s key stakeholders and understand their frustrations.
Walk the production line, go into the storerooms, meet the departmental leaders and understand the business challenges from their viewpoint. You can simplify organisational complexity by doing this.
Barriers to procurement change: Process complexity
NW: It’s important to simplify processes, to maximise value and minimise complexity.
An example might be a business looking to have a new supplier approved. The delegation authority on something like that might be 15 levels deep, meaning they’ll need sign-off from 15 people. Slim that down to six or seven approvers. It saves time and frustration, and makes the approvals more meaningful.
CC: Rather than seeing complexity as a barrier to transformation, see it as an enabler. Map the process. Identify areas of non-value and bottlenecks. Figure out how to simplify and automate. Use this to build a case for tech investment, and demonstrate the payback.”
Barriers to procurement change: Over-commitment of initiatives
NW: Instead of spreading yourself thinly across ten projects, focus on, say, three, and make sure they are delivered to a very high standard. Less is more -and be patient. A technology project in a large company might take two years, and be multi-phased. Even when it’s implemented, training needs to be ongoing, because people are always joining or leaving.
CC: Over-commitment is easy to do and difficult to step back from. No leader wants to fall short of what they promised the board or, worse, Wall Street. Under-promise and over-deliver, but without appearing to have set soft goals.
Barriers to procurement change: Lack of funding
NW: Procurement is never top of the shopping list. Sales, Marketing, Business Development and R&D are always top. So recognise that, and take the time to make your business case as persuasive as possible.
Bring in the hard data, the benchmarks, the external perspectives on what everyone else is doing, and you should be doing the same. We live in a world of shortages and cost inflation, so procurement has never been more important. Right now, procurement managers should be driving transformation initiatives harder than ever.
Barriers to procurement change: Inadequate use of funding or resources
CC: It’s much easier to ask for funding or resources when you’ve some points on the board, so identify and deliver some quick wins. Seek out more-progressive business partners who may be able to fund the kind of innovation that can be used as a proof of concept for a bigger ask.
Barriers to procurement change: Lack of C-suite backing
NW: Any significant project needs buy-in from the CFO and other board members, and that has not always been the case with procurement. But I’d say the past two years of supply chain challenges has shone a light on the procurement function. Third-party risk management, balancing efficiency with resilience, making sure there’s enough stock in the warehouse. These things are front-of-mind right now. Strike while the iron’s hot.
CC: This slows down the flywheel of change more than anything. To avoid it, you’ve got to build an understanding of what procurement can bring to the table, and demonstrate the ability to deliver bottom-line value. You’re going to have to invest time and energy into building relationships and finding allies.
Look beyond your organisation for mutual peers in similar companies who can help you build a best-practice story and communicate the value you can deliver.
- 78% of procurement execs recognise the importance of Scope 3Sustainable Sourcing
- How committed is construction to sustainable procurement?Sustainable Sourcing
- CPOs 'can drive sustainable & profitable construction'Procurement Strategy
- Top 10 procurement and supply chain events to attend in 2023Digital Procurement