Procurement’s 7 Deadly Sins. Part VI: Antiquated Team Management
Antiquated Team Management. Put simply this means, that just like our sourcing processes, we are managing our people, prioritizing projects and allocating resources based on expired best practices from an era not benefited by modern technology. We do this mostly because of inertia. We have always done it this way and it is hard to find the time to think about how we could do it better.
Consider these questions:
1. Can you easily and accurately determine what your team is working on?
2. Is your team seeing every sourcing need basis your company policy?
If you answer no, then you are certainly contending with Antiquated Team Management and I can help you change or at least point you to solutions that can move the needle.
Industry 4.0 Technology Enables Real-Time Transparency Across Your Team
Have you ever tried to get a list of what your team was working on? Now imagine that team is 300 people big, spending $10 billion a year, across 12 time zones. You would likely put a request in, and somewhere between one and two weeks later you would have a list, likely not a comprehensive one but rather one populated with almost immediately stale data. So not only is your data outdated, it was an arduous, and likely manual, task that ultimately told you what your team WAS working on but is not able to truly inform you of what your team IS working on.
When Bill Gates imagined a computer on every desktop, most people scoffed. Similarly, I imagine that every procurement buyer will log on to SaaS platform every morning as a core part of doing his or her job to deliver world class outcomes through the source to contract process. This single investment is the key to answering “what’s my team working on?” Simply logging in would allow us to answer who, what, when, where, how, and what is the total spend, across all sourcing activities. This solution transforms sourcing engagements, from bids to contract negotiations, into savings opportunities and provides us the first ever ability to forecast procurement’s outcomes. Instead of waiting months to “settle-up” with finance we can forecast our performance against targets. The list of what your team is working on will be available and up-to-date at anytime and provide so much more actionable insights.
Not only does procurement leadership benefit from this visibility but your business stakeholders do too. Ideally, they log into the same platform and see the status of their requests, easily identify who is supporting them in procurement and escalate any concerns. Thus, just as personal computers have changed the way we work, enterprise procurement platforms will transform how your function engages the business and how the business sees your team’s contributions.
One of the most actionable insights gained from having an enterprise procurement platform is overcoming the limitations of static org designs based on category spend to achieve an agile, dynamically evolving, work allocation model. Historically, we formed our teams on backward looking data based on category spend, supplier complexity and business structure. We might shuffle team based on changes in these factors, but such changes are inherently reactive. Reality, I think, oftentimes requires a much more agile workload allocation model which can only happen if you can answer in real-time “what's my team working on?”
If we accurately, and consistently, know what the current and ongoing business needs are, then we can deal with the dynamically changing volumes and complexities embedded in the deals we support. I often hated the anecdotal stories that my team would share about the sporadic burnout that was happening in multiple spots in the business in extraordinarily unpredictable ways. Thomas Edison is attributed with saying that, “The perils of overwork are slight compared to the dangers of inactivity,” and I found my teams contending with both issues. One category manager had dozens of unanticipated requests for support while another was forced to find busy work. Although I'm a huge fan of Edison, I believe we must manage both overwork and inactivity resulting from our standard industry practice of static people management.
Consider for a moment the demand profile of a theoretical buyer for my research and development team. The areas in red represents areas of either overwork or underutilization. I believe that both are sub-optimal workload conditions that can be overcome by the modern agile procurement team. Further please recognize the green area labeled “planned demand.” If the workload for the entire year were effectively spread out at even intervals, this buyer should have no problem managing this amount of spend for the research community. However, because we rigidly allocate all research development work to this individual due to our antiquated category structure, we wrongly subject this individual to repeated cycles of overwork and underutilization which need to be eradicated as a practice in modern procurement. I imagined, if I could see their workload, in real time, I might be able to better allocate the work from the people who are overloaded to the people that were underutilized. In effect, I can level load the demand and capacity to support because I can answer in real-time “what's my team working on?” Procurement teams must pivot to this model, because a static category management framework is Antiquated Team Management, and we can be better.
Driving Policy Compliance with Industry 4.0 Solutions
The second question I'd like you to consider is are your teams seeing everything they should be seeing basis the policy? Virtually every major company these days has a particular policy which sets the action level where procurement is to be involved in 3rd party purchases. At several companies where I've worked, that action level was 100,000 USD. Above this threshold, stakeholders, to comply with policy, had to include procurement and a minimum of three suppliers were required to be included on that bid. Historically procurement support is requested at the eleventh hour from the business, (in what I call pull sourcing), to comply with this policy. But if you are not seeing the full need, or seeing it too late to action, because you are dependent upon stakeholder’s adherence to, and application of, policy, you are unable resource correctly and are therefore fundamentally mired in Antiquated Team Management challenges.
Below are the steps I have taken to determine stakeholder policy compliance rates and thus if I have this problem (spoiler alert – you probably do). I’d encourage you to do the same if you are trying to find the hidden opportunity at your organization.
1. Add up your PO after invoice spend;
2. Forensically assess all of the spend in the last calendar year that was greater than $100,000 (or your policy limit) that procurement was not involved in;
3. Add to that all of the spend where your procurement team was notified at the last minute and therefore could not do a robust sourcing event on it;
4. Add to that all single and sole source work;
5. Add to that all spend that you did with three bidders which was a gross under representation of the suppliers that should have been included in that work;
6. And, add to this Maverick spend, or spend where the full potential of the sourcing benefit did not materialize due to an unknown reason;
If you sum up all of the spend represented in the aforementioned buckets, even just doing the mental exercise, and on the basis of your total spend, what percentage do you think your team isn't robustly seeing? I did this exercise at the last four fortune companies had the privilege of leading and what I learned was that procurement was missing a lot of spend. Moreover, I was concerned that my team was working on significantly lower value add projects than they should be. Correspondingly the business was missing huge amounts of opportunity to get to better outcomes. In many cases, 10-30% of spend was actioned in a less than optimal way. I submit to you that I believe 10% to 30% is too big a number to be mismanaged by any procurement team anywhere on the planet.
I have spent many hours pondering how and why this happens and have considered multiple contributing factors from ignorance to intentional avoidance. At the risk of overly simplifying it, but to keep this post a reasonable length, there was most always a common factor: it was easier to go around procurement than work with us.
Going back to my own experience, we decided to flip the script and make it easier to work with procurement than not. Our goal was that with only 60 seconds stakeholders could engage this new process. Our promise was that in 60 seconds they would know exactly the right player in my 300-person team to help them with their $100,000 plus bid and if they gave us 60 days, we would fulfill their request. We call this the 60/60 process. Now we don’t always get 60 days’ notice but our delivery rate, basis their target date, is remarkably high. Furthermore, our ability to see and action sourcing opportunities before it being too late to help inform them has grown exponentially.
By using an enterprise procurement platform, you create accountability on both sides of this exchange from stakeholder request through procurement delivery. This solution is the same one that enables my procurement managers to dynamically prioritize their team which is crucial for meeting request timelines. It is the same solution that stakeholders can use to request support and identify their key priorities, which are often not procurement’s savings targets. Fulfilling customer requirements (remember the business is procurement’s customer) increases repeat business. Thus, between ease of use, responsiveness and satisfaction with the process (and ideally outcome) we drive increased policy compliance
Retiring Antiquated Team Management Excels Your Transformation
The last question I want you to consider is what does this new team management practice allow me to accomplish?
The future is real-time workload visibility and an agile, dynamically evolving work allocation model.
The future is resources balanced with business needs to deliver on-demand and on-time services.
The future is active engagement, where procurement has the visibility to business need to “push sourcing activities” in advance of deadlines.
The future is maximizing your team’s throughput and delivery.
The future is increased stakeholder compliance.
The future is better insights for your business.
The future is seeing, and having time to action, 10-30% more spend.
The future is delighted and informed stakeholders with transparent processes.
The future is forecasting your outcomes rather than summing them up after the fact.
The future is proactively engaging the supply market for innovation, sustainability and many more objectives beyond just savings targets.
Retiring our outdated team management approaches will transform procurement from a business process owner, and avoided gatekeeper, to a business value creation lever. Investing in process management solutions that focus on increasing source-to-contract opportunities and outcomes is how we avoid this sin and become Modern Procurement Teams.
Where can you get help?
These issues are correctable with the right application of tools, processes, and team capability building. At issue is that too many of us simply don’t know how. Bill Gates’ wisdom can be helpful here: determine “who has done it well and what can we learn from that.” I believe that among my 30,000 social media followers, the answers are out there.
We now need to get those solutions to the people that are still struggling with problems that someone knows how to solve. These Seven Deadly Sins are fixable, we simply need to get the solutions to the folks that are suffering in silence. When we are done, and when the solutions are deployed, the business world that drives I aspire to be a catalyst for that functional change in industry.
If you think your team is limited by Blindness, 3-5% Savings Fallacy, Limited Business Stakeholder Focus, Three Bids in a Buy Abuse, Effectiveness Tools Handicap, Lack of Stakeholder Centricity, then here is what I recommend you do:
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3. Continue to READ and SHARE my blog article with anyone in your network that is struggling with any of the “SEVEN DEADLY SINS” mentioned – one more to come
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