“Thanks for sharing the quotations, we prefer the most expensive one”. Beyond doubt this is one of the cruelest feedback a procurement professional can receive from his/her internal business partner at the end of a lengthy supplier selection process. After so much work, internal and external engagement and dedication to save money for the company it comes as a cold shower, which most probably many procurement colleagues have experienced during their career.
When recruiting, as a procurement leader, I have often faced the challenge that candidates with great CVs, professional background and saving records may not always be able to understand business requirements beyond costs, which may lead to serious performance and motivational issues after joining the new organization.
Without diving deep into the psychology of procurement professionals, I am certain that the pavlovian conditioning and connection between cost savings and success may originate from multiple sources including cultural and individual characteristics as well as the basic, sometimes primitive performance metrics of companies or the oversimplified training materials used to train procurement teams. For us the most important is to realize that procurement means much more than this. In fact, the story only starts with cost considerations and becomes more exciting and value-added when we look beyond that.
In the last decades, the Situational Leadership theory by Hersey-Blanchard has become very popular across the globe and almost a common sense when it comes to management training courses. In essence, it builds on a simple principle that effective leaders can adjust their leadership style to the given task and the maturity level of their team. It means that there is no single best leadership style, for example, full control and telling people what to do in an autocratic manner may not always lead to an optimal outcome.
In my view, a similar approach would certainly contribute to success in other areas, including procurement as well. I have always argued the view that the success of a company lies in the ongoing battle and competition among various business functions. On the contrary, I believe that a common understanding on business objectives and wide collaboration across the organization are key to longer term success.
As a first step, the procurement function needs to understand the real (!) business need and intent. Unfortunately, the related alignment discussions may often become victims of time pressure (“we need this for yesterday”), indifference or isolated functional priorities, which may ultimately lead to the inconvenient situation described at the beginning.
In a training course recently, we worked on case studies from the real business life, one of the which relates to the selection of consulting companies. The group of procurement professionals working on the case immediately entered a lengthy conversation defining ways how the requestor could be convinced to choose the most cost-efficient offer. In fact, it was a great professional discussion and it was good to see the passion on their faces; however, they were simply missing the point. What did the business partner really need?
Those who know the consultancy business and how that supports large companies have most likely faced situations when internal ideas could be “sold” easier under the logo of famous consultancy firms. If we can support our initiative with studies and research data from these external partners, the investment decisions may take place much quicker. In fact, this was the situation in our case, as well. Our requestor had obviously no intent and motivation to pick a cheaper and less recognized supplier to support and sell his message.
I do not intend to underestimate the importance of procurement controls and the dedication to minimize costs for the company, however, it is obvious that without understanding the original business need we cannot provide an adequate solution. This is why I consider it crucial to transform procurement from a static function into an agile organization that has the ability to adapt to changing situations and requirements; meaning that the best buyer may not be someone achieving the most saving but the colleague who managed to understand and define the best way to support common business goals.
In my experience, the lack of this attitude is one of the major root causes behind the existential dilemmas of procurement in many companies. In such organizations, the purchasing team can easily be seen as a self-centric, administrative function that is better to avoid when possible. This results in ongoing conflicts with the wider organization and performance issues coupled with motivational challenges internally. Being the “bad guys”, Procurement colleagues cannot really develop and unlock their potential. Finally, we find ourselves in a dead-end street, which is well reflected in a recent feedback from a frustrated business stakeholder: “we highly appreciate the negotiated prices but do not need the garden furniture with winter delivery!”
To get out of this stalemate, we need to redefine the role of the procurement function in alignment with our stakeholders and apply the new approach consistently across all areas including recruitment, setting goals, performance measures, training programs and internal/external interactions with our partners.
Finally, if some fancy and scientific packaging is required to obtain support for this approach in organizations where it may be new, let’s call it simply and stylishly Situational Procurement.