The Evolution of Procurement - Stay Four Steps Ahead

Charles Darwin’s theory of evolution, 150 years old this month, is characterised as smooth progress from ape to man with no hiccups on the way. The evolution of our profession, however, is not so simply defined. Procurements collective progress is in fits and starts – unlike sales or finance it is in its youth and there will be many detours and hitches before it meet full maturity. Nevertheless, and allowing for the difficulties of forecasting, it is worth speculating on the direction of the profession.

My theory is that a successful procurement function will have four stages of evolution before it stands proud.  Having observed and spoken to more than 100 procurement functions, this applies to giant and tiny teams alike. Each stage implies a different focus and so a different skill set will be needed.

Stage 1: Supplier-Orientation  
We are all used to negotiating with suppliers and leading the charge to extract value from them. As a first stage, this helps ensure that the marketplace delivers the best for your organisations. The problem, however, is that this leaves some important people behind – namely the stakeholders. And if you’ll allow another historical comparison, the French cavalry in Agincourt in 1415 charged away from their infantry without communication with one another. They were cut off, hit by a hail of arrows, stuck in the mud and the cream of French knights were slaughtered all because they left some key people behind.

The procurement community frequently charges off without having engaged stakeholders only to discover it has not fully understood the business’ requirements, does not have the support of stakeholders, compliance is poor and it is now stuck in the mud, ready to be shot down (or worse, ignored). Every time you read about a procurement team being displaced this is the most frequent explanation.

Stage 2: Stakeholder Engagement  
The next stage is to bring your stakeholders with you. In the past decade, leading procurement functions have made immense strides in developing communications and persuasion skills.

Key to success is your ability to create mood and in particular set up the circumstance where you are operating in sync with the stakeholder community, sometimes challenging, sometimes going with the short-term need, always constructive. The test of success is the extent to which you are able to create demand for your service, outside any mandated requirement to use you. A happy internal customer comes back because he or she believes you added value before.

This is about procurement recognising is it a service and support to the rest of the business. Those that do not see this are slow-grilling toast.

Stage 3: Commercial Advice
In the past, you may have created demand for your service, now your challenge is to create demand for your skills. As organisations face uncertainty and change we need to be prepared to not only source categories that we have never sources before, but to also extend the remit of procurement outside of its conventional boundaries.

Procurement directors who want to progress to the board need to engage with activities that are strategic in nature. They also need to ensure they have a more sophisticated narrative than just generation of savings within their organisation if they are to protect their team  and resource deployment.

More strategic engagement with your business can be advising the sales team how to deal with buyers to maximise margin, or advising the CEO on negotiating to buy another business. This is what I mean by commercial adviser. It is your ability to analyse, judge, negotiate and cajole that is being sought as opposed to simply some category understanding. To do this needs trust and a recognition that the skills you bring are not only applicable to suppliers but more broadly.  The result will be that your stakeholders will travel a long way for your advice.

Stage 4: Commercial Coach
None of us should have a problem with developing our teams. But I am not sure to what extent we see our role as helping to make our whole organisation more commercially aware.

Having sweated to create deals, engage stakeholders and bring suppliers to account, eternal vigilance from the procurement team is not the best long term answer to keeping the supplier community in check. A better answer involves training the rest of the organisation to make better commercial decisions.

Purchasers are frequently task focused and we have a tendency to try to do everything ourselves. I notice time and again that those organisations where commercial behaviour is part of the DNA often have procurement at their heart, and it is easier for their voice to be heard in areas outside of the conventional remit. Some of us are lucky to be in those environments. Others of us can and must seek to create them.

Purchasers are frequently task focused and we have a tendency to try to do everything ourselves. I notice time and again that those organisations where commercial behaviour is part of the DNA often have procurement at their heart, and it is easier for their voice to be heard in areas outside of the conventional remit. Some of us are lucky to be in those environments. Others of us can and must seek to create them.

The last stage means you must take up the mantel to change the behaviour of your colleagues and ultimately the whole business and you can be leader of this. In the Tour de France, the cyclists in a team ride in one another’s slip steams, which saves energy but it means the person at the front is pedalling hardest.  Procurement should be prepared to pedal hardest in an organisation in the knowledge that we are helping to propel colleagues forward.

What this means:

Of course these changes will have implications. 

Stages two to four are about engagement with your colleagues. Neanderthal negotiations may work for the retailer but if you want to position yourself to provide what your colleagues want, then you have to bring them something. Training in skills such as persuasion, trust building and communication are critical, and recruiting those with the aptitude to learn those skills becomes all the more important given the frequency with which I read or hear statements about procurement being poor at “selling itself”. The onus on you as leader is to become more of a coach and advisor to your team. 

So will say this is procurement’s moment and that with a slowing economy this is no need to develop colleagues. 

However, this is to forget that when the crunch comes, your business has free resource that is can apply to cost cut, and if your colleagues are not looking to you for help, you will be ignored.
 

American basketball coach John Wooden once said “a player who makes a team great is more valuable than a great player.”
 

Procurement can alter itself to change the rest of the business and help make it great - perhaps that is the most valuable thing we can do.    


*Originally published on www.supplymanagement.com