Your stakeholder is frustrated with your process. Finance does not understand your value. The salesperson you are negotiating with tries to work behind your back and negotiate directly with your stakeholder. It’s time to “re-think your Procurement”!
Often there is a gradual erosion of how procurement is seen as value-add which happens at different parts and functions of the organization. Part of this erosion is bound to happen, due to the nature of the work performed by the procurement function, its objectives and process. But part of it is often self-inflicted.
Value means different things to different people and functions
We advocate an approach in procurement that is aimed at delivering different types of value to different functions of the organization, or to different individuals. This does not mean that procurement is chameleon-like and changes colors for every task at hand, or at the whim of every individual. Processes and standards exist for a reason; to ensure the consistency of the value delivered. But it does mean that a nuanced approach of identifying all areas of value and demonstrating different types of value to different individuals and functions is key. Understanding, identifying, and selling all areas of value will allow you to reshape your procurement organization in the optimal manner to demonstrate such value.
Here are a few examples:
- Your finance department will likely be laser-focused on one aspect of ‘savings’, and one aspect only: ‘P&L Impact’. Unless a project was fully budgeted from the outset and is delivered under-budget, or a price-reduction obtained from a vendor is, in turn, reducing next-year’s budget, or any other such specific scenarios occur whereby the P&L statement is directly impacted, the procurement professional will be challenged when trying to claim savings achieved through one of their projects. The solution is to align with finance at the outset on a more refined approach where different types of savings are identified and defined, and all of them are tracked by procurement, even if finance is only tracking to P&L. In other words, agreeing upfront on 2 parallel paths to track savings, combined with a very robust ‘procurement savings tracking methodology’ that finance is aligned with, is key. The result is that all parties involved understand that not all of the value-creation that procurement is tracking is ‘finance value’, but that all of it is still important and valid.
- Your stakeholder will likely be focused on project delivery timelines and the quality of the product/service procured. An approach that creates a robust methodology to define and evaluate quality in the procurement process will go a long way with your stakeholder. Consider creating detailed score cards that are put together in partnership with your stakeholders, and other items like product demo schedules, and pre-agreed Acceptance Criteria.
- Some in your legal department might not appreciate procurement giving opinions on ‘legal’ matters (which are often perceived by lawyers to be anything contained in a contract that is not directly related to pricing or fees), but open-minded lawyers will likely appreciate procurement’s thought-out positions on matters such as liability and risk, as they relate to the vendor/product/service, and would find them of great value.
There are many ways for procurement to demonstrate ‘value’ across the organization. Understanding what value means to different people and departments is the first step in a multifaceted procurement approach, and will serve procurement well in its everlasting journey to create value.
