13 Sep 2015 Managing Maverick Spend – Helping the business to see the value of Procurement
One of the biggest challenges in implementing successful Purchase to Pay program is getting the business to change. It’s a cliché and a truism that change management is crucial for a successful project. “Change Management” is really a piece of succinct consultancy speak that is all about persuading people to change the way they do things – adapt to a new, unfamiliar system or take direction from another part of the business and it is this last aspect that is the most difficult. So how should maverick behavior be tackled especially in a business environment where people prefer to do things their own way?
The first thing to do is listen.
No-one likes to be told what to do or to be told how do their own job. When working within a procurement or P2P function, it can be very easy to drift into a lazy way of managing compliance by simply laying the law down.
Recognize this? “Why should you use this supplier? Because that’s the preferred supplier. Procurement policy says you should always use the preferred supplier list.”
Look at this from the other side of the fence. You’re a civil engineer and you are building a bridge. There are 50 grades of concrete that you can choose from a short list of preferred suppliers. But the architect’s design specifies a different grade of material that requires you to use a new supplier. How seriously are you going to take the P2P compliance police when they tell you to ignore the architects specifications? You’re not. How absurd is it that the non-specialist is dictating to the specialist because they want to impose the P2P policy.
This happens a lot. And the mistake that the procurement person is making is that they have failed to listen. Let’s look at another example – this time a real life example that Warren Daniels from Basware shared with me recently.
Warren is a marketing expert and in a previous life he was faced with a challenge. His marketing budget was – I can’t remember the exact figure but let’s say it was €1 million. Yet what he wanted to do would cost €1.2 million. Now, anyone who has experience of policing compliance to P2P policy will know that marketing people are amongst the worst offenders when it come to maverick behavior. At the risk of offending a few of them, they can be a little precious. They’re proud of being maverick – original thinkers, creative types – why would they constrain themselves by complying to procurement policy?
And actually they’re right to be like that – to a certain extent. Marketing people do buy some interesting stuff. I once performed some spend analysis for a bank and found that they’d bought an elephant. Well – hired one. It was for a launch event of a new product and it was to provide a spectacle to get people to attend the event. As you’d expect, there was no existing preferred supplier of elephants.
So how should procurement police marketing spend? Well they shouldn’t – instead, they should listen and add value.
Getting back to Warren’s anecdote, his problem was he didn’t have enough budget so – uncharacteristically for a marketing guy – he approached procurement for assistance and on this occasion, the procurement person got it right. Rather than dictating what needed to be done – they listened. They listened to what Warren planned to do and worked with him to negotiate a set of performance targets with a small set of suppliers together with discounts and SLAs. By consolidating the marketing activities and offering fewer supplier more business, Warren was able to get his €1.2 million of marketing activity into his €1 million budget – squeezing a quart into a pint pot.
What Warren may not have noticed is the use of proper controls like a PO and putting in place a contract would have mitigated commercial risks.
Warren was a self confessed maverick marketer but he’s now a procurement evangelist because he saw the value that procurement bring first hand especially when they are invited to help at the outset. And for procurement and P2P people there’s an important lesson – don’t tell – listen.
Pete Loughlin can be found on twitter @peteloughlin
