Ask anyone who knows what they’re talking about – go to any conference on Purchase to Pay and you’ll hear the same thing: The biggest challenge to making P2P work is the disconnect between finance and procurement.
I’ve commented on it many times. There are fundamental differences between the way finance and procurement see purchase to pay and getting alignment is not straight forward but there’s another reason why, for some organizations it is a challenge and that is their organizational structure.
Managing P2P in a matrix
To someone in an functionally structured organization, it doesn’t seem unusual. Indeed, if you are used to working within a functional silo, to operate in a matrix environment would seem daunting. How can you serve two masters? How can competing priorities be managed? In contrast, those that operate in matrix organizations view siloed businesses with some disdain. The term “silo mentality” is never used as a compliment. But sometimes, silos are sensible or at least non-negotiable and when that’s the case, the task of implementing P2P is especially challenging.
Back to basics – what does matrix management mean?
This isn’t as simple a question as many would have us believe. If you operate in a silo and you have never been in a matrix organization, it can be a difficult to fully appreciate what working in a matrix environment means. To understand the P2P challenges it’s important to understand what a matrix organization is and what matrix management is all about.
A good example of a matrix structure is a cross functional project within a siloed organizational structure. Think of a rebranding project that affects all parts of a business across all of its functions: HR, Finance, Procurement, Marketing, Product Development, Sales etc. Within that project, team members have a dual allegiance – to their functional leader and also to the programme manager. The project can be represented as a horizontal structure across vertical functions with stakeholders in the intersections.
Matrix management within a functional structure where strict command and control management styles are the norm presents a series of management problems. Most notably are problems of communication and decision making and it is this that presents the most important hurdle that must be overcome if Purchase to Pay is to operate effectively across the functional siloes of Finance and Procurement.
Effective Purchase to Pay in a silo organization
It should come as no surprise that for Purchase to Pay to be effective it needs to be implemented across the purchasing and finance functions. The clue is in the term “Purchase to Pay”. P2P implemented in Finance alone will have an emphasis on the finance aspects. Implemented in Procurement, it will focus on procurement and purchasing. To get it right, a matrix structure is essential but that can be easier said than done.
The challenges of operating in a matrix structure
It’s not that easy. Anyone that says it is doesn’t understand it. But neither is it any more challenging that managing in a siloed structure. The challenges are just different.
Within a matrix structure, reporting lines reflect the interest of functions or geographies, and these quite naturally, are not always aligned. There is an omnipresent risk of turf wars and battles over accountability.
While most people applaud the empowerment of individuals that a matrix structure can foster, the reality is that not everyone is suited to taking responsibility or self-management and managers need to remain attentive to their teams.
Working successfully in a matrix environment
Not all management styles are successful in a matrix structure. A strict command and control style appropriate in a functional silo is unlikely to be successful. The ability to network, mentor, coach and to facilitate, rather than dictate are key. It is essential to be able to empower people without delegating accountability.
KPIs and personal objectives need to be aligned both horizontally and vertically. People should be encouraged to build and strengthen their personal network. They should be supported when they question demands on their time and helped to balance the often competing short term objectives in an open and transparent way so that everyone is fully aware of conflicts that arise.
For Purchase to Pay to operate successfully, a matrix structure is a prerequisite. There is no other way. It is non-negotiable. The success of P2P absolutely depends on buy-in to this approach. All stakeholders, leaders and managers within the functional siloes as well as their direct reports, need to put aside the traditional politics that reinforce the boundaries between departments and work collaboratively. Without this buy-in – without the consent to succeed – they might as well put P2P back in its box.
Pete Loughlin can be found on twitter @peteloughlin