17 Aug 2016 Purchase to Pay best practice – you can’t collaborate from an ivory tower
It can be amusing to listen to peoples’ claims of expertise. People that say they are photographers when they mean they enjoy photography. People who say they play a musical instrument when really, they just own an instrument. You’re not a photographer unless you earn your living from taking photographs and there’s a certain standard of musicianship that is required before you can honestly say you “play”. Why do people do this? I don’t think it’s because they have an overblown view of themselves (although I know a few people that absolutely do), I think it’s because they don’t fully understand what it is to be a real photographer or really play an instrument.
This phenomenon is seen in business. Finance people think they understand procurement. They think they understand P2P. Procurement often have a similarly ill-informed view of finance. I have written and spoken many times about the need for procurement and finance to work collaboratively if purchase to pay process are to work optimally but moving from an understanding that it is necessary to actually putting it into practice, especially for finance teams, can be challenging. And the reason why it’s a challenge for finance teams is because they sit in ivory towers. Masters of all they survey, they imagine they understand the daily business challenges of the people on the ground. They’re not the only ones. There are lots of teams who sit in the ivory tower remote from the real workings of the business but they are blind to their ignorance of the day to day realities at the coal face.
Let me illustrate what I mean.
The setting is a very large hotel where one of the least compliant departments from a purchase to pay point of view was the laundry room. There were no purchase orders in place and there was no receipting. Procurement had the challenge of putting this right. The finance view was to recognise that with daily collections and deliveries of variable and largely unpredictable quantities of linen, a P.O. for every delivery is likely to be impractical. Therefore, a call off order should be put in place against which invoices can be matched. And get them to count all of the linen delivered too.
One point for finance for spotting that a P.O. for every delivery might not be workable and another point for suggesting a call off order. But two penalty points for assuming an understanding of the world of the hotel laundry. It sounds straight forward to simply ask the laundry team to count the linen coming in but to know why this won’t work, you need to understand their world.
This is the reality – at least a part of it. The laundry launders some items in house and sends bed linen to an external third party. Each day, piles of bed linen are delivered. It’s not counted – there isn’t time and it would require an extra member of staff to do that. If too much is delivered it doesn’t cause too much of a headache – if not enough, the laundry simply phones up and asks for more. It’s uncontrolled but it runs like clockwork. The important thing is that all the rooms get changed in time with beautifully clean linen. And it’s been run like this for a generation. The same small team has been running the laundry for years. It’s their domain and they don’t like being told what to do. Count every bed sheet that comes in each day? Impractical. Record the quantities each day? On what? A piece of paper? A spreadsheet? The laundry staff are not only not computer literate; they are barely literate literate. What seems like a simple request from finance that works in their view of the world is hopelessly naïve in the real world.
Finance think they collaborate, indeed they want to collaborate – they are good corporate citizens – but you can’t collaborate from the ivory tower.
So what is the correct approach for this set of circumstances? As always, there’s no single right answer but here is an approach that did work.
The underlying problem that we’re are trying to solve here is that invoices are being paid on trust. The hotel has no real idea how many laundered sheets are being received but they are expected to pay invoices promptly. The laundry staff treat their world as somehow their own – not to be interfered with from outside but they are as guilty as finance are in not appreciating other’s jobs. If the laundry staff understood that the hotel needs to control costs and in order to do that, they need to understand how many sheets are being delivered, they might be more receptive to change. Just as if the finance people understood the frenetic environment of the laundry, they would appreciate that they may need to be imaginative when it comes to implementing compliant P2P. So why not walk in each other’s shoes? One member of the laundry staff spend half a day in the accounts payable team and one member of AP spend a morning in the laundry.
Half a day isn’t enough for people to understand someone else’s job but it is enough for them to develop an appreciation that there’s more to it than it looks from a distance. In the end, the solution to this particular P2P problem was to ask the supplier to change the way they delivered laundry and to package it in batches with a summary statement each day. That way, the laundry staff could easily sight check that the number delivered was correct and the daily statement could be sent to finance to act as a receipt.
The first lesson learned from this example is that despite the appearance of simplicity, the real world is often much more complex and that simplistic approaches just don’t work. The second lesson is about appreciation for others’ perspectives. The view from the ivory tower is not clear and claiming expertise in your business from that perspective is as naïve as claiming to be a photographer because you own an expensive camera.
The third lesson, which many, including myself I have to say, learn and relearn regularly, is that a little humility goes a long way.