25 Jul 2017 The “keep the plane flying” fallacy
There is a culture in many organisations that the only investments that will be made in back office are those that “keep the plane flying” – in other words to do the minimum to maintain the back office so that it doesn’t fail completely.
I have a lot of time for this sentiment. Back office systems and processes like P2P is not core business. Depending on the type of organisation, investments in sales, growth, R&D, CRM etc. take a precedence over procurement of indirect goods and accounts payable. So a few suppliers are paid late sometimes – it’s not the end of the world. And the purchasing system is a little archaic – nobody’s going to die. But one poor review of a product from a disgruntled customer, one opportunity missed to develop a more competitive product or an important new customer lost to a competitor – these things can spell disaster.
But while I have some sympathy for the “keep the plane flying approach” I also think it is based on a fallacy.
Let’s use an analogy – I’m driving a car. It gets me to and from my place of work. It has seen better days but it’s fit for purpose. In all honesty, I don’t like driving it and I don’t like being seen driving it. I’d prefer a nice new Mercedes but that will cost me over £50,000 and even a more modest new car will cost me between £10K and £25K. My current car can be expensive to maintain but it would take many years of maintenance costs to begin to equal the cost of a new car so I stick with the banger. I do this because I am pragmatic and wise. Or am I?
What happens – and it surely will happen – when the car just stops? It breaks down completely. It can be repaired but the costs of doing so are more than the value of the car. And even if I think that the costs of repairing a write off are still less than the cost of a new car, there will inevitably be another occasion when again, I’ll have to dig deep to keep the car on the road.
This is the “keep the plane flying” approach. Don’t spend money until it’s absolutely necessary. And this is exactly why back office infrastructure is so often under invested. But while it has merit at a micro level – keeping the car on the road for as long as possible – at a macro or business level, it is absurd. If my car does die, I take the painful decision to buy a new one. Apart from the money, it will take a few painful days of public transport to get to work but within a week or two I’ll have new car. But the analogy doesn’t work at a business level. There is no public transport equivalent of an ERP system. It’s rather like comparing, as politicians do, an economic strategy to a household budget. Comparing a nation’s economy with it’s access to taxation and tools like quantitative easing to a family with a bank account and credit card is nonsensical. So is comparing enterprise applications with motor cars.
If my procurement system, the one I use to create and approve purchase orders and correctly account for what my company spends, stops working, I cannot simply hop on the bus. If it breaks, the business can’t buy stuff. It can in a very uncontrolled way but not in a way that would safeguard the business from disruption and fraud. It is very possible that the business could be brought to a halt. And this can’t be fixed in a few days or even a few weeks. To replace enterprise applications takes months and this is why the keep the plane flying approach is fallacious. It is based on a premise that P2P is not crucial to the business.
I once heard a procurement director of a very large global bank describe his role as “doing the shopping” – very much someone who is part of the problem. Back office is quite rightly a second priority. But to say that only first priorities, the more visible and easy to understand functions like sales and marketing are the only functions worth investment is naïve and it is the responsibility of purchasing and finance community to ensure that their function has the right profile, that it is respected and that appropriate and timely investments are made to ensure its long term well being.
Pete Loughlin can be found on twitter @peteloughlin