Indirect procurement implementations are tricky. Take into account power dynamics, and there’s an emotional conflict that needs to be overcome too.
At a recent CIPS event in Zurich, the topic was disruption in indirect procurement. There were some excellent presentations and lively discussions afterwards on working with business functions.
But when I raised the fact that, in fact, successful indirect procurement implementations take away power from functional heads, the reaction was raised eyebrows.
While leading the build up of a global indirect procurement business partner organisation, I was sure that the hardest part would be getting the right talent to face off to the business. And if this match up were done correctly, all would take care of itself.
This formula worked well at first, and the team was making inroads with the business and delivering real savings.
But as we got into more controversial categories, the team started talking more and more about how difficult some business people were, especially senior ones.
Targets pressure was high, and the tension mounted both from the team and from executive management. My thinking that things would smooth out on their own over time was dead wrong!
Addressing Power Dynamics
Then I realised we were actually in the midst of three power dynamics that were holding us back. These had to be addressed.
Buyer & Supplier
The first power dynamic is the obvious one that happens when you cut across existing relationships between the business and the suppliers. It’s not just about interrupting nice lunches, but also touching the egos of the functional colleagues because procurement was:
- Saying the business were not expert negotiators, which some colleagues took very personally.
- Interfering with relationships where the business colleague had been the centre of attention and they now had to share airspace.
We were still at the beginning, so some good stakeholder management allowed us to work through this power dynamic by:
- Putting in highly qualified and business knowledgeable procurement managers with great business partnering skills.
- ‘Love and Care’ – taking time to listen and understand their concerns, which lead to better understanding but also assuaged egos.
Loss of Power
The second power dynamic was harder. The reality was that as spend came under control and savings were embedded in budgets up front:
- Budget holders were losing decision making power over ‘their’ savings that could no longer be used to fill gaps.
- There was more scrutiny, and decisions on re-investment were being taken at a more senior and cross-functional level.
Needless to say, they didn’t like it!
At this point, even the most fearless and confident team members were getting stressed. We needed to find a way to reduce the tension. We did it with:
- ‘Tough Love’ management engagement – being very transparent that, yes, it was a shift of decision making, and not pretending that it wasn’t (supported by ‘Love and Care’).
- Support and coaching of the procurement teams, so they could talk openly about difficult clients, and then work up solutions to solve it.
Senior Management Power
The third power dynamic is the trickiest. This was about very senior management and their personal skin in the game for the indirect procurement program:
- The easy blanket ‘we support you’ was not giving enough air cover for the complex and more controversial projects.
- We had specific blockers in the system at very senior levels that needed to be overcome to move forward.
The indirect procurement leadership discussed the issue intensely and decided to try a new direction:
- For each of the controversial projects we presented to the senior committee, we asked for an individual sponsor from them
- We also asked each sponsor to not only enable cut through with their own organisations, but also those of their peers
They said yes and volunteered specific sponsors right then and there.
This created space for the team and also created a peer pressure dynamic among the executives. We reported regularly, and no one wanted to be behind.
The team then took forward a series of projects closely aligned with the business functions, including transforming legal services, establishing consulting preferred suppliers, and changing the business model with marketing agencies.
In addition to delivering significant savings, there was a deep change in the relationship between indirect procurement, their functional colleagues, and the senior management, as a climate of respect and common purpose took shape.
I knew things had moved on, when at a regular update, the CFO made a classic comment that ‘his wife found a cheaper plane ticket on the internet’, and his peers looked at him and we moved on as if it hadn’t been said.
Implementing indirect programs involves strong emotions and power dynamics which need both active upward selling and strong change management. This might involve simply getting the right people together to make a fit for purpose plan for formal executive presentations and stakeholder management.
Solving the underlying emotional conflicts creates trust and delivers results.
Pauline King is the CEO of Heykins GmbH, Rapid Results Procurement, focused on working with clients’ existing teams to deliver tangible financial results.
She is a recognised expert in indirect procurement with deep operational experience in procurement transformation. Pauline also works closely with The Beyond Group AG where she heads up the Indirect Procurement Practice.