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- February 18, 2014
What exactly does it mean for procurement to be strategic? There are a lot of things wrapped around that, but at a high level I define it as being engaged with your colleagues within the company, being perceived as a valuable resource and ultimately, being decision makers—people who can say yes as well as no.
To do this, procurement people need to take themselves out of governance-type mindsets where they sit back and wait for people to come to them with something that they want to do. They need to get out and engage with the business to see how they can help. They need to take a more customer service- oriented approach. Here’s an example.
At one point in my career, I was in an organization where procurement was set up in charge-back mode, so the business units had to pay for our time. This organization wanted the overhead areas to
recover their costs, so when we went in to do work for somebody, we actually had to charge them.
There were some areas where this obviously didn't apply. You couldn’t say, "Well, we don’t want to pay for the auditors, so we’re going to forego being audited.” But for the most part, working with procurement was optional.
It made some sense, because when people pay for something, they have a tendency to engage in a different way. But to be willing to engage when they know there’s a cost, they have to believe that they're getting value out of the service.
Once you throw a roadblock like that in front of people, they've got something that they can use to make excuses-- and they do. It’s just human nature, and in this organization people were balking at working with procurement. A typical statement would be, "Yeah, we'd like to use you guys. But we can do a pretty good job ourselves and then we avoid the cost.” This attitude was keeping the organization from reaping the benefits of what I thought was a pretty good procurement organization.
To get around this obstacle, I let managers know, "Look, when we get finished with a deal, if you don't believe that we met the goals and objectives that we agreed to and we didn't add value to the transaction, you won't pay for it." It was the equivalent of a money-back guarantee.
I believed in our team, I believed in the organization and I believed that we could add value in most transactions. And even in those where we didn't think we could save a tremendous amount of money, we could help a lot with the way transactions were structured.
Adding value is not always about saving money. It’s also having good terms and conditions. It's having a deal structure that provides the business with flexibility, so that if they want to do something different in six to eight months, they can do that. It’s making sure that well-intended people don't lock the business into things that they might not want to do long-term.
To make sure we always added value, we made sure that in the beginning we laid out what they were looking to accomplish, and that we defined that very well and everyone was in agreement.
We also required periodic touch-base meetings during the course of a project. I had to be involved in those, as did my counterpart in whatever functional area we were working with. That way, we could avoid a situation where we’d get three months into a four-month project, and then everybody gets together and says, "This is a lousy deal." We could see in a timely manner if we were going a little bit astray, whether it's the procurement people or the folks that we're working with, and get everybody back on track.
We also had to have good communications and pretty good planning. When it came to paying for our services, this approach eliminated arbitrary assessments such as, "Yeah, they did a good job," or "They didn't do a good job." People had to have facts and data behind their case.
In the end, we never did anything for free, and we got ourselves involved in a lot more deals than we would have if we just sat in our offices and waited for people to “hire” us.
The basic challenge here is that people in organizations, and procurement organizations in particular, don't see themselves as service organizations. They get into a mindset where they spend more time telling people what they can't do than helping people accomplish what they need to better, faster and in a more economically feasible way.
The fact of the matter is that procurement is a service organization and they need to think of themselves that way. If they don't provide a good service, people aren't going to use them. They’re going to look for excuses or ways around the rules. But if they do provide a good service, people will be more apt to engage them, seek their guidance and involve them in decision making in a proactive way. Ultimately, that is the key to becoming more strategic.
Jack Miles is the former Secretary for the Department of Management Services for the state of Florida. He serves on Coupa's Visionary Council. This article previously appeared on ProcurementLeaders.com