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- March 31, 2016
- Gabe Perez
Imagine you were just elected mayor of your city, with a mandate from the voters based on an ambitious agenda that includes cutting costs. You’ve promised to streamline programs, increase transparency and work to a set of measurable success criteria which you laid out in your campaign. You know there will be challenges. But, when you roll up your sleeves and get to work, you start to have some rude awakenings.
You realize there's a section in the city that has its own budget and runs its own services because it’s in a special tax jurisdiction. And, there’s a powerful labor union that dictates wages, job duties and hiring across the city.
You also find you can’t get accurate reports because data resides in separate systems that don’t talk to each other—and neither do the people who run them. You realize that more than anything, the bureaucracy and the politics that have grown up around it are what shape how business is done.
The success of your initiatives, and the city as a whole, are your responsibility and you’ll be held accountable. But you don’t have full visibility into, or control over, what happens. Accomplishing your goals under these circumstances is going to be a real leadership challenge.
Mayor of spend management
That’s what it’s like being the head of a procurement organization today. You lead the official buying organization, but the employees in your organization will buy based on the easiest process available to them. If there’s a contract in place and you make it easy, they’ll buy against the contracts you’ve negotiated. If not, they’ll buy what they need on their p-card or credit card, and expense it. Or they’ll go out and make deals on their own and an invoice will just show up.
But spending is spending, no matter how it happens. It all ends up in accounts payable (AP) and the bills get paid. When it comes in through the front door, you have the opportunity to manage and optimize for cost and compliance, but there are also side doors—multiple independent buying processes--for things to get bought and paid for without you knowing it in advance.
This is also a leadership challenge, and one that most procurement leaders face. There’s no one who is accountable for all of the company’s spending. Everything goes through AP, but by the time it gets to them, the money’s already been spent so they’re just focused on effectively managing the payment process.
The whole spend management process – invoicing, expenses and procurement -- should be united under one leader responsible for optimizing all of the company’s spending. This head of procure-to-pay, or chief spend officer, would manage the spend management organization to a shared set of KPIs.
The missing P: People
This is not a new idea and it makes sense to most of us. We now have the tools-- modern, easy to use spend management suites--to streamline the process from end to end and enable data sharing to make each part more efficient. For example, everybody’s expensing the new iPad? Procurement gets an alert: Hey, maybe you should source that.
What has made this such a tall mountain to climb isn’t the lack of technology to support a unified process. It’s that most organizations don’t have alignment of their people. Even the best technology won’t fix everything if procurement and AP aren’t working together and aligned to the same goals.
Bringing the people together is a perfect leadership challenge for procurement to take on.
Think about it. Over the past few decades, the profile of the procurement profession has been rising. The average level of education and certification has been rising. The amount of spending that they’re managing is increasing. Procurement departments took center stage during the great recession—not just cutting costs, but leading new strategic initiatives for their companies.
There’s a feeling in procurement that the profession hasn’t yet achieved the status it deserves. There’s still a lot of talk about striving to be seen as strategic, and to have a seat at the table with top leadership. Striving to ascend, as Tim Cook did at Apple, from procurement to CEO.
An executive level challenge
Here is your chance. We know there’s huge business value that companies can achieve from uniting procurement and AP—value far greater than the sum of automating each separately.
The world is changing faster than ever, and becoming more connected. In the consumer world, we have visibility and data everywhere; in the business world, not so much. You can see your Uber approaching on your smartphone but you can’t see where your invoice is in the payment cycle. Your watch or wristband can tell you how many steps you’ve taken today, but you can’t tell how many orders have been placed against a contract. Your dishwasher can order its own soap from Amazon, but employees in many companies can’t even figure out the best way to buy a stapler.
Businesses need to achieve the same levels of visibility, efficiency and control in every area of their business in order to meet rising expectations and to stay competitive. A unified, automated spend management operation does that for spending.
If procurement wants to ascend to the heights it aspires, it can show leadership by spearheading the effort to tear down the silos between buying and paying so that someone, a chief spend officer, a head of procure to pay, a head of business services—it really doesn’t matter what you call them--can finally be responsible and accountable for making sure all of spend is optimized. Someone can finally be mayor of spend city.