Back in 1996, supply management within the BOC Group was organised in the same way as the rest of the company – on a country by country basis. Fifty countries, 50 structures. As head of purchasing in Australia, I didn’t know my counterpart in New Zealand, let alone in South Africa, Venezuela or France. I knew we had a world headquarters in Windlesham in the UK, but there was absolutely no need for me to go there, and I don’t think there was any need for them to come to us. Corporate rules would come through from time to time and you’d comply with them, but my boss was in Sydney, not in Windlesham.
In being structured that way, the company wasn’t asking us to look beyond our own country boundaries; it was saying: do a good job within your own country, be as good as you can be given local market forces and macroeconomic circumstances. That was our mission. And it had served us well for over 100 years. But looking forwards into a new century, we knew that a proud heritage was no guarantee of future success, that doing the same things in the same ways as before would not necessarily deliver the same results, especially if our competitors chose to be innovative and brave.
I remember Tony Isaac, who in 1996 was the group finance director and is now the CEO, coming to Australia. As a local management team, we had to make various presentations. Mine was about how we had pulled the states in Australia together to buy as one country. Because he travelled extensively, Tony saw the same thing happening in other BOC countries too. The question he asked was this: if we could make states, provinces or counties work together, why couldn’t we do the same between countries? He took the view that we could probably buy better and smarter from best-of-breed suppliers if we all did it together as a single company. That doesn’t sound very radical now, but at the time not many people were thinking that way, let alone doing something about it.
Tony (to whom I now report directly) called all of the country supply managers together and sponsored the exploration into what global purchasing and supply management would mean for BOC. He recognised that different time zones, languages, levels of experience and ways of working would make it much more complicated, but also that the prize would be grander. He didn’t know the size of the prize, but he wanted to know.
THE PROCUREMENT GOALS
From a global perspective, we wanted to get the benefits of an organisation that spends £2.5 billion a year. If our companies are not all holding hands across the oceans, then all they are are small companies, operating as islands. Our default position now is to pull together all of our spend and buy it once for everyone from the right mix of suppliers. A single global deal may not be possible for things like electricity (10 per cent of our total spend), site security or calcium carbide, but what you can do is see the world as one place as far as your consumption is concerned and sign a multiplicity of contracts in the same timeframe.
Another key goal was to utilise our internal knowledge and talent. Aside from fragmented buying, the real problem of the old country-based structure was not being aware of solutions to supply-related issues that had already been developed elsewhere in the organisation. The result? You ended up either reinventing the wheel or, worse still, living with the problem or putting in a bad solution. And all the time, someone somewhere inside your own organisation had the answer. Not only did you not know about it, but there was no way of getting it to you.
Or take another example: you have an expert in some form of sourcing in China, but you need to buy it into your local business in South Africa. It would make sense to utilise that expertise from China if you practically and logistically could. One of my goals is to make sure that my team members in South Africa know that person in China. Getting the right mechanisms in place to make knowledge and solutions flow to people in a timely way is something we spend a lot of time thinking about and trying. Thankfully, the blessings of modern technology make that a whole lot easier, and an airfare is not always required.
OUR GLOBAL STRUCTURE
Compared with 1996, we now have one functional supply management organisation. It operates locally but we develop strategy globally and execute globally within our three major lines of business (see factfile, below). Of the 200 people in my team, only seven are based in world headquarters; the rest are located within our 20 major business units around the world. Each of those has a lead supply manager who reports to a local business executive and to me functionally, so in that sense it’s a matrix organisation like many others.
Those 20 lead supply managers are my senior team, and collectively are known as the global supply management council (GSMC). Twice a year we all get together for a week, once in the UK and once in a BOC business elsewhere in the world. The purpose of this is not about making the venue interesting; it’s about ensuring that my senior team are fully aware of the different business challenges being experienced by their colleagues in another country and another culture.
At those meetings, we devote three days to the business issues for the global group and two days to learning. And it’s not just about talking: we throw ourselves at some local business issues. At a recent GSMC meeting we tackled a problem the local business was having with key account management on the sell-side. We’re pretty experienced at relationship management as a process from the buying side, so we helped to develop a better structure for our sales and customer-facing colleagues.
Every six weeks the same team takes part in a “global link-up of telephones” – a Glut – which is our term for a teleconference. Each Glut lasts for one hour during which time we deal with burning issues in a 10 or 15-minute timeframe. It might be things I’m working on that I want them to know about, or problems that they want their colleagues’ help in sorting out.
For me personally as the CPO, it’s essential that I don’t just spend the rest of the time sitting in my office at global headquarters. In a typical year, I will make around15 trips to our businesses around the world. As well as visiting my supply management colleagues, I want to meet with the local business head and his or her other key executives. My relationship with that person is crucial if we are to strike the right balance between local and global initiatives, and I have to work hard to build and develop it. If the local executive is unavailable, I’d rather change the date of my trip than leave without seeing them.
From them, I want to know if the local lead supply manager is lined up to achieve what they want done locally and what I want done globally for the function. What we’ve ended up with today is a balance of some local themes that matter to the local business and some global themes that matter to the global group-wide business. Each supply manager’s job objectives for the year will reflect that. He or she gets the local ones from their local executive, who has shared them with me; plus there’s a set of global objectives, which this year are known as “the Craig 18”. Examples include participating in global and cross-regional cost-reduction projects; re-evaluating and updating global processes and tools; and conducting at least three site safety audits.
By going through that process 20 times, I end up with 20 lead supply managers each with a consistent set of global objectives. For each of them, I’ll do a mid-year and end-of-year review together with the local executive. In addition, I do an annual business review with all the staff in each local supply management team where we talk about their progress in hitting particular targets. A summary of all of those reviews is published in an annual global report.
The way to think about it is a rowing boat with 20 oars. We want those 20 oars being rowed in unison at the same pace, not some in the water, some out; some short strokes, some long; some crossing over one another or not moving at all – and with one destination in mind.
THE LESSONS LEARNED
So what have we learnt about successfully building a global team? Well, on the basis that key priorities such as aligning procurement strategy to business strategy, defining what success looks like, and delivering and measuring real benefits are a given, I would highlight the following eight points:
1. Communication is the global ‘glue’
It’s easy to draw an organisational chart and put 20 names in 20 boxes. But if all you have is a chart on the wall you’ve got a global picture, not a global team. You need some special ingredients, and one of those is your communication tools. The GSMC meeting, the physical coming together – as expensive as it is – is a key part of keeping the “glue” dry around the global team, keeping global global. The same’s true of the six-weekly Gluts. My team tell me they enjoy the opportunity to get on the “global phone” and talk issues through. It also makes them feel well informed and valued, as they achieve more collectively than they do individually.
2. Insist on common tools and processes
In BOC, global co-operation is based around a “three-way promise”: if we don’t have a tool or process, we will copy it from one of us who does; if we don’t have one at all, we will build it together; and if we think it needs to be improved, we will refine it together. Those principles are vital to avoid duplication and stop us operating in isolation. On our supply management website, we now have over 50 tools. Key tools are globally “owned” by a named lead supply manager and cannot be changed without the agreement of that person. Those tools and processes are consistent across the group, so if a new junior supply manager joins in Kuala Lumpur, they will be briefed on those in their induction. It’s the same tools and processes in Johannesburg, Basle, Toronto or Shanghai. Some are quite generic, others are bespoke. For example, our project management process follows the tried and tested models that are taught and applied in many organisations, whereas our supplier selection and performance management tool is an in-house design – in fact, its name, SESPA, is trademarked to BOC.
3. Make competency profiles universal
You have to define the competencies you want in your modern procurement professional. We use a competency framework during every interview, during every potential promotion. Every individual gets a score across 10 competencies. Some of those are directly pointed at a candidate’s capability to think global, act global and collaborate beyond their own country borders. This consistency makes our supply management team transportable from one business unit to another or one country to another; they don’t have to relearn a different set of competencies to be successful, they hit the ground running.
4. Don’t apologise for your private language
We hear a lot these days about procurement needing to speak the language of business, and that’s absolutely right. At the same time, we have our own language in supply management at BOC that the business is learning to speak – a lot of acronyms and code names for things. That actually becomes quite special internally and helps us to gauge our impact outside of our functional walls. It also means that from one country to another we understand what’s being said or referred to. Our global language means the same thing to all of us.
5. Beware of one-size-fits-all policies
People need to know what the ground rules are, and a breach of those is not tolerated. But that doesn’t mean those rules have to be identical globally. For example, in our ethical purchasing policy, which the GSMC created, there’s a section on gifts and entertainment, and that takes account of different countries. The “red envelope” in China is an accepted business practice; no one is compromised by it, no one is embarrassed by it. It’s an expression of gratitude in a business relationship that is consistent with local culture and custom. If anyone is unclear whether something is right or not, my simple rule of thumb would be this: if it was the headline in tomorrow’s newspaper, would you be professionally embarrassed by it? If the answer is yes, then don’t do it.
6. Make your function diverse and representative
Your organisational structure needs to represent a cross-section of the different businesses, large and small, near and far. Do this by believing that the world is your talent pool. As the leader you must be proactive and interventionist to make this happen. Last month we moved a young South African from our business in Johannesburg to England. He will be here for two years with a view to maturing globally and then returning to our business in South Africa. If this event is a one-off in your purchasing function, you are leaving too much talent on the table.
7. Use local talent for global projects
Don’t just run global projects using people who have global jobs. Run global projects with local people. At the end of the day, they are the ones who have to live with the consequences. At BOC, over 90 per cent of our procurement budget is spent outside of corporate HQ. Implementation at the local level is key to the success of a global deal with local implications. By utilising local talent you enable that process, as well as giving valuable global experience to local team members.
8. Ensure that suppliers respect your global structure
You must spend sufficient time with suppliers to explain what global means to you, so that they not only understand it, but may also even turn it to your mutual advantage. What you want to avoid is a structure that they disrespect or choose to circumvent. Our supplier selection process takes account of this, as does our supplier performance appraisal process. For suppliers to do a good job they must understand us. If they have any confusion about this, I hold myself responsible.
Ultimately, globalisation means finding some sameness, some consistency, a common umbrella under which everyone operates. But you also have to find balance; not just be global at the expense of the local market or key local things that need to be achieved. When you get complete alignment, the sort of structure we’ve built is really effective. But does it happen naturally or by issuing e-mails? No. You’ve got to get out of your office and make it happen.
FACTFILE:
BOC Group at a glance
- Founded in 1886
- Listed on London and New York stock exchanges
- UK HQ, operations in over 50 countries
- 43,500 employees, 200 in supply management
- Over 2 million customers
- Annual procurement spend: £2.5 billion
Three major businesses:
- Process Gas Solutions (PGS) – on-site gas supplies for various industry sectors
- Industrial and Special Products (ISP) – compressed, liquefied and medical gases
- BOC Edwards – materials, equipment and services for the semiconductor industry
Financial results to 30 September 2004:
- Turnover: £4.6 billion
- Operating profit: £577 million
- Pre-tax profit: £504 million
Craig Lardner is group manager, supply management, at the BOC Group, based in Windlesham, UK (craig.lardner@boc.com)
