There was a time when procurement was handled by managers and executives with little or no training, and who received minimal feedback on the quality of their decision-making and the value they created or eroded for the business. This situation remained unchecked for far too long, and so the establishment of a professional procurement “industry” with training courses, qualifications, consultants, quality business processes and supporting software was long overdue. With rock-solid procurement professionals and procurement processes in many large organisations, in both the public and private sectors, there is now no longer any excuse for haphazard and inappropriate buying behaviours.
However, the processes, the planning, the contracts and even the negotiations are in danger of becoming “spot welded” in place, and at times can be more hindrance than help. The profession has become obsessed with standardisation and consistency, as though one size always fits all. In addition, this procurement approach is, at times, in danger of damaging the alliances and partnerships that are the lifeblood of great procurement practices.
It is vital that the (relationship) baby is not thrown out with the (cost) bath water. The new procurement approach needs to be built on the cornerstones of trust and relationship. This is where leadership comes into the equation. It is imperative that there is an optimistic vision for every deal, and with the necessary trust that leads to strong relationships. This can be transforming for both the procurement role and the longevity of the deal in question.
The introduction of strong management processes and procedures is sensible and necessary. However, there is still a place for well-informed judgment. For judgment, read leadership. Leadership in the main cannot be delivered by process. Historically, processes were put in place because we couldn’t get the right talent in all the right positions. Therefore, we have adopted a “painting by numbers” approach. This is foolproof when monitored and measured, but may not maximise the potential opportunity. Getting the best deal, especially a unique opportunity that has never been attempted before – and that might be a life-changing moment for the organisation – may not be delivered by tried, tested and rigorous procedures and protocols.
These situations demand leadership: vision, a “risk-ready” approach, courage, inspiration, insight and a feel for what the potential outcome could bring to the business in the future. I’ve yet to see a totally process-driven approach deliver a truly unique and inspiring transaction.
This is not about doom or gloom – on the contrary, the procurement profession is at a crossroads of opportunity. It can choose to continue delivering consistent quality and beneficial value and find itself limited to senior management positions across the organisation. Or, it might just take a necessary risk and vote for leadership. This is scary and not easy, but the first step necessary is a shift in thinking.
Manage a little less, lead a little more
At this point, it is worth considering where leadership differs from management. Strong professional management is essential in every organisation, no matter what its size, be it private, public or not for profit. Managers are focused on getting things right. It is the job of management to ensure that all strategic objectives are delivered to the required timescale, the right quality standards and on budget.
No organisation can deliver without sound management, but in today’s hugely challenging environments where customers and citizens have become far more discerning, management alone is no longer enough.
The most progressive organisations have recognised the need for leadership. This is not just what happens in the boardroom, it is much more about a state of mind of the whole organisation, from the front-line operators (receptionists, cashiers, customer service desks, and so on) right up to the chief executive and the directors.
Sir Terry Leahy, chief executive of Tesco, the leading British supermarket chain, says: “We do not have one leader, we have thousands of leaders, local leaders, close to the customer.” We can all be leaders, if we choose to. It’s not about rank, status or job title; it’s far more about attitude than it is about skills. It is your attitude that determines your altitude.
Many managers spend their time focused on safety and security, cost reduction, service provision, planning, task and performance management, and budgets. Contemporary leaders will also focus on positive communication, vision, talent, support and inspiring people to be the best they can be. In short, managers tend to focus on doing “stuff”, while leaders tend to focus on how people feel. The most inspirational leader I’ve ever had the pleasure to work with is Matt Barrett, chairman of Barclays Bank. Why? Because of his ability to get ordinary people to do extraordinary things.
I completely understand the need for standardisation, consistency, transparency and the best price. Recent developments such as reverse auctions and “beauty parades” in the main add significant value, but on occasion they can destroy healthy relationships that have added untold value. Such value can be difficult to capture with a well-meaning process or algorithm.
Therefore, let’s think about this a little differently. Let’s think about collaboration. The terms “partnership” and “win-win” have become much abused and have fallen into disrepute, so let’s call it collaboration. In my book, the best leaders are the best collaborators: they know what they are good at, and know where they need help and how to get it.
Having spoken to many chief executives about procurement over the past year, by far the two most common points they make are:
- “They know the price of everything and the value of nothing.”
- “It is far easier to teach a business executive about procurement than it is to teach a procurement manager about business.”
This should make every procurement professional sit up and smell the opportunity. It’s not just me who believes that collaboration offers a huge opportunity for procurement. At least, it shouldn’t just be me – you must believe there is huge opportunity and that it’s an opportunity for you.
At the procurement profession events I’ve attended, including a recent global leadership conference I chaired in London, I’ve heard a lot of discussion about why procurement should be (and usually isn’t) represented on the board. This indicates that the ambition is there. But ask yourself the following questions:
- How much do you want to be in the boardroom?
- Do you want to influence your organisation’s strategy?
- Do you want to be part of the decision-making process?
- Do you love people?
- Do you enjoy making a real difference?
- Can you spot talent?
- Do you care enough?
If the answers to all of the above are “yes”, what are you going to do differently tomorrow? When a director of your business, or better still the chief executive, turns up at your desk asking for your views or assistance in delivering a big opportunity, that’s when everyone will be clear that you have arrived in the leadership club of your business. Don’t be satisfied with being summoned to a director’s office to explain why procurement has not delivered upon its promise. Take a risk, take the lead. As the saying goes: “If you always follow the lead dog, the view never changes.”
I would offer two pieces of advice here. The first is to look beyond your function. Having left the British retailer Marks & Spencer for a board position at Pepsi, my first board meeting was a career-changing moment. I felt both anxious and exhilarated at being in the rarefied atmosphere of the boardroom.
However, it turned out to be a chastening experience. I was responsible for all the technology in the business, but technology was never mentioned during the meeting and so I didn’t say a thing.
When the meeting ended, the chief executive called me to one side. He asked why I hadn’t contributed to the discussion. I replied that no one had mentioned technology and he hit the roof! I may have been on the board because of my functional excellence, he said, but that meant nothing now.
My responsibility, like all of my board colleagues, was the day-to-day running of the business. If I didn’t feel I could contribute to that, then there was no point in me attending another board meeting. As hard and as painful as that feedback was, he was absolutely right. And I never forgot it. So don’t be as naïve as I was: take an interest in the organisation at large.
The second piece of advice is to understand and appreciate what your strengths are. Try to forget the years of feedback in your appraisal about your weaknesses and remind yourself of the column that focused on your strengths. Quite simply, it’s your strengths that will be noticed, it’s your strengths that you will enjoy focusing on and it’s your strengths that you will perform best at. So why focus on your weaknesses? To quote a Yiddish proverb: “If you need a helping hand, you’ll find one at the end of your arm.”
So, back to the opportunity. As I’ve already noted, on occasion it is necessary to take a leadership stance and be prepared to make a few judgment calls over and above what the data and the analysis say. This might be about whether a deal is tactical and transactional or whether it has the potential to be truly strategic and integral to the success of the organisation’s aims and objectives. This is where I see the big leadership opportunity
for procurement – in alliances and true collaboration.
Few things are best done alone
Business is becoming increasingly competitive and complex; timescales are getting shorter and shorter; everything is happening at an alarming speed; shareholders are more active and less forgiving; and sustained success would appear to be nearly a statutory requirement. How does business not just survive but continue to thrive in these challenging times?
The most progressive organisations have realised that they can’t be good at everything. In fact, the best of the best only want to be truly brilliant and unique at one or two things. They have a strong belief that to try to do many things brilliantly is to do many things badly. The absolute market leaders are usually Olympic standard at one or two things only, but they collaborate with many organisations that are best in class at what they do. This has enabled them to continue to do what they do best and collaborate to achieve the rest.
Trying to create a competency that your company lacks from scratch can be costly, time consuming and is often doomed to failure. It can also expose your team as “well-meaning amateurs”. A merger or acquisition can fill the gap faster, but this can be the most expensive bet of all. In recent memory, Chrysler and Daimler-Benz merged in 1998 to a fanfare of trumpets. Their marriage was supposed to be true globalisation in action, yet losses escalated and the share price went south-east. Sometimes there is no choice but to bet your business on a particular strategy or outcome, but it’s a high-risk option.
Thankfully, there is an alternative to both grow-it-yourself and mergers or acquisitions. I’m talking about strategic alliances. Collaboration can really make a difference and quickly. Ericsson hit the buffers after years of sustained growth. Its mobile phone business moved from being the goose that laid the golden egg to being the loss millstone around Ericsson’s neck. The company was full of great technologists, but they perhaps lacked real understanding of the consumer – and a fast-changing consumer at that.
They also lacked inherent design skills, and that necessary empathy with the young at heart. Sony, for once, lacked the technical know-how in this technology maelstrom, but is brilliant at understanding the consumer of high-tech gadgets, with a brand that is powerful and trusted in this arena. The strategic alliance of Ericsson and Sony could well deliver a real challenge to the might of Nokia.
Sometimes the best and most obvious of alliances are between ostensibly strange bedfellows. Borders, the high-street bookseller, and Amazon have demonstrated that even fierce competitors can work together for mutual gain. Borders axed its massively money-burning internet venture and adopted Amazon’s legendary fulfilment to meet any web demand. This may not be the most glamorous role for Amazon’s mammoth brand, but it is a good and welcome revenue stream, and it does not lose money on these transactions. For Amazon, perhaps a cash-positive future beckons; for Borders, no further deflection from its strong core business.
Let’s be clear, partnering is no panacea. You have to mean it, and really want it and work at it. A recent study indicated that between 55 per cent and 70 per cent of business coalitions fail, or do not meet the original objectives. The major cause tends to be poor working relationships. It is not just about great strategy, or clear and agreed working practices. Not even common goals can guarantee success. It is about people. No matter what industry you are in, it is still a people business.
Now is a really good time to consider collaboration. Remember, the target may be to increase profitability, but it could well be to end a very costly war that is deflecting your organisation from growth. Making alliances work is not easy: it is seriously hard work, but well worth the effort when it pays off.
Some things to consider when drawing up a plan for making a well-thought-through strategic alliance really deliver are as follows:
1. Light the blue touch paper but stay close
Strategic alliances are seriously important and need the appropriate launch pad. Having selected the right mixed alliance management team, they need to be briefed and motivated and provided with the necessary support. Discuss risks, especially those associated with different cultures and approaches to work. Ensure that there is clear ownership by a senior executive and keep close. The doomed alliance between the Swissair and Sabena airlines left both companies in the packed graveyard for failed national carriers. They should have been more aware of each other’s deep-rooted problems.
2. Working together, winning together
Common goals and common messages are essential. All team members from both companies must live and feel the union. Who makes what decision must be clear to all. All communication must be common to all. It sounds obvious, but it is so easy to get this wrong, and all trust can be lost in no time. Be clear that a shortfall in trust means a shortfall in the relationship – which means forget it.
3. For better or for worse
Do think about the worst-case scenario. It may well happen, and usually for the wrong reasons; a potentially synergistic world can still lead to disaster. Think about the huge and unseemly falling out of Ford Motor Company and its tyre maker Firestone, partners for the best part of a century. Something went wrong and that was it. They both continue to lose millions of dollars as a result.
4. Strange bedfellows
Do not think friend or foe. Think what is best for your organisation. Do not think what your competitors are doing against you; think of what they could do for you. Remember Amazon and Borders. The UK retail banks are fierce competitors but are sensible enough to share their very expensive infrastructure. This has lead to ATMs being available to many customers, no matter what their bank is.
5. All for one, and one for all
The ability to manage and nurture relationships should not be seen as an individual skill or trait. It has to become second nature to all those who are involved in delivering the partnership. Clear business processes must underpin this. The airline alliances have worked hard to ensure a seamless service for their partners’ customers.
When choosing a life partner, you should not ignore compatibility, chemistry, behaviour and long-term goals. Strategic alliances are no different; this is no one-night stand. For procurement professionals, I believe that given your insights, your technical skills, the relationship opportunities you have and as long as you have the right attitude, being the “keeper” of the key strategic alliances might well deliver that board position – the CPO as “chief partnering officer” rather than simply chief procurement officer.
But remember this: management and process alone will not get you there. Welcome to the world of leadership.
CHECKLIST: The CPO leadership challenge
To test your leadership mettle, answer the following questions and see how you shape up:
DO YOU...
1. Give ideas breathing space?
2. Inhibit creativity in others?
3. Create or drain energy?
4. Encourage, welcome and praise loyal opposition?
5. Connect with people?
6. Step into your discomfort zone?
7. Provide “air cover” for your people?
8. Set the pace?
9. Praise enough?
10. Have work-life balance?
René Carayol is a business thinker, speaker and author specialising in organisational change and leadership (rene@carayol.com)
