Why CRM is the long term answer to stakeholder relations for procurement
August 2022, By Jonathan Dutton FCIPS, CEO at PASA
… argues Jonathan Dutton for Supply Clusters members.
The lessons of the pandemic for procurement
Procurement had a good pandemic – the much higher profile for the supply side during the crisis – both publicly (toilet roil shortages, etc) and corporately (business continuity dramas) - was immediately addressed by Procurement teams bringing strong business alignment and a real sense of urgency accompanied by real responsiveness, even whilst working from home.
And stakeholders loved it. One senior stakeholder who attended our CPO Roundtable at PASA nailed the point describing a much valued new role for procurement – that of corporate “pathfinder” through the long purchase process, cutting away unnecessary steps. A new level of engagement with stakeholders resulted.
But, what now? The reaction to a return towards normal times comes with quotes of 9 month go-to-market sourcing exercises. And stakeholders now protest that they, “…want the 3 day service we had in the pandemic.” Two steps forward, three steps back for stakeholder relations for some perhaps?
Stakeholder relations have been a top 3 issue for procurement managers in Australia for nigh on twenty years or more. Almost every survey had them amongst the top 3 issues it seemed.
In procurement training, engineers were always painted as the baddie stakeholders. Involving procurement late, narrowly defining needs to favour incumbents, leaking budgets, cutting deals with suppliers and procurement presented with fait accompli on Tuesday afternoon with orders demanded to be placed by Friday to hit operational deadlines.
In procurement parlours, sometimes you’d overhear competition amongst buyers – who has the worst stakeholders? Maverick academics perhaps? Arrogant clinicians? Or the granddaddy of them all - Defence personnel and their seemingly endless river of interminable delays, budget blow-outs and bizarre stuff-ups? Why are stakeholder relations so difficult for Procurement?
But things are rarely as obvious as the cliches painted above. Truthfully, procurement internal stakeholders do not set out to be difficult. So why is it all seemingly so hard?
Stakeholders often seem consumed, even obsessed with their task – their bit of the business. They are often customer-focussed or operations-orientated and feel the weight of their challenge from the C suite. As technical specialists, usually, they are often high-end subject matter experts and can feel that only they can succeed in their domain. As business partners they sometimes present as goal focused, passionate and entrepreneurial. Not so bad then?
Yet they bristle when procurement (and others) do not seem immediately aligned or, even, have the temerity to question their approach. Or risk delaying it. And they can also come across with the downside of the ‘entrepreneurial spirit’ … innovative sure, but stubborn, single-minded and tenacious with it.
If things seem too slow or too cumbersome, the senior stakeholder instinct is to go around the problem. Or under it, or over it:
One clear symptom of stakeholder anxiety is maverick spending – that is the purchase of goods/services from suppliers outside a company’s pre-established procurement policy or process.
This occurs largely for the reasons outlined above and, often, when an internal stakeholder’s frustration takes over, and their vision overwhelms the corporate process. Or when stressful deadlines loom and short-cuts become all too tempting, and even obvious to them, and their goal-focussed approach.
They are not malicious nor egregiously driven. They just want the result. More quickly. Their buying approach only serves their goal success. They are often customer focussed – the real customer that is, the one that spends money to buy your organisation’s goods or services – and fear letting the side down on the new target or project to win in the marketplace.
So, how to manage maverick spending?
Well, what drives maverick spending is three things really :
1. The maverick drivers inherent in goal orientated internal stakeholders – described above
2. The corporate culture – which allows such behaviours
3. Misaligned purchasing process and systems – ill shaped to match real needs
The easiest to tackle is #3 – which, in itself, laregely enables #1, if not #2 as well.
The procurement process
A clear problem in the modern one-click ‘BUY IT NOW’ world, is the mismatch between long-standing purchasing process and our Amazon - one-click & delivered tomorrow - experience at home. How can we get such service from our sofa at home, yet not in our ultra-modern and sophisticated office (when we go there, that is)?
This disconnect has been at the heart of much procurement process thinking in recent times – and the introduction of self-serve or user-managed buying has resulted. Basic procurement is not rocket science and the system can do much of the heavy-lifting nowadays, when aligned to a pre-defined balance of service -v- needs and when set up correctly to do so.
The classic dichotomy in the development of such eProcurement systems is – do I automate our own, often bespoke, existing process, with all its imperfections, or do I redesign the process perfectly and systemise that instead?
This penetrating question has an obvious answer – b) we redesign the process to work better and automate that. However, this means it is more difficult to buy ready systems off-the-shelf, demands consulting and programming time (slow and expensive) and therefore needs a full an proper business case and professional project management. All things that are not usually signed-up for in the first place.
Normally, there are one of two main drivers for new systems implementations in a procurement context:
1. The organisation are buying a new ERP or P2P system – let’s haggle in some extra software for procurement, eh?
2. We need to be a little bit more efficient, really.
Neither business case is right, nor good enough. Thinking through what business problem you are truly trying to solve on the supply side, and why, as well as how, is worth its own project and its own justification. Can you articulate it well enough is the true question?
Risk v benefit
At the heart of the maverick spending problem, and using systems to fix it, is another more opaque question. But also one, perhaps, that is more revealing of the real issue – that of corporate risk -v- immediate service:
Simply, in today’s ‘ESG’ world, corporates have to be careful. They not only have to manage risk, and compliance, but also the notion of provenance from the supply side and, particularly, ensuring that the organisation doesn’t jeopardise its social licence.
Social licence – or the latitude of the general public and stakeholders to let you carry on as normal (without being ‘cancelled’), can be lost surprisingly easily. In addition, the modern organisation has to keep up with a wide range of obligations including the mandatory (eg; Modern Slavery Act & Payment Times Reporting Act) as well as the almost obligatory (eg; decarbonisation, gender equality, diversity) and the optional (eg; indigenous procurement policy, LGBT support, small business support, payments policy, charitable endeavours).
Often the safest place for larger organisations to fulfill these spend quotas is within the indirect expenditure categories. Utilising the process & system support to accomplish this is efficient and helps keep score on who gets what. Maverick spending is therefore no help.
Yet, in essence, what we are saying is that instant service (like click & collect) is compromised for the greater corporate desire to manage risk, liability and share. To balance their supply side with clear policy in a much sharper way. This is, practically, what we mean when talking of “risk” in the practical sense – and why it delays instant service.
Naturally, stakeholders, especially user departments, and certainly maverick spenders, are entirely uncomplicated over these finer points of risk – although they are designed to protect all stakeholders, including the brand, staff, customers and suppliers alike.
Speed of service is a business benefit, but how many internal needs truly can’t wait a day or two? Or, more compellingly, cannot procurement design high-service standards into the corporate solution? Using call-off orders, spend reconciliations, blanket discount levels, rebates or other devices is not difficult. Such mechanisms can be applied through automation even more easily than through a buyer’s manual effort. This is the true challenge for procurement – make is safe and make it quick.
New stakeholder needs
Much of our ‘Procurement’ success during the pandemic was the building of stronger stakeholder relations. These were nurtured upon a much greater alignment with their core business needs (speed, a sense of urgency, process short-cuts, enablement not obstruction).
As we said already, ‘stakeholder relations’ are not a new challenge for procurement. But stakeholders saw procurement largely in a different light during the (early stages) of the pandemic – urgency, alignment, proactivity and so on. This enlightenment has created the opportunity and the potential for stronger relationships which can work more proactively – and this is what is new.
But how can we sustain this progress? How do we keep impatient stakeholders onside? Especially when business returns to a “new normal” and stakeholders facing a 9 month go-to-market sourcing exercises say pointedly, “but you did it in 9 days during the crisis!” Can ‘Agile Procurement’ form part of the solution?
Stakeholders are immediately attracted to the idea of ‘Agile Procurement’ – it tantalises SPEED In other words, it promises accelerated procurement. But agile procurement does more. It is not just about speed. Done well, it offers actually FOUR critical business benefits:
1. Responsiveness to changing needs – the procurement process is a journey towards a purchase decision. Needs change, often quickly. Agile helps react to these changes better.
2. A voice for the customer – agile prioritises the voice of the customer. Which is often the preoccupation of customer-facing stakeholders.
3. Speed of purchase – is much quicker with agile, as it prioritises the project, concertinas process, but does not cut corners.
4. Earlier business benefit – the business benefits of any purchase, often outlined in detail in the written business case, are brought into your organisation much earlier than otherwise through AGILE.
Together these four key benefits make a compelling business case for an investment in AGILE PROCUREMENT approaches in themselves.
Yet, for Procurement, the benefit can be huge as well. Simply, these benefits address directly the long-standing angst of many procurement stakeholders – why does take so long? Is it the failure to combat this hard perception that has held procurement back from the C Suite? Can agile procurement approaches break the glass ceiling holding procurement back, and is now the time to grasp the opportunity that the pandemic has given us?
So, agile is not so much just about speed, as many people often think. Nor is it a short-cut, as many people assume – cutting red-tape, compliance, process and due-diligence to save time.
Simply, it fuses the principles of ‘AGILE’ with the procurement process. It brings the key players together for one-time. It defines needs much more closely through collaboration. It concentrates effort and then iterates solutions cross-functionally. It is genuinely customer focused. It ‘tries ‘n’ buys vendors. It works transparently. It decides openly and quickly. And captures early business benefits for doing so.
In this way, AGILE PROCUREMENT is, in fact, a new way to maximise responsiveness to your organisation’s true needs, and how they frequently change, and to react to them in real-time. And, in this way, has the potential to address those long-standing procurement problems – just not on every project; only he the right ones.
As we pull out of the pandemic period (hopefully) maybe ‘agile procurement’ has some of the answer we need to balance stakeholders needs and corporate needs at the same time?
Conclusion – using CRM in reverse
In essence, in balancing (internal) customer & company needs, we are talking about using CRM (customer relationship management) in reverse. Instead of suppliers’ business development managers using CRM techniques and data management on its customers (us), we adopt these techniques and mindsets in dealing with our stakeholders.
We already have adopted the principles of CRM and applied them into modern SRM (suppler relationship management) thinking. Is it not time for procurement to go the whole way and utilise CRM in a proactive way as well?
Stakeholders are always going to need things faster – in fact better, faster, cheaper, safer and greener as well. All of the above, in fact. Always. And now.
Better systems, with a stronger business case, and using ‘agile procurement’ approaches where appropriate (not everywhere) could be the formula to help procurement leverage their success during the pandemic for a longer term benefit for all the stakeholders in the supply side.