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Spineless Procurement

May 8, 2009

Procurement Leaders offers an interesting commentary on the way that Procurement is being driven to destructive behavior by executive management (see The Big Debate: Short-Term Myopia hHas Taken Over From Long-Term Strategic Thinking).

The core hypothesis is that the current economic environment has caused Procurement efforts to be diverted from delivery of value to delivery of lowest price. The article suggests that short-term, bottom line savings are the imperative that has undermined the noble mission of the typical Procurement group.

I find two fundamental flaws with this commentary. First, where is the evidence that most Procurement groups ever bought in to value versus price; and second, where is the evidence that those who understood this difference have in fact changed their behavior?

At IACCM, we have the benefit of bringing together buy-side and sell-side practitioners – so we see and hear both sides of the argument and we continually explore the best methods to secure value for both sides.

For all the talk about how Procurement reached the top table, had become strategic deliverers of business value etc., we have known that this is the exception, not the rule. It is of course in the interests of the procurement press to highlight the strategic and business skills of their members; It makes them feel good, it suggests status – but you have only to talk with our sales contracting members or to observe the realities of Procurement contracts to recognize that the truth is rather different. So when the call comes from management ‘Deliver more savings’, most Procurement groups respond with relish.

But there is another side to this story. The real leaders from procurement who grasped the principles of value-add have been able to resist the pressures from executive management because they have the information and knowledge to demonstrate why this would be counter-strategic. So our experience at IACCM has been quite different from that of Procurement Leaders. In recent months, we have had numerous calls from members asking for insights and data that would assist in showing executive management why an aggressive approach to suppliers would be wrong. We have featured leading members on podcasts and in interviews who have explained why and how they ensured that renegotiation was a positive relationship builder, not a destroyer. We have had a growing participation in our Ethical Contracting community of interest, as professionals understand their role in protecting corporate reputation.

So perhaps Procurement Leaders is right to highlight myopia. But maybe the myopia has more to do with the failure of their audience to broaden its horizons and become part of a  community that commits to collaborative, value-driven relationships.  Strategic significance demands courage; those who wish to rise the top table must be ready to confront executive demands and demonstrate why short-term fixes will create unacceptable risks to the business.

2 Comments
  1. Jan Parkinson permalink

    It is not surprising that Board rooms under pressure are less open to sophicated thinking. Particularly in areas such as Procurement that’s not, already, well understood. Proving the case for win-win approaches is not something that cannot be summed up easily i.e. using a couple of winning bullet points; particularly when faced with a plethora of cost reduction targets/forecasts. Short-term goals generate short-term actions. Evidence and presentations that challenge this position would be most welcome.

    • Jan,
      You are right that it is most likely pointless to try to shift management thinking at a time of crisis. Generating acceptance and understanding of why the role must change takes time and, as you say, more than a couple of bullets on a chart. We do have extensive materials and ideas at IACCM about how this shift can be achieved and I would be delighted to discuss and share them with you. Feel free to e-mail me at tcummins@iaccm.com

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