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Are organizations incapable of running successful trading relationships?

November 12, 2014

Yesterday I was involved in a webinar discussing the future of Procurement, which IACCM ran in partnership with Proxima. I very much enjoyed the discussion and thought that many good ideas emerged, but I was left with a nagging doubt over whether we had really addressed the key issue.

The program featured an extremely talented and successful CPO. He explained that his ability to contribute increasing value to the business was being achieved in large part through the development of talent and skills within the Procurement function. But he then made clear that most of this was due to hiring in a diverse range of professionals with no procurement background – for example, lawyers, accountants, risk and compliance experts.

Essentially, as I commented on the program, it sounds as though he is actually building a ‘business within a business’. And while I can see the short-term attraction of this, I wonder whether it is a sustainable model and whether it actually addresses ‘the future of procurement’.

The big challenge for successful procurements (which is similar to the challenge for successful sales) is the need to integrate internal resources and stakeholders, to reach consensus and ensure that commitments are supported. Of course, one way around this is to avoid the stakeholders. That certainly increases the speed of decision making – but usually spells disaster when it comes to implementation. Another route – which I suspect this CPO is pursuing – is to create a shadow organization, which can also make some decisions more independently, but may also be more effective in communicating with internal business groups and functions because they speak the same language.

The problem with this approach is that over time, there tends to be contention over authorities. For example, a lawyer in Procurement is not a Corporate Counsel and their authorities are accordingly restricted. For the individual in Procurement, those limitations can become galling and they also lose a natural career path within their own functional discipline. And from a business perspective, the perception of duplication of effort raises questions over costs and efficiency.

However, a different point of view could be to recognize that the biggest challenge to good trading relationships is the existence of internal silos and specialisms. This realization might lead to the creation of Procurement and Sales Contracting groups drawn from a diverse array of functional skills so that they can perform precisely the accelerated role and interactions outlined above. Perhaps rather than having people build a career in Procurement or Sales Contracting, they are individuals assigned from their function for a period of time, as a career broadening and development move. Indeed, this might be an excellent way to spread commercial skills and competence through the business. However, ultimately it would also be a recognition that there really is no such as thing as a “Procurement” profession – it is rather an amalgam of diverse business skills, employed to overcome the weaknesses created by today’s functional silos.

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