Where’s the Glue?

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It’s actually sitting right under our nose  . . . . . . but we manage to snub our nose at this function time and time again.  It’s Purchasing – not Strategic Sourcing, not Category Management, not Global Sourcing, not the forever –exalted Supply Chain (and it’s ever changing scope /definition) but simply Purchasing!  And I say Purchasing with all the professional respect this group deserves BUT seldom receives.

We, as “buying” professionals, have historically treated Purchasing as the “ugly stepsister” (no offense to stepsisters by the way).  This group is often referred to as tactical, non-value added, transactional, able-to-be automated, outsourced or even eliminated.   Here is how we think about the Purchasing function:

In a nutshell, Purchasing is the “Glue” that holds the buying function together.  They play liaison to internal business partners, suppliers and customers and are the face of whatever you call your “Procurement” function.   When Purchasing works, everyone up and down the supply chain is happy:

  • Sales – customer order are being filled on time and at the agreed upon margin
  • Sourcing – the internal organization is  buying off of contracts
  • Manufacturing – materials are where they need to be, when they need to be there
  • Plants – inventory in being maintained at optimal levels
  • Suppliers – purchase orders are being issued and invoices are being paid
  • Internal Business partners – requisitions are being processes and filled
  • Customers – orders are being filled under the agreed upon time frame
  • Everyone – issues are being resolved in a timely fashion

When Purchasing does NOT work, then the entire Procurement function falls apart.  I wish I had a dime for every time I hear a Sourcing organizations complain about having too much tactical work and not having the time to focus on Strategic Sourcing.  This is because not enough attention is being paid to the operational excellence that is required of the Purchasing function.  By the way, operational excellence is not about having everything automated because that is impossible.  What it is about is having the right combination of adoptable processes, technology and skilled people to get the job done.  In addition, it is also about strong customer service, attention to detail and the ability to lead change. 

By the way, the best Strategic Sourcing contract in the world is meaningless unless it is successfully executed and adopted – and THAT is Purchasing’s job!   Sourcing professionals, take a good look at your Strategic Sourcing process (7 steps, 9 steps, 10 steps, whatever . . .).  It cannot be executed without the strong involvement and support of the Purchasing function.  Best of luck getting accurate spend data, supplier information or even business requirements without Purchasing.  In addition, if the operational execution is failing, your internal business partners are not going to be too willing to let you lead a Sourcing team for one of their categories – they will kindly suggest that you look elsewhere.

So the next time you think of the Purchasing function imagine a model airplane.  If all the parts are properly in place and glued together, it has a pretty good chance of a successful flight.  But if those same parts are not glued together, it will fall apart the minute it tries to launch.  Thanks to the thousands of Purchasing professionals that provide the “glue” which allows the rest of the “supply chain” function to soar . . . . .

Join in the conversation and let us know what you think  . . . . . . . 

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If you ain’t got the right questions…

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…You don’t have a snowball’s chance in &^$$ of getting the right answers. I cannot tell you how many times I’ve had this discussion with CEOs and other senior executives. Or, as my friend Pete often says – “The most common source of mistakes in management decisions is the emphasis on finding the right answer, rather than the right question”. Or, as my other buddy Al says – “The formulation of a problem is far more essential than its solution, which may be merely a matter of mathematical or experimental skill”. Those would be Peter Drucker and Albert Einstein.

Asking the right questions is a critical competency that very few people pay attention to or develop. How many times have you been involved in futile number crunching or mind numbing analytical exercises that as soon as you’re done, someone decides that it wasn’t the right analysis and let’s go do another one? Often referred to as the “get me a rock” exercise – where the executive says “go get me a rock” and as soon as you bring in a rock, it’s not the right one and you have to go get another rock.

We often run a team simulation where we give the team all kinds of data and they have to answer a question. If the team took the time to examine the problem and identified the right set of questions, the answer can be had in 2-3 minutes. We’ve had teams take 45 minutes and not even be close – they keep crunching the data and formulating all kinds of analysis and spinning their wheels and validating their wild guesses every 5 minutes and getting more and more frustrated. And the teams that do the worse are the ones with the high achievers, the analytical super horses etc. etc.

We were just at a client meeting where the client was jokingly showing fake exasperation with all the questions we were bringing up and was wondering what value we were bringing since all we did was ask questions and we were getting paid for it. The conversation turned serious when I explained that the first job of any good consultant was to make sure that ALL the RIGHT questions had been asked. Only then should the consultant start working on potential solutions. The client admitted that the questions we had been asking were driving them to do some serious thinking – we were working on their core value creation and delivery process and the questions led them to a strategy to leapfrog their competition.

And there are techniques you can use to improve in this area. An example is The Minto Pyramid and the associated MECE principle. So slow down, stop, and reflect! Make sure you have all the right questions first – otherwise you will be headed on the fast train to nowhere.

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IT Adoption

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With annual IT spending topping two trillion dollars globally, it makes sense for organizations to assess whether they are receiving the value from these investments.  Unfortunately, the answer often appears to be no.  Why is this?

Because there is an obvious gap between PERCEIVED COSTS – the effort it takes to effectively use a solution (training time, emotional acceptance, desire) and PERCEIVED VALUE – what the outcomes people desire .  This gap is a measure of the technology’s Adoption – when the Perceived Costs outweigh the Perceived Value, the technology will not be adopted.

For years, CIOs have understood this from a financial perspective — it is essential for their success that the business benefits they generate need to outweigh the investment costs.  In recent years, IT organizations have attempted to increase their PERCEIVED VALUE not by improving how technologies are delivered, but by preparing glossy brochures, binders and fancy presentations which explain the value the IT organization is creating:  “Look, see we spent $X millions on IT, but look at the $Y millions in benefits we created.”

Of course, the benefits “created” are often not really created, but the benefits PROJECTED or estimated when the investments were initially approved – often years earlier and nowhere near the actual financial benefits seen.

If the benefits of the IT investments were truly valuable, IT organizations would not need to produce glossy brochures or presentations reminding the rest of their companies how much value they produce – the value would be inherent.

 

A FOLLOW UP BLOG WILL FOCUS ON SOLUTIONS…

 

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The Sponsor’s Role In Change

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The sponsor of change is a senior officer, one who holds the organizational power to legitimize the change.  This person knows when the time has come for change and has the confidence and strength to do something about it.  The sponsor goes forth and leads—overcoming obstacles, finding truth, and sharing knowledge.  Significant organizational change will not occur unless those who legitimize or mandate the change demonstrate FULL commitment to the task.  Here is a brief section from a comprehensive white paper:

 Characteristics of Effective Sponsors

  • Dissatisfaction with the Present State

The effective sponsor will be consistently aware that the organization cannot afford to fail at the change because the status quo is too costly. 

  •  Clear Definition of the Change

The sponsor has as clear a picture as possible of the desired state.  A clear vision also focuses and mobilizes the targets.

  •  Strong Belief that Change Will Occur

The sponsor believes that the particular remedy undertaken is the one that will relieve the organization’s pain. 

  • Organizational Impact of the Change

A change in one area of the organization significantly impacts other areas.  Effective sponsors must understand the complex web of relationships that comprise their organization and understand how the proposed change will affect these areas.

  •  Human Impact of Change

Effective sponsors understand the implications of their decisions in terms of the effects on people and their workloads throughout the organization.

  •    Scope of the Change

The effective sponsor understands how broad or narrow the ranges of responses are among those to be affected by the change decision.    Effective sponsors acknowledge the role of synergy in change and build resilient teams to create that synergy.

  •  Amount of Resources Necessary for Change and Commitment of Those Resources

The sponsor must be willing to allocate the financial, human, and technical resources required to make the change occur.  A common mistake is that sponsors underestimate the time, money, and people resources necessary for the implementation of change.

  •  Demonstration of Public Commitment

Sponsors must manifest commitment publicly so targets know their sponsors are not acting arbitrarily or without support from above.  This is an effect of sponsorship being cascaded down the organization with the targets having knowledge that the change has been legitimized at the top.

  •  Strong Private Support

The sponsor meets privately with key individuals/groups throughout the change process to ensure their continued support for the change.  This is the skillful influencing that goes on behind the scenes that communicates that the sponsor is not just paying lip service to the change project.

  •  Consequence Management

This is the system of rewards and punishments that an organization uses to sanction change.  What is measured in organizations is what is rewarded in those same organizations.  Effective sponsors will identify the “heroes” who can be publicly rewarded and the “heretics” who can be publicly burned at the stake as a signal to the organization. 

  •  Monitoring Procedures

Periodic reviews of progress toward change objectives are essential.  This helps to identify implementation problems early so that they can be ameliorated or eliminated.

  •  Commitment to Sacrifice

The effective sponsor understands that the costs for success are real and leads the way in paying them, thereby establishing a normative behavior that calls for sacrifice when the price of failure is prohibitive.

  • Sustained Support

The effective sponsor will engage in all of the aforementioned activities for as long as it takes to successfully implement the change and avoid short-term gains that are off the strategic path or will consume resources. 

Clearly, this is the most Critical Success Factor in any change effort.  If you would like to receive a copy of the complete white paper on this topic, please contact us.  You can also contact us for a free assessment of your current initiative or project.

 

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