Centralized, Decentralized / Consulted or Center-Led? Which organization structure is considered Next Practice? Regardless of the industry you are in or whether you are doing Strategic Sourcing or have matured to Category Management, any or all of these structures can work. We spend so much time paying attention to the boxes and titles that we lose sight of what we are really trying to accomplish – developing a structure that allows us to meet our goals in an efficient and collaborative way. Designing an organization should not be an exercise in “boxology” (drawing boxes and putting together org charts); rather an attempt to organize your talent to leverage their skills and competencies to maximize effectiveness. In other words, it’s more important to define what happens between the boxes than drawing the perfect picture.
The Procurement function is unique because we function as a shared service that may play different roles in different categories. We may centralize certain areas of spend like office suppliers / equipment, may decentralize / consult on other categories like HR and may create a center-led model for areas of spend like Information Technology. How do you decide?
Here are the attributes of the three different models:
We highly recommend sitting down to determine some principles under which you would like to design your organization. Here is a sample of some org design principles:
- A common Procurement / Strategic Sourcing / Category Management process will be used across the organization
- Transactional process will be separated from Strategic Sourcing / Category Management and technology will be utilized to automate as much as possible
- All categories of spend across the organization will be candidates for Strategic Sourcng / Category Management
- A hybrid organizational model (a combination of Centralized, Decentralized / Consulted and Center-Led) will be utilized
- All Strategic Sourcing / Category Management will be done in cross-functional teams to facilitate collaboration with Business Units
- Active and Visible support from Executives will be critical
- Role & responsibilities within and between Procurement / Strategic Sourcing / Category Management and their internal business partners will be clearly defined (what happens “between” the boxes)
- The Procurement / Strategic Sourcing / Category Management organization should be independent (from a reporting relationship) from the internal customers they serve
Taking the time to do this upfront planning will be huge in designing the appropriate organization structure for your company. Once your principles are in place it is time to do some meta thinking – decide on how you are going to decide which categories of spend belong under which structure. Here is a sample model to consider:
The attributes used to determine the org structure in this model should be customized based on what is important to your company and completed for each major spend category. Going through this exercise helps you think through the most effective way, organizationally, to have an impact on the spend, leverage the skillset of your organization and ensure buy-in from your internal customers. You should do this BEFORE you even think about drawing boxes on an organization chart. ANY, ANY organization model will work. It’s not how you draw the boxes but how you ensure the boxes work together to meet your goals and objectives. If you are having issues with your internal business partners, you may need to look at the way you are engaging them not what your organization structure looks like.
Centralized, Decentralized / Consulted or Center-Led? It should be about collaboration and impact not an exercise in “boxology”.
Let us know what you think and join in the conversation . . . . .