Dangerous Supply Chain Myths (Part 4) Revisited

Like the old real estate adage of location, location, location – communication, communication, communication is the key element to a successful supply practice.  Unfortunately, ineffective methods of communication between important stakeholders continues to plague most organizational supply chain initiatives.

This point was driven home by the results of a 2007 Aberdeen study involving Chief Financial Officers in which the general consensus was that “too often, finance executives in Corporate America simply don’t believe that purchasing departments are really bringing in the savings they claim.”

WOW!  This and the study’s other “surprising” results stops my audiences in their collective tracks.  The silence is usually deafening.  (Note: Part 3 of the Changing Face of Procurement conference series delves deeper into these as well as the results from other studies to provide purchasing professionals right up to the CPO level, with the necessary insight into how they can better align their objectives with those of their finance department’s.  Use the following link for more information on this and other seminars; https://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/)

The main reason that was cited for this critical disconnect is that “finance and purchasing don’t speak the same language.”  And as Bill McAneny suggests in his book Frankenstein’s Manager: Leadership’s Missing Links, the desire (or lack thereof) on the part of senior management to effectively communicate most likely extends to almost all stakeholders both internally as well as externally.

Against this backdrop of floundering dialogues a CPO Agenda Roundtable’s findings, which revealed that most senior executives believe that their purchasing departments are best run by someone who does not have a purchasing background, does little to build a collaborative bridge of understanding between the diverse interests that define an orgaization.

It is within the above context that Part 4 should be reviewed.  It should also be understood that it is not the identification of internal and external collaboration as one of the seven critical supply strategies that I questioned.  It is instead the limited potential for success given the hierarchical communication framework and corresponding attitudes that continue to permeate most executive suites, thereby reducing the concept of open discussion to one of political correctness rather than tangible reality.

 

Dangerous Supply Chain Myths (Part 4) – Reprinted from June 6, 2007

 

Segment 4 – Internal & External Collaboration: A Desire versus Skill!

• Internal & External Collaboration
  In order to extract the significant gains that collaboration can bring, companies will need to enable best-practice multi-lateral collaboration between supply partners, achieve integrated product development, and employ “customer of choice” positioning.

Once again, and at the conceptual level listing internal and external collaboration as a critical supply strategy makes sense.  However the inherent flaw with the report’s framework for collaboration is that it fails to recognize the real-world challenges faced by the vast majority of procurement professionals. This of course prompts the question, why is there a consistent disconnect between what the report has identified as being critical supply strategies versus what real-world procurement professionals consider to be important? 

I believe that the problem does not lie in the intelligence of the people who prepared the report but instead in the methodology they employed to reach their conclusions.

The Report’s Methodology  The report indicated that more than 100 supply management executives participated in “face-to-face” meetings and teleconferences.  As a result the authors felt that this wide reach gave great credence to the validity and reliability of the conclusions. 

However for this to be true one has to assume that the beliefs or perceptions of the 100 (regardless of their position in the organization’s hierarchy) are an accurate reflection of the industry as a whole.  Keeping in mind that 75 to 85% of all initiatives fail to achieve the expected results, it is not unreasonable to consider the fact that the net for capturing relevant feedback was too narrowly cast. 

This is especially significant when you consider the possible backgrounds of the many senior-level procurement executives who are likely to participate in such a study.

Is It Really an Arm’s Length Exchange of Information? In a speech he gave several years ago, Colin Powell made the statement that while it is important to seek the input of “experts” it is also important to consider the fact that they may have reached their peak in terms of current day relevancy. 

Conversely, the value of being on the front lines of procurement is that the feedback you receive is a true reflection of a present-day reality (or mindset) and not linked to a long held belief that is the result of past corporate affiliations.

Over the past year or so I have come to realize that there are a fair number of procurement initiative champions who have been hired by end-user organizations that have previously been employed by either a vendor or consulting firm. Therefore it is not unreasonable to believe that they bring to their position a predisposition in terms of their thinking.

For example, there was the senior government executive who was hired from IBM.  And another that was recruited from a major financial institution with close ties to EDS.  Even former managers from software companies such as Ariba have found their way into the executive suite. This begs the question, are the results of reports such as the one authored by ISM, CAPS and Kearney a true reflection of the issues that impact procurement practice?  Or are they the contemplations of the same tightly knit fraternity that continues to fall back on the mantra of past experiences and allegiances?

Besides Colin Powell’s invaluable insight based on his own experiences, the 75 to 85% rate of initiative failure is a result that cannot be ignored.  In short, do end-user organizations abdicate their responsibilities for developing sound procurement strategies by looking outward for “expert” guidance rather than calling on the internal resources and experiences that ultimately determine the success or failure of an initiative?  This is a question I raised in an article I wrote (as well as my column in Summit Magazine – refer to the link in the upper right hand column of this site) titled Technology’s Diminishing Role in an Emerging Process-Driven World.  

In the final paragraph of the article I made the following observation:

“Finally and this is key, have more confidence in your own team’s ability to understand and assess what needs to be done.  Anytime a vendor or consultant makes a statement that what they have to offer will make you a better organization run, do not walk to the nearest exit.  I have always considered an outsider’s proclamation that they know your business better than you do to be a foreboding sign of things to come.  The fact is that the partners with whom you choose to work should possess the ability to understand your business and provide valuable insight without a preordained end result in mind.”

I believe that this lack of confidence is responsible for the majority of procurement initiative failures.  That is the perception that you have to look outside of the organization to gain needed insight into your company’s procurement practice.  What is the old saying a prophet is never well-received in his (or her) own town?! 

Now I am not suggesting that you should not leverage valuable resources and insight from external parties.  The objectivity that can be gained is just one of the benefits of such a relationship. 

However, problems arise when you haven’t effectively laid a strong organizational foundation of understanding whereby effective avenues of communication have already been established between all key stakeholders both within and external to your company.

Unless you have a clear-cut understanding of your own organization’s unique requirements, the external input that you seek will define versus verify and refine your core procurement strategy.  This of course leaves you susceptible to interests or predispositions that may not entirely align with your best interests.  Once again think of the challenges associated with change management.

Communication/Collaboration- A Desire versus Skill  In another article that I wrote titled How Not to Abandon your e-Procurement Initiative, I referred to Bill McAneny’s book Frankenstein’s Manager – Leadership’s Missing Links.  In the book McAneny stated that second to the ubiquitous lack of people skills complaint, the most common charge leveled at an organization’s leadership is ineffective communication.  He further went on to say that communication is actually a desire and not a skill.  And herein rests the key to a successful (or unsuccessful) procurement strategy.  

Communication!  Collaboration!  Does your organization have the desire and the will to effectively identify and engage all key stakeholders?  If not, you will lose the necessary mechanism that will enable you to filter the diverse concepts associated with what is supposedly “popular” or “mainstream” thinking.  And once again, with a 75 to 85% rate of failure that is a fraternity from which you do not want to be a member.  
 

Building a Successful Blueprint  The cornerstone for a successful initiative begins and ends with the establishment of a Results Objective Table.  While space limitations preclude me from including an example of an actual table (I will be happy to provide you with a copy of my original How Not To article as well as the follow-up piece – Vendor/consultant fees: Value for money? upon request, both of which include the aforementioned example), the benefit of this approach is in its universal applicability.

Regardless of where you are with your current initiative, this exercise will enable you to make decisions that will be understood and more readily embraced by all stakeholders.  As a result you will not have to automatically hit the eject button and jettison what is usually a sizeable investment to date along with company morale.

In fact, quite the opposite will be true. By taking the time to understand the forces at work both within and external to your organization (at the grass roots level) through the construction of a Results Objective Table you will eliminate the risks associated with a costly and ineffective program.  This includes capitalizing on the sharp decline in vendor licensing and maintenance fees, including consulting costs.  Next Installment: Talent Attraction & Retention

 

To learn more about the Dangerous Supply Chain Series as well as our other Seminars, simply use the following URL Link: https://procureinsights.wordpress.com/seminars-and-conferences-with-jon-hansen/