Anyone that has experienced a spend management solution rollout will tell you that the first unveiling is a watershed moment. In some cases, the company is transitioning from multiple data sources to one, and, in others, it is making the huge leap from department-owned spreadsheets to a consolidated online spend management platform. The value of seeing all of the company’s spend data together — categorized by supplier, buyer, date, and category etc. — being updated in near real-time is enormous. It is well worth the effort required to bring enterprise-wide spend analysis online.
But, unfortunately, right after the rollout, most companies immediately make a huge mistake. They position spend data as procurement’s exclusive domain, breaking the link between the rest of the organization and spend data made available by the newly implemented solution.
Segmented systems and manual spreadsheets are inefficient and inconsistent. They increase the risk of departments exceeding their budgets and negotiating less than optimal terms and pricing with suppliers. That said, they do have one huge advantage: they put spend data into the hands of the people making purchases.
Procurement may be the right team to lead the way to centralized spend data, but once it is in place, there is absolutely no reason why the entire organization shouldn’t have access to it. Centralization does not require exclusivity. The really amazing thing is, after the spend management rollout, procurement is often shocked (shocked!) to discover rampant maverick spend, apathy towards purchasing policies, and the view that procurement oversees ‘administrative’ activities.
The underlying assumption on procurement’s part is that all of these sentiments existed before the spend management rollout and they just weren’t able to get visibility into them. But what if overly-centralized spend management creates or exacerbates the distance between buyers and the organization’s objectives for spend? When procurement teams struggle to get departments and business units to engage in improved spend management, it is reasonable to stop and consider whether increased access to their own spend data would resolve the challenges procurement commonly faces with decentralized purchasing.
One of the most frustrating things for procurement to address is buyers that ‘go rogue’ and purchase from whatever suppliers they want – regardless of whether or not those companies are currently under contract. Procurement’s interpretation of maverick spend may be that buyers are ‘bad’ or deliberately undermining their efforts, when in fact they are doing the best they can despite a complete lack of understanding about what the approved options are, and how off-contact spend affects the company. Seeing maverick spend transactions stand out on a category-by-category basis, associated with their department – or worse – their name, gives buyers a reason to tow the line by buying from contracted suppliers.
Purchasing is seen as a distraction
When procurement struggles to get active stakeholder participation in strategic sourcing projects or supplier performance reviews, it is likely because procurement has concentrated so much of the ownership for spend management under their own umbrella that people feel distanced from it. Pulling responsibility and spend visibility away from buyers means that it occupies a smaller role in their daily job. Over time, it is hard for them to authentically engage in efforts to improve purchasing value, no different than the challenge they would face getting enthused about taking on the responsibilities of a different functional team. If a review of spending is part of regular team meetings and reporting, awareness and engagement will both increase, and operational teams will see the importance of managing their impact on the bottom line as well as the top.
Another of the challenges procurement regularly faces is effectively communicating their priorities and objectives to the rest of the organization. This is absolutely crazy. Procurement exists to make sure that the company makes efficient use of their supply chain. Achieving this leads to the creation of shareholder value, increased market share, and solid competitive advantage. Companies that maximize these things attract better employees and are able to offer better compensation and benefits packages. Given that these are the reasons everyone goes to work, it is in the employees’ best interests to advance procurement’s objectives. The only reason this connection even needs to be articulated is because procurement has been so thorough in their centralization of technology and data, unintentionally removing ownership from individual departments.
I’m not suggesting that procurement intends to cause a break between buyers and their spend. When it does happen, it is due to procurement’s enthusiasm for centralizing spend and their high level of ownership for what is accomplished through it. Separating spend information from the heartbeat of the company – its employees – is a huge mistake. Fortunately, it is an easy one to fix. Procurement should roll out spend visibility to as many employees in the organization as possible. They should set the expectation that everyone will be knowledgeable about their own buying habits and that department leads – not procurement – are accountable for their contribution to the bottom line. Not only will these changes lead to better spend management, they will foster a better Spend Culture in the company.