Strategic Irrelevance: The Real Cost of Getting Lost in the Weeds

Spend Matters welcomes this guest post from Jim Kandilas, CPA, EVP and founder of The Shelby Group.

Strategic relevance is a concern of all shared services providers in today’s enterprise. We know what we do in procurement is important. But all too often, we overlook the root causes of perceptions held by stakeholders who don’t regard procurement as a strategic partner. In today’s environment, perception is a reality that all procurement professionals need to better understand, diagnose and manage.

Free Research: Direct procurement is tough. We tell you how to make it work

In my last post, 5 Steps for Keeping Procurement Strategically Relevant, I shared basic questions and ideas for building and managing strategy. Here, I’ll explore some of the symptoms and consequences of operating in an environment where procurement is not regarded as a strategic enabler of business outcomes.

You may have a great strategy for creating business value, but your success in delivering this value is often determined by the perceptions of the business executives and suppliers you will depend upon for successful execution. If procurement is regarded largely as a tactical resource inside your company, this represents a “procurement perception problem” that is likely to result in the following consequences.

Can’t Grow Beyond Current Categories of Spend

As procure-to-pay (P2P) systems have matured over the past decade and traditional indirect spend categories have stabilized, many procurement organizations struggle to get the buy-in needed to add new categories to their portfolios. This is complicated by the fact that there has been a growth in the number of vendors offering convenient ordering options that encourage rogue spending.

How do stakeholder perceptions influence your ability to add new categories such as professional services, staffing and printing? In a word: profoundly. If business buyers feel procurement doesn’t add value to current categories, expanding your reach will be an uphill battle.

Brought Into Projects Too Late to Make a Difference

How many times has your organization been brought in at the eleventh hour on an RFP that has been in development for several months? This type of circumstance may clearly violate policy and procedure, but they exist because of a perception problem. Internal clients may not understand how earlier involvement from procurement can be of benefit, or this could be the result of negative past experiences. The belief, right or wrong, among those who propagate such behavior is often, “We’ve done all of the heavy lifting, now let’s get it to procurement to manage the details.”

Lack of Executive Support and Low Adoption Rates for New Initiatives

A third indicator of a procurement perception problem is often subtle and difficult to address. When launching a new procurement initiative, are you getting the cooperation you need from key stakeholders? Are they devoting the time and effort to help you rally support for launching upgraded or expanded system capabilities? Without visible and proactive support from business leaders, any change management initiative will suffer.

If you are experiencing any or all of these symptoms, you’re not alone.

But what can you do to facilitate the changes in perception needed to expand the role and increase the perceived value of procurement in your enterprise?

Understanding Your Internal Brand

Every shared services department in your company has a brand. The value of that brand, or brand equity, is determined by the perceptions of internal customers. Think about how each of the following departments are perceived within your company: IT, HR, security and finance. How are these perceptions different than those regarding the procurement organization? What are the departments with the highest brand equity doing that your department isn’t doing?

Understanding how your stakeholders perceive the role of procurement is an essential first step in building an organization that is customer-centric and strategically relevant.

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