eProcurement – and a lack of trust that holds us back

- January 17, 2013 5:13 AM
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In this series of articles we are looking at why eProcurement in businesses has failed to live up to the enjoyable and simple experiences of home shopping.  We now turn our attention to the staff who are being asked to engage in the activity.

Why is it that so many projects in business start with the premise, whether intentionally or not, that staff are not to be trusted and must be kept within very tight boundaries.  What is it we fear?  That an administrator might actually see the pens reserved for the Chief Exec, that a member of marketing might suddenly try to order spare parts for a machine tool, or, heaven forbid, someone might try to buy something from a company just down the road!

If you don’t believe me or you think that it’s not true for your business, then just look at how many check points and reviews a single document has to go through before it gets out of the door, and even more so before it’s paid for.  In one organisation I was involved with, there were almost 90 different classifications of staff, according to the eProcurement system, and each one was able to view a subtly different sub set of products yet they all worked for the same organisation.  Even with that a single transaction required up to six different (albeit electronic) signatures between shopping cart and payment.

The problem is that these controls hamper activity.  Staff are not ignorant.  They quickly pick up on this lack of trust and it seeps through into how they behave.  With the economy the way it is, there is a desperate need for innovation and entrepreneurship from within businesses to make sure they survive and grow.  If staff do not feel trusted by their employers then why do we assume that they are going to go the extra mile?

Sure, there have been a number of high profile cases of members of staff defrauding their employer or at least doing things they shouldn’t, but the majority of controls employed are at best bureaucratic and at worst draconian.  They start from a perspective that all staff are out to do wrong and as such they hamper those that just want to get on with things.

So what is the alternative, I hear you ask?  Well how about starting instead from the premise that the majority of staff are trustworthy and want to do the right thing.  Let’s face it, most staff are able to do far more damage to a business through improper use of social media than by ordering the wrong type of ball point pen.  Sure, there are those who will seek out the loop holes that enable them to scam significant funds, but they don’t do it by looking at the wrong catalogue or by choosing the wrong pad of paper. Let’s face it, if they believe they are trusted, they are more likely to go the extra mile rather than bad mouth you on Facebook or Twitter.

What is required is a totally different way of thinking.  Instead of trying to second guess everything that staff could do wrong, putting in tight controls to avoid them all and stopping staff from acting in innovative ways on behalf of the organisation (“Intrapreneurship”), just do the basics.  Make sure that administrative functions of the system are restricted to a select few, educate managers on how to effectively manage budgets then LET GO and watch the business grow!!

Comments

  • Nexus789:

    These are interesting observations. Many times I have run workshops that gathered the ‘collective wisdom’ of people that purchased ‘stuff’ (not sourcing, only basic purchasing). Over and over it soon becomes obvious that the purchasing process is driven by ‘SUD’s’. People, usually managers, that think they are Special, Unique and Different. The purchasing process when you get into it is actually very simplistic and straight forward when an element of trust is thrown in and the approval nonsense is removed.

    Trust can now be ‘embedded’ in modern Web based purchasing systems so that people can purchase against rules and budget limits – they can be treated as responsible adults. There is no need to book time to get a signature to purchase some pens, or indeed, go through multiple approval processes. All of the current checking, approving and signing off consumes time – even in an electronic system and the nightmare is amplified if you still use manual processes. This is time that could be better spent on dealing with other issues.

    The home or consumer shopping cart analogy is a good one in terms of treating people like adults. A large Telco I worked for scrapped all of its idiotic multi approval and paper based systems for travel and hotel bookings. They transferred the responsibility to staff. Guess what, people behaved as responsible adults. Overall staff got better deals than a consolidated third party could. On the processing side you got a single file accounts file each month that you had to match to your receipts. Once done it went up one level for approval and once approved it was consolidated into a single payment. This resulted in massive process cost savings and the costs for accommodation and flights went down as on a micro level each employees acted responsibly to get deals based on their circumstances. Most people acted to make sure they (and the company) got a good deal. The only proviso was that you kept all of your receipts for the odd audit.

    The above reflects a more enlightened approach where people are trusted and given the tools to enable them to decide – the overall result is a good deal for their organisation. Once this philosophy is developed in one area of a business it could be extended to other areas. There is nothing more frustrating than having a flexible electronic system that is able to devolve responsibility when all that managers want to do is replicate their current ‘control’ mentality in that system. One step forward and two steps back comes to mind.

  • John Diffenthal:

    All good examples of cost saving but whenever the responsibility is shifted to employees there is always a risk – Hogan Lovells the London Law firm discovered that one its Partners was buying airline tickets and then cancelling the flights and pocketing the refunds. The amount involved was roughly £1.3 million in a scam that took place over 4 years and included 57 separate claims. Responsibility is great, but it needs to be supported by some form of audit to keep people honest. Christopher Grierson, the solicitor involved, is currently serving 3 years. Prior to being sacked by Hogan Lovells he was pocketing £830k per year as his legitimate draw from the firm.

  • bitter and twisted:

    Isnt 57 non-existent meetings a more serious problem than the lost money?

  • Planbee:

    It might be the company was more efficient because it DIDNT have 57 meetings

    Trust has to be earned. A company I worked at had 2 years of losses (the first in its history) and a massive cost reduction programme, including thousands of job losses. You’d have thought all those ‘trusted’ employees would have really examined their expenditures and ‘done their bit’

    But no. When we introduced a rigorous pre approval process we found, amongst many things, that 2 mid level managers were renting 2 car parking spaces at £80k for themselves, and we received a request for £25,000 for repairs to the company yacht that no one knew we had.

    There is space to allow people to buy pre designated items and services but let go of the grip of control on other stuff and you’ll be in trouble.

  • bitter and twisted:

    ‘Approval’ is a dead end. Its usually just the passing mind fart of a nominal superior.

    What you need is purchasing activity to be remorselessly recorded so every misanthrope and cynic for the next decade can scrutinise it and seek for the sin.

    Also, open and honest rule breaking supported by valid reasoning needs to be rewarded with medals and pie. Because the rules will have to be broken, you know.

    I need a drink.

  • Ronald Duncan:

    There are two parts to this.

    1/. Trusting people is generally good, especially if you have good quality audit information that allows you to track all the expenditure.

    2/. Having control over your spend is also important since this allows you to get the best price and quality service for your organisation.

    It is reasonably easy with good systems to have both.

    The other important factor is making sure that things are easy for both buyer and supplier.

    It is possible to have an easy to use process for business as usual that does not require any approvals and ensures that all the items are purchased off contract at best prices with automatic payment and reconciliation.

    You can then have a sensible approval process for the exceptional items to ensure that you have appropriate controls for the non-core spend.

    Another problem that people have not covered in the approve everything mentality.

    Is that if everything has to be approved then nothing is checked.

    e.g. I know a FTSE 100 company, where they approved a purchase order for 10x their turnover. It went through 6 layers of approval where every layer just said yes without checking it, because everything had to be approved and the more senior layers had delegated opening up and approving everything in their mailbox so that they could do some work.

    Another major company has its own internal airline, and because of the 16+ forms that need to be completed some divisions have worked out that completing the forms for the free internal flight costs more admin time than using an external provider, and thus banned using the internal flights.

    Thanks
    Ronald
    @UK

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