What is Procurement? Call It the Business of Change

Spend Matters welcomes another guest post from Jim Kiser of GEP.

I would suspect that people view procurement in subjective ways. It can mean many things to different corporate stakeholders and industry experts. Senior management should consider how a company views procurement in terms of what and how much financial benefit will be required from their procurement department. Do we really want to be best in class in many areas or do we just desire to be efficient in our transactions instead of effective in strategy?

Ultimately, the true drivers of procurement change come from any organization’s senior level that should be wound tightly with managing change. How much change is required? What are the real financial and organizational benefits that change might bring? Who is affected? How much effort and how long will the change we identify take? Many could challenge the idea that change management in procurement is no different than any facet of a business, but there are reasons why procurement and business managers need to view change in a different way.

Recognize that procurement is still relatively young in terms of its strategic importance to organizations. This means procurement, previously named purchasing, is really only beginning to be viewed by executives as a profit center to a company’s bottom line and not just as an order-taking back room function. With respect to change – resource structure, process, systems, and practices – management must be working to move from its past perception towards what is should be in its present. In a practical sense, in order to manage change with a team or department effectively, you need to begin to understand how and where a procurement department and its stakeholders can adapt to offer greater value. So the question that should be asked is this: what real value can or should procurement bring to the party for a particular organization and its cultural type?

Once the players decide what is desired from procurement, it has to understand how good the procurement department is. Here are some of the change management questions regarding the department that need to be assessed:

  • How is the department structured, organizationally and in terms of oversight aspects?
  • How are our spending and contracts managed?
  • What are the roles, responsibilities, accountability, and authorities that lie within procurement’s control?
  • Do we understand the competencies of our procurement individuals? What are the strengths and weaknesses as it relates to positions?
  • What needs to change or be managed in order to reach goals we have agreed on?

Keep in mind that some aspects of tactical procurement will not necessarily change in terms of the act or needed practice. The real need for change in the department might be on senior management to put in the tools and methods to anticipate external market dynamics, global trends, stakeholders ongoing developing needs, and to make sure procurement’s growth and competence is aligned with strategic change goals established by management.

It’s important to remember that real change management can only be developed when management understands the current procurement state within the organization. Deciding the level of change and if it is possible to meet, we need a baseline gap assessment between the current and the future model, and it should be evaluated for planning and preparation purposes by senior management.

For more interesting thinking on procurement, visit the GEP Knowledge Portal.

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