Procurement organisational structures, CLAN and SCAN – part 3 (at last)

We published a couple of posts around CLAN and SCAN last month, arguing that technology makes it more feasible these days to exert meaningful control over a procurement network without necessarily having direct line management reporting into the centre. We said then that we would add a cautionary note; here it is, somewhat later than planned!

It is, quite simply, that how procurement is structured in large organisation must fit with the overall organisational strategy, culture and design. In other words, it is unwise to try and implement a heavily centralised procurement organisation in an organisation that gives a high level of autonomy to local managers. I’ve seen a number of CPOs who appeared to be doing a great job fall down over this sort of issue, usually when they find themselves trying to take power form well established local operational management.

So if you are considering your procurement structure; here are a few things to think about.
• Organisational culture – centralised, decentralised, obedient, maverick?
• How are other functions structured? Finance, HR, IT? Is there evidence that how they do it works well (or doesn’t)?
• Your own and the procurement function’s goals – is there a burning platform for action that might support a highly centralised, directive function?
• The function’s current maturity and capability – from both a technology and more general standpoint. There are good arguments around don't run before you can walk and take on the world before you're ready– although see also the ‘burning platform’ argument.
• Top management backing – perhaps the most important. What does your boss and the Board want from procurement, are they prepared to see power shifts, and how quickly do they want to move? Air cover is certainly key if you are trying to grow the function’s power.

As we said last time, I pick up a general move to a more centralised approach to procurement, perhaps ironically given that technology (as we argued) does allow greater co-ordination now without necessarily having full centralisation. But I’ve seen the pendulum swing a few times over the last 20 years, so take care; there’s been a few promising careers nipped in the bud when people got this wrong.

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