Spend Governance – the latest in the BravoSolution Real World Sourcing series

guy aLast week saw the latest in the BravoSolution Real World Sourcing briefing series, with Guy Allen (ex CPO of Santander and Fujitsu) taking us through "Making Spend Governance Work".

It is maybe not the most glamorous of topics, but nevertheless is one of great importance to almost any operational procurement person. I say ‘almost’ because there are two types of organisation where it might not matter so much:

1. An organisation where only one person makes all the spend decisions (probably the owner) and no-one else has any spend authority whatsoever ; or

b. An organisation with no rules whatsoever!

The second type of business doesn’t tend to last long , and not many of the first type stay that way as they grow. So for every organisation that fits somewhere between the two in terms of their approach to spend governance, the rules around budgets, spending limits, delegated procurement authorities and so on are important.

We got into some interesting topics with Guy; such as what are the appropriate steps or sanctions that organisations should consider if people break the rules? Yes, severe physical pain would be something that many of us have wished we could inflict on people who ignore all our efforts to put some procurement disciplines in place, but short of that, what can be practically done? Some organisations have gone so far as firing people who were persistent offenders. Taking action short of this is the usual answer; but compliance is certainly helped if people know there are some consequences for overt bad behaviour.

Generally, procurement needs to be sensitive to the culture and style of their organisation and work out (often with colleagues in finance and audit) what is an appropriate spend governance regime. That means balancing the need for flexibility, innovation and entrepreneurial behaviour against the need also for control, visibility of spend, and propriety. Getting that balance right for your organisation is not easy, but is vital to put a good spend governance process in place.

We also talked about the “burning platforms” that can drive a desire for improved spend governance. That might be after an acquisition or merger; a new CEO or CFO coming in who is familiar with robust governance; an incident or scandal; a poor audit report; or simply business performance issues driving a harder look at spend controls. But like any other significant change, it helps to have that pressing reason, so we can use that to drive the improvements that procurement wants to achieve.

Anyway, the slides are now available here to download if you want to take a look at them. And don’t forget, we have the BravoSolution Real World Sourcing scholarship too, so you can take the “test” to count towards that. The top ten scorers over the whole series (you must have actually attended at least three sessions to be eligible) get invited to an excellent dinner in December, at which the overall winner of the £2,500 bursary for training or development activities will be announced.

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