Monday, 8 October 2012

Defensive Behavior: A Sign of Lost Opportunity for Value Creation

Authored By Mickey North Rizza

Procurement organizations have long been criticized for being overly cost conscious, resource and technology constrained and extremely reactive. This perception fuels negativity within the Procurement team, bringing about defensive behavior. The perception turns to reality when senior management finally takes notice – their Procurement team is a laggard when compared to the industry leading Procurement teams. Unfortunately, it is also a sign of lost opportunity and can equate to millions and even billions of pounds in lost revenue, cost savings, and working capital.

Senior executives with laggard Procurement teams are typically blind to the profitability and return on investment opportunities that lie within their Procurement organization. Organizations suffering from this laggard mentality have a few telltale signs of their struggles:
  • Little to no margin impact from Procurement department
  • Cost avoidance and savings are the main Procurement KPIs
  • Reactive, resource and time constrained Procurement teams with no consideration of time or value
  • Spend Under Management is recognized as a term by senior executives; but the definition, KPI and traceability of Spend Under Management is not identified or tracked
  • Sourcing is dispersed throughout the organization, not as a Center of Excellence (COE)
  • Ideas from outside of Procurement are perceived as threats, not business value enhancers
  • Opportunities to create visibility, awareness and drive real value are thwarted with excuses, such as “we have already done it”, and “we don’t have time to try something new”
  • Long “source to settle” cycle times
  • Threatened Procurement leadership
  • Working harder vs. working smarter to deliver value
These struggling organizations are missing two key ingredients that are stopping them towards a journey of value and excellence: leadership and the recognition of opportunity. The leadership failure may start with senior management but also includes the Procurement leader. If the organization’s leaders possess a “know it all” mentality, an inability to align the objectives or have no interest in change, the Procurement team will stay a laggard. If the leaders recognize an opportunity and seize it as a path forward, value contribution can be strategized, mapped, and executed. In summary, the buck stops here, you don’t make excuses; you don’t stop learning, caring, or trying; and you are always looking to improve your position.

It takes recognition to start a path towards leadership – where is your organization on the journey to procurement excellence?

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