We are often approached by clients to advise them on how to best transform their Procurement/Source-to-Pay function or operating model. They ask us what the secret ingredients to successful transformation are, as well as what to watch out for based on programmes that have failed to deliver their objectives, or even worse, where there has not been any transformation at all. I believe that transformation fails or fails to fully deliver the expected goals due to four underlying reasons.
Reason 1: Inadequate Understanding of the Current Situation
The first is that organizations don’t fully understand their current situation. All to often, the business case has not been completed in sufficient detail and scope to identify the true underlying issues or barriers to operating at a higher level.
The are two lenses you should use to understanding the current situation and it’s imperative that both are used. Firstly, complete a detailed exercise to identify the issues or pain points impacting your current performance and secondly by undertaking an assessment or benchmarking of your current levels of performance against peer organizations using an appropriate set of success metrics. It is also good practice to complete an audit of the current levels of skills or capabilities of the people who work within the function. When navigating, sailors will often take a number of fixes or bearings to various landmarks to determine exactly where they and allow them to plot a safe passage to their destination. Consider this activity as a way to effectively perform something similar, but within the procurement arena. The more “fixes” you can take the more accurate the picture you will paint on where your procurement vessel currently sits and which direction to take.
Reason 2: Misguided Interventions
The second can be a consequence of the first reason, whereby organizations apply the wrong interventions to fix an issue they have not sufficiently understood. To use a medical simile, you’ve got to diagnose the illness correctly to prescribe the right medicine. How many courses of antibiotics have been wasted trying to cure colds?
This can be exacerbated due to biases in organizations to initiate certain types of intervention. There are some organizations that are very technology prone and as a result will always look towards technology investment to solve the issue, whereas others may have a bias towards undertaking process re-engineering or introducing skills and capabilities improvement programmes. Humans are naturally influenced from their past roles and ways of thinking, but this can lead to unintentional blinkered thinking.
The reality is that true transformation will need to address all components of an organization’s operating model from providing fit for purpose technology solutions, to designing clear and agile processes, to supporting impacted colleagues to learn and grow their skills.
Reason 3: Striking the Right Balance in Plans
The third reason is that plans may be either overly ambitious, envisaging giant and unrelenting strides towards an improved level of efficiency, or at the other end of the scale, plan a series of “baby” steps over an elongated timeframe that either fails to deliver a meaningful difference or loses momentum over time.
The level of change and time ambition to progress that change is very much a Goldilocks type situation – promise too little and failing to capture the support can be as problematic as promising too much and creating a sense of failure when things are not delivered in full. This is where benchmarking insights can help you identify challenging but attainable objectives for your programme.
I had a recent example of this where a senior stakeholder stated that they felt attaining a first-time invoice match rate of 95% was entirely realistic with 12 months. We were able to provide them with appropriate benchmarking insights to help temper that ambition with an appropriate peer group comparison, which still delivered a significant performance uplift but was also a more realistic goal.
Reason 4: The Essence of People in Transformation
The final reason is that organizations can lose sight of the fact that, underlying all of this is, it takes people to transform.
Whatever stage you are at, whether you are starting to build the case for change, mobilizing your resources, or even if you have started to deploy some of the transformation initiatives, those impacted by the transformation need to be front and centre of your plans. Consult and engage as widely as possible when building your business case to truly understand the impact of the proposed change and your people and build a coalition of support to help you define and deploy the solution.
Aligning Goals and Capabilities: The Strategic Foundation
As a build to my points around setting the right level of ambition and bringing people with you, Procurement/Source-to-Pay organizations need to initially spend time defining the strategic goals and capabilities that will help guide the transformation. Failure to either define those capabilities or to align them to the wider organizational goals can lead to a transformation that fails to secure the support or attention of the wider leadership or fails to inspire those directly impacted by the change. Ensure that you are building the right capabilities in your organization to achieve your strategic mission. For example, if your mission is to mitigate cost then ensure your transformation will focus on building the right sourcing and contracting capabilities.
Leverage Our Expertise: Paving Your Path to Success
If you require assistance, please contact us. We can leverage our extensive knowledge and experience of known barriers or pain points impacting Source-to-Pay performance to help you better plot a pathway to success. We can also help you benchmark your current performance in a robust and comparable way or support you complete a skills and capability assessment within the function to help identify opportunities. We have a range of proven tools at our disposal, such as Health Checks and our Procurement Diagnostic, that will help set you up for success on your transformational journey.
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