Most Common Mistakes During Procurement Transformation (and How to Avoid Them)
The fourth episode of Corcentric’s podcast series, Mastering Procurement Transformation, reveals the pain points, challenges, and lessons learned that you need to be prepared for.
This Corcentric Conversations podcast series has been about Finance-led Procurement Transformation and that means priorities will be different than it would be if this were a Procurement-led initiative. For Finance, transformation starts with technology (digitization and automation) that will streamline processes, create cost savings, and provide visibility into cash flow. This ultimately will enable better management over working capital and will, hopefully, allow the company to meet its overall goals. That means that Finance (especially accounts payable) will play a significant role in the transformation process and, therefore, their concerns need to be accounted for at all times.
If you’ve now reached the point in your Procurement Transformation where you’re ready to move from proposal to execution, you need to be ready for any challenges you might face and have the plans ready to answer those challenges. What lessons have been learned from the mistakes of others?
Creating a communication and outreach plan
Planning has always played a major role in this transformation, starting with the road map developed at the beginning of this initiative. Now that you’re ready to move forward; communication with everyone who will be impacted becomes even more important if your transformation is to succeed.
The important thing to remember is that not everyone impacted is involved in the day-to-day project, so it’s easy for them to forget why this initiative is important, especially when they have their own priorities and agendas. To ensure organizational alignment, make sure you continue to communicate why this initiative is taking place and what the role is for both the person and the function they perform, including the expectations for commitments in time and resources.
Communication can present its own challenges, so be prepared to address these issues:
- It’s a marathon, not a sprint – Often, people get very excited in the beginning of the transformation process and then interest starts to wane as they get involved in other projects and tasks. That’s why ongoing communications is essential.
- Don’t get caught up in the “best laid plans” dilemma – Disruptions will happen that may get in the way of your plan (like a pandemic) so you need to have, in addition to the overall plan, an escalation plan to quickly respond to anything that can disrupt the process. Changes will need to be made, so it is essential to define the chain of authority when it comes to decision making. With that defined, it becomes easier to answer any challenges and resolve them as quickly as possible.
- Know who you’re talking to – Although your communications always need to have the completion and success of the transformation as the main point, to ensure success, you will likely need to customize your communications, based on the person (or persons) being addressed. People will always be asking what’s in it for them, so you need to be able to make that clear. When you’re talking to top-level sponsors of this transformation, you need to keep them apprised of your progress, but you also need to know what is important to them and communicate how this transformation will answer their needs.
- Tamp down fear of the unknown – For many people, change is threatening, especially when it changes how they do their job, or even redefines what that job is. Change management is one of the hardest issues to tackle, but it needs to be done. To ensure cooperation and collaboration with all the stakeholders, make sure to get ahead of any concerns they may have, including concerns regarding any new technology and a change in business processes. Keep the fear of the unknown limited by constantly reminding everyone how this change will help them do their jobs more efficiently and contribute to the overall good of the organization.
Pain points and challenges
Aside from solidifying communications, there are three additional areas that present challenges to those responsible for the Procurement Transformation initiative.
- Resources – Do you have the right people in the right position? Do you have enough people to handle the necessary tasks? This is especially true when it’s a Finance-led transformation as stakeholders need to worry about ongoing issues like month-end closings, year-end audits, etc. This can take people away at the most vital junctures.
- Timing – When it comes to timing of the steps to be taken (which should be in your road map), balance is needed. If you move too fast, you could conflict with other priorities happening within the company. Move too slow and people can begin to lose interest. Keep an eye on any changes and adjust timing as needed.
- Budget – The challenge with budgets is that they are often underestimated. If you don’t plan appropriately, you end up needing more resources than you planned on, and costs become a potential barrier. At a time when you need executive support, overruns and requests for additional budgets can definitely put off the people you need most.
Most common Procurement Transformation mistakes
Besides the issues and challenges listed above, when you examine those Procurement transformations that have either failed or underperformed, you find that the same mistakes are made, over and over.
- Leaving suppliers out of the equation – The communications plan should be covered from all perspectives (Finance, Procurement, stakeholders, and leadership team), but if you’re not including your suppliers in your plans, you will likely not succeed. Never underestimate the value of supplier relationships. Once you’ve assessed the situation and concluded that a Procurement Transformation initiative is needed, you should solicit input from suppliers and let them know what your plan is. Ask them what success looks like to them. When you explain how this transformation will streamline processes and approvals and provide visibility into the status of every purchase order, invoice, and payment, suppliers will react positively. In addition, when you go from a decentralized process to centralization, suppliers will have to deal with less people, which means less phone calls and emails and more time for value-added tasks.
- Underestimating involvement – When it comes to Finance-led Procurement Transformation, the perception that is that digital transformation is all that needs to be done. Just get rid of the paper and manual processes and implement software and – poof – workflow is done and mission accomplished. If this were AP transforming AP, that might be true. But procurement professionals know that Procurement is different and requires additional steps (compliance, governmental regulations, spend management, supply chain issues, contract management, etc.). After a transformation is complete, those in the procurement team will admit they didn’t realize how big a role AP would be playing. That’s why Procurement and AP need to be in alignment from the beginning.
- Too many starts and stops – If there’s anything that can torpedo a successful transformation, it’s the lack of consistent movement. Just assessing your current situation and stating where you want to go isn’t enough. Good intentions really don’t matter if they’re not followed through with action. Unless you’re prepared to follow through all the way, don’t even start the process. Be prepared to do things at the right time with the right people; be prepared for what’s needed, from start to finish. If you’re not, you just end up discouraging involvement from the stakeholders and even worse, you end up losing people’s trust.
Is it time to bring in a third party?
One of the other mistakes that businesses often make when undergoing transformation of their procurement department and procurement processes is believing they can be objective about the needs and anticipated outcomes. Every team member has different perspectives, different pain points, different goals, and different assessment of their own place in the company. At the very beginning, during the discovery and evaluation phases, objectivity is absolutely essential. When the people responsible for the transformation are also the ones leading the evaluation, that objectivity can be difficult to come by.
As the process goes on, we know that day-to-day operational issues and challenges can create roadblocks that slow down the process and impact the timeline. For this reason, many organizations consider outsourcing; bringing in a third party, one not distracted by other issues, to share their perspectives and make the necessary recommendations. When considering this path, companies should look for a third party that has expertise in the transformation process and the tools necessary to help bring the transformation to a successful conclusion.
Going through Procurement Transformation, whether it’s Finance-led or Procurement-led, is a complex process, so knowing where the pitfalls are and how to either avoid them or mitigate the damage they can cause will make for a much smoother transformation.
Listen to our Corcentric Conversations, Mastering Procurement Transformation, Episode 4 below.