Procurement’s critical success factor: Stakeholder Engagement
One of the biggest reasons procurement initiatives fail to make a P&L impact
The degree of success (or failure) of any procurement initiative can often be boiled down to one Critical Success Factor - stakeholder engagement.
Perceptions about the role of procurement have been changing. Once viewed as a transactional based function, procurement must increasingly deliver far more than the old-adage of ‘on time, on budget on quality’. In many organisations today, procurement activity is expected to deliver a clear-cut P&L impact.
But without effective stakeholder engagement the impact on the P&L often equates to zero.
The issue is that it is relatively straightforward - and far easier - to undertake a technical procurement process independently of the business and stakeholders to which it is serving. But the net result is commercial deals not linked to the true business requirement of the organisation, delivered in isolation and, in consequence, never used. .
What is a stakeholder?
So, what actually is a “stakeholder”?
In procurement we define this as someone who has an influence over a category of spend within an organisation.
Typically, there are three types of stakeholder;
- Sourcing Professionals – People that spend most of their time working across the sourcing process
- Purchase Agents - People that spend an organisation’s money but do not have procurement as a profession. E.g. Marketing Directors, IT Managers, PA’s
- Sourcing Influencers - People who have supplier contact and/or influence the sourcing process, e.g. setting the specification or defining the business needs.
Why are stakeholders important?
If we think about the lifetime of a procurement process, stakeholders have an impact on each and every step:
You need stakeholders to help you understand the current situation; current suppliers, contracts, spend, supplier performance and business issues
And how do we engage them?
Engagement needs three things to consider; mapping, communications and management
First, identify every stakeholder and map their influence on the outcome (support for the process vs. influence on the result) so that you can see who your champion is and who may need some persuasion!
Secondly, work out a comms plan. RACI is a great tool for deciding who is Responsible, Accountable, Consulted and Informed. From there, define how you engage. Those on the Informed list may just need an email update whilst your Responsibles and Accountables will need a high degree of involvement throughout the process.
The definition of “Consulted” speaks for itself!
Finally, manage them. Form a cross-functional stakeholder team and take them through the process. And don’t underestimate the time input required to manage your stakeholder team; far more than the time required in engagement with the supply-market.
Success or failure?
Getting it right means you deliver a commercial deal which is perfectly aligned to the current and future requirements of the organisation, with suppliers selected by the organisation from high-performing incumbent suppliers and ideally-matched potential suppliers, with a contract that will deliver the performance service levels required whilst balancing risks and - fundamentally important - will be fully utilised by the organisation who are bought-in to the desired outcomes.
Things to consider:
- Excellent procurement is not just a technical skill. Stakeholder engagement is the Critical Success factor.
- Excellent procurement cannot be done in the background.
- Successful procurement requires consultant-level skills to engage and manage senior people. If your procurement is a back-office, transactional function, their ability to impact the P&L will be limited to spend areas that are back-office and transactional; probably influencing less than 5% of total spend.