Thanks for your reaction to our first article.
Many of you appreciated the distinction that I described between leadership and management, and a number of respondents asked us to explore a topical leadership challenge, relating to change management, and particularly applicable to procurement – effective governance.
I loathe bad governance…and I get really mad at those in business who don’t understand the role of effective governance in the procurement setting, and confuse it with authority and power.
The failure of some of the most successful organisations, and a number high-profile CPO’s, to embrace and engage the value of effective governance, is utterly astonishing.
I had a recent conversation with a colleague in the Asian group of a global procurement team, in a complex business, in which she confessed that “we don’t really invest much in getting governance right in this business”.
That sentiment is tragically endemic, and I just fail to comprehend why intelligent people, with sophisticated business and influencing skills, cannot grasp the significance of good governance.
Procurement, in a dynamic and fluid environment, requires the design and implementation of effective change.
Reliance on power and authority alone, to orchestrate that is crass and wasteful, whereas the investment in setting up good governance is always worthwhile.
Think about it like ensuring the oil is in the engine before it is first started, or, in the work setting, understanding exactly what your objectives, limitations and authorities are, prior to commencing a negotiation.
What, then, is governance?
Well, you’ll be able to find lots of definitions and opinions, but checking the word’s antonyms or opposites, is more amusing and instructive. They include impotence (not in the medical sense), incapacity, opposition, and weakness, all of which nicely help me with my proposition.
Attempting to drive change, using only your authority, is futile, in a complex and fluid organisation. Experience and history show us that engaging all legitimate stakeholders in change is essential to successful change, whether these stakeholders are in your chain of command or not.
We shall explicitly cover stakeholder engagement next time.
Meanwhile, a decent governance model will enable and mandate the steps of a change project, un-block barriers, allocate resource, provide advocacy and legitimacy for change, and importantly take a co-ordinated view across multiple work-streams in a complex change programme.
Sound too hard?
Here’s an illustration to bring the subject to life.
A de-centralised PLC with autonomous divisions decided to embrace strategic procurement, for the first time, designed and driven from the centre. A small number of categories of spend, like packaging, marketing, and IT hardware, were selected, to test the theory that the combined spend across three divisions could drive larger benefits than the individual businesses could achieve.
But, how to run these categories, when each division had its own procurement head and processes, stakeholders, specifications, pricing, suppliers, and managing directors? And each division had a different attitude to the initiative.
The answer, after a bit of trial and error, was a governance body, led by the person at the centre who had been charged with trialling the new style of procurement, supported by a change governance specialist, and including the MD’s and heads of procurement of the three participating divisions, and an internal data analyst.
Each of the heads of procurement led a category of spend, with sponsorship from one of the MD’s but not their MD.
The heads of procurement pursued their respective projects with a tailored procurement category management approach that the governance body had signed off.
Each project had a charter, a set of objectives, and a timetable, and each reported their progress against a set of agreed criteria, using a project-management RAG (Red, Amber, and Green) methodology.
Having established terms of reference for the governance body, and communicated the entire process effectively and consistently around all the divisions, the programme was out of the starting gate at a gallop, with all the players determined to illustrate their value and effectiveness to the process, and with any barriers and objections being tackled fast and constructively, as they arose.
Each category over-delivered, on value and time, and in all cases the whole was greater than the sum of the parts.
In addition though, the biggest benefit of this approach was the visible demonstration of the value of good governance, and the breakthrough of achieving collaboration between divisions who had previously managed to avoid any motivation for working together.
The example may ring a bell with some readers, and it is a model that has been replicated many times over, with local variations.
All the divisions acknowledged willingly that they could not have orchestrated the changes from the inside out, and could not have achieved the benefits that the combined effort achieved.
In the absence of robust governance, impotence, opposition, and weakness can prevail, and probably will, due to the lack of common purpose, or leadership.
In my opinion, this perfectly captures and explains why so much ‘big-ticket’ change fails to deliver in the private sector, and more visibly in the public sector, where the only motivation for change is an edict from the centre, often Westminster, and an expectation of local delivery.
Sorry folks, change just doesn’t work that way – in the private sector, we need more enthusiasm for good governance and less politics; meanwhile, maybe we need a new approach in the public sector, where government promotes good governance, to facilitate success, and maybe even an increase in capability – but I’m not holding my breath!