Archive: January, 2014

Working together

The success of procurement is largely down to the relationships it has with in its organisation and with suppliers. Arguably, none is more important than the relationship it has with Finance.  By working closely together, Procurement and Finance can improve the financial performance of the organisation and reduce the risks.

Unfortunately, Procurement and Finance often see the world differently. For example, if you consider purchase to pay (P2P), a business process that cuts across the entire business, Procurement and Finance often work in relative isolation. Procurement wants to manage the supply base while Finance wants to account for the expenditure.  One way to encourage closer working is through the use of matrix management.

Matrix management is the practice of managing individuals with more than one reporting line. It is also commonly used to describe managing cross functional, cross business groups that cross the traditional vertical business units – often silos – of function and geography.

In a recently published article called “Purchase to pay and the challenge of matrix management”, Pete Loughlin argues that for P2P to be effective a matrix management structure needs to be implemented across the purchasing and finance functions. He goes on to describe the challenges of moving from a siloed structure to one where reporting lines reflect the needs of the wider business. He observes that not everyone is suited to taking responsibility or self-management so matrix management might not suit them. Furthermore, managers need to empower people without delegating accountability so it might not suit them either. Finally, he states that “all stakeholders, leaders and managers within the functional silos as well as their direct reports, need to put aside the traditional politics that reinforce the boundaries between departments and work collaboratively. Without this buy-in – without the consent to succeed – they might as well put P2P back in its box.”

As with any relationship, the one between Procurement and Finance takes time to build.  There are many different approaches and matrix management of the P2P process has been found to be one of the most effective. But it is only one element and it needs both sides to work together. As Henry Ford famously said: “Coming together is a beginning; keeping together is progress; working together is success.”