Archive: March, 2019

2. Changing source

The outcome of strategic sourcing invariably involves some change. Introducing a new supplier, for example, or offering a new range of products or outsourcing services all impact day to day operations. Where there is significant disruption, change management can be as important as negotiation.

In the second in the series of blogs about change management in procurement, I consider the change activities required in sourcing projects. Research by Burnes showed that two thirds of change management projects fail. In my experience there is no reason to believe that strategic sourcing projects are any different. In this blog I’m going to look at the strategic sourcing process, ways to assess the impact of any change and approaches to communication.

There are several strategic sourcing processes with anything from 5 to 12 separate steps. My favourite is A T Kearney’s 7 steps for sourcing information products. Change management is mentioned in a couple of steps:

  • Step 1: Profile the category, understand needs analysis: “You should … interview current users to develop a thorough understanding of their needs for the product, their view of the suppliers’ performance, and any enhancements that they would like to see in the product.”
  • Step 6 Integrate suppliers: “If you have decided to work with a new supplier and/or to discontinue an old one, you will need to identify any transition issues, consider organisation implication and any required changes, create new processes and procedures if necessary create a transition /implementation plan and communicate the changes to your users.”

But how do you “identify transition issues, consider organisation changes … and communicate the changes”?

There are several evaluation methods but the most popular is the 7-S model. As the name suggests there are seven interdependent element which are categorised as either “hard” or “soft”.

“Hard” elements are easier to define and management can directly influence them: strategy (the plan devised to maintain and build competitive advantage); structure (who reports to whom); and systems (the day to day activities and procedures that staff members engage in to get the job done).

“Soft” elements are less tangible and more influenced by culture. These soft elements are as important as the hard elements for the organisation to be successful. Soft element include style (of leadership); staff (type and number of employees and the way they are recruited, trained, motivated and rewarded); skills (the actual skills and competencies of the employees working for the company) and shared values (or “superordinate element” , that is, the core values of the company that are found in the corporate culture).

The model states that these seven elements must be aligned and mutually reinforcing for the organisation to perform well. Take, for example, replacing several hotel, flight and car rental suppliers with a single travel management company (TMC). A new expenses policy (strategy) and approvals hierarchy (structure) can be embedded with the TMC to provide a more robust controls framework. New processes (systems) will be required to channel employees to the single supplier and then to the most cost-effective travel arrangement. Staff will need to be trained on the new policy and processes (skills). Given the emotive nature of travel, support from the organisation’s leaders will be critical to success (style). Finally, the approach must be aligned to the organisation’s shared values, so making everyone fly on Ryan Air will probably back fire.

Now that changes have been identified, how should you communicate these to the organisation? There are several factors to consider including the structure of communication, target audience and method.

There are many ways to structure message, but the 3-step approach works well for introducing new suppliers:

  • start with “coming soon” – “We have selected a new TMC to replace supplier X, Y and Z”
  • followed by “save the date” – “The new TMC will go live on 1 Jan”
  • finally, “go live” “The new TMC went live today so if you have a travel requirement click here”

The message should be tailored to the audience. Travellers, for example, need details of the supplier, scope of work, service level agreement and where to get help. Approvers, however, only need to know that something is changing.

There are several methods of communication and include:

  • web-based communication – one of the lowest costs methods but relies on internal stakeholders actively looking for information (pull communications)
  • email – another low-cost option but you can’t rely on recipients to read their email (push communication)
  • video and telephone conferencing – enable people in different locations to interact
  • face-to-face meetings: enable the most interaction and should be supported by a presentation to ensure consistency
  • reports: used to drive compliance

The best approach is a combination of all methods so that as many people as possible receive the message in a way they find easy to understand.

Poor compliance to new procurement processes is common and arises for many reasons. The route cause is a lack of clarity about processes and inadequate training and communication. If procurement wish to realise the full savings potential then investment in change management is essential.