A great organisation design is just the beginning, but if you don’t get that structure right for your organisation you will never optimise delivery.
Having done several organisation designs in recent years in both line roles and consulting positions, it still surprises me how businesses neglect to consider their team structures in pursuit of procurement excellence.
Most CPOs recognise that Category Management is a basic functional discipline but face the challenge of whether they have the right talent, the right process, the right communications, whether they develop the current talent or draw in new talent. They’re all good questions but the first thing I look at when talking to a CPO with a challenge is consider their design.
Procurement Organisation design for me always starts with the wider business structure and stakeholder inputs – they are our customers after all and we need to find the best way to sell to them. Organisation Design or OD as HR folk like to call it when they work on it so frequently has many angles to consider starting with the need for redesign first, before design itself.
Some parts of the Need will be obvious to the CPO – intuitively some of the KPIs won’t feel optimised, savings rates not materialising, negative or neutral feedback on the function by the business – procurement is a fundamental enabler of business success and can impact profitability of the company in a more significant and direct way that almost any other function. Gather some facts internally and gather some external benchmarking – especially around bandwidth/numbers of resources. This is crucial – all procurement functions have to prioritise but leave it too sparse and the Buyers will lose the will to live. As a broad rule of thumb I believe a Buyer should be able to cycle through their entire spend within 3 years.
Do chat around the business – ask those customers what they want from their procurement ‘supplier’ – this way some real nuggets can be captured and create a case for change that you genuinely couldn’t have put better yourself. I recently undertook a redesign for a client where a stakeholder simply said “well procurement can’t do a job sat behind their office desk – they need to get out more” and another said “I want them to do their homework and give me strategic choices – options, with pros and cons”. Like gold dust, and using the businesses’ own words to replay back to them makes a much more compelling case.
So what of the right design? Accepted thinking is that there are broadly 5 design concepts from Centralised to Decentralised, Federal (Local led) to Centre-Led and Co-ordinated. All have merit and need to be considered within the wider business structure – and crucially the wider business culture. Centralised procurement in a highly decentralised business is likely pushing against a constantly shutting door.
But getting a design that feels right for the organisation – and it’s like a breath of fresh air. Suddenly the options become clear – targets start to materialise – accountabilities and responsibilities more naturally are understood, and the job of ensuring the right category planning, strategic sourcing and supplier relationship management approaches are put into play and rigour applied suddenly appears much more straightforward.
And as for the talent? Well the right structure will always attract the best.