Letting Others Take Out the Trash: Punting the Small Stuff to Prioritize High Impact Sourcing Initiatives

Today it gives me great pleasure to welcome guest blogger Barnali Dasverma to 1 Procurement Place. Barnali is a Manager with Treya Partners and an acccomplished consultant and thought leader in the procurement field. She is also a candid and entertaining writer which is why I have been looking forward to her debut on 1PP for some time. Today Barnali delivers an insightful analysis of one of Procurement's greatest challenges in delivering value - how to avoid speading oneself so thin that one struggles to deliver value at all.....I'll let her explain....

Taking Out the Trash with a Smile

“If a business owner asks Procurement to take out the trash, we have to do it with a smile" were the words spoken by the CPO of a $3 billion national retailer and a past client of mine. This Procurement executive felt strongly that his department could not say “no” to stakeholders in his company. His organization gave a project with a $200K savings potential equal priority to another project capable of delivering $5 million, and staff were expected to dedicate similar levels of effort to both. In the quest to gain the trust, respect, and support of stakeholders - crucial for a procurement department to be effective - an overarching priority on customer service can sometimes compromise the pursuit of high-impact sourcing initiatives than could save millions for corporations and state governments. This needn’t be the case.

Learning How to Say No to the Small Stuff

In the six years I have spent as a spend management consultant, an inability to “say no to the small stuff” is something I have encountered repeatedly, both in the public and private sectors. Procurement organizations are often so dedicated to serving their internal customers that they spend far too much of their time and energy on low dollar value procurements and far too little time on high value, strategic sourcing initiatives with significant cost reduction potential. Unfortunately, there are only so many hours in the day, and if we don’t learn how to say no to the small stuff, we’ll never have enough time to dedicate to the "big stuff" projects that ultimately will have the most significant financial, operational, and strategic impact.

Punting Gently

So, am I advocating a war on drugs style “just say no” campaign? Of course not – I’ve been a sourcing geek far too long to promote such a simplistic, unrealistic solution. However, I do have a few ideas I’d like to share on how to punt the small stuff gently. First, begin by defining contract value thresholds at which your procurement department must get involved – delegate contracts below a defined dollar value, say $50K or less, to business owners in corporations or state agency personnel in the public sector. You’ll be surprised to find that in some cases, those internal customers are happy to handle the small stuff on their own – they may have been pulling in Procurement because they thought they were obligated to. In other cases, you may encounter some initial consternation that can be addressed by gradually weaning your internal customers off of Procurement.

Weaning Internal Customers off Procurement

Before embarking on the weaning process, create guidelines and templates to support your internal customers so they can get the guidance they need as they take ownership of low dollar value procurements. Develop a step-by-step guide to simple procurements that colleagues in other departments or agencies can use as a reference, and include basic advice like:

• “Request bids in the same format from at least 3 vendors”

• “Be sure to tie future price increases to the Consumer Price Index”

• “Include a travel expense cap on all professional services contracts”

• “Make sure the contract doesn’t include an automatic renewal clause”

In parallel, develop contract templates tailored to key purchasing areas (e.g. commodities, professional services, IT) and get these templates pre-approved by your legal department. Now consolidate your newly defined procurement policies, guides, and templates into an easy to understand toolkit that explains the rationale for the new approach - that procurement’s resources are limited and need to be prioritized on the highest value opportunities for the organization - but that clearly conveys Procurement will still be there to support business owners. Emphasize that while business owners will be expected to take ownership of low dollar value procurements going forward, procurement staff remain available for consultation and will be happy to provide coaching and guidance. Consider holding a “road show” within your company to personally communicate Procurement’s new approach and the reasons behind it.

Tracking Transformation & Focusing on Savings with a Smile

Ultimately, recognize that your procurement department can’t decline all the small stuff, but aim to have your staff spending at least 80% of their time working on high impact strategic sourcing initiatives – and most importantly, track this carefully to make sure it actually happens. Have each and every member of your team track their hours for the first six months after you implement your “punt the small stuff” efforts. Then, check in with each team member each month to understand what percentage of his or her hours is being spent on low and high value procurements, respectively. While you can’t get to your ideal 80/20 mix overnight, you should see consistent progress over time. By the time month six rolls around, any CPO who has embarked on this journey should be able to say, “Our procurement department has made it so easy for business owners to take out their own trash that they would never bother asking us to do it. Instead, we’re able to focus on creating substantial, hard-dollar savings - with a smile.”