6
CROSS-FUNCTIONAL CHANGE: Repositioning the Function as a True Partner
This chapter is somewhat shorter than the other chapters in this book. Cross-functional change management is a key theme that runs through all the chapters of this book, so in order to avoid excessive repetition, we've kept this one relatively short and to the point.
Why Is Cross-Functional Change Management Important?
Procurement is very much seen as a profession / a function of experts that do a discrete thing. The problem is, as soon as you view it that way, you limit its potential by casting it as separate from the other functions.
Procurement's very existence is cross-functional by nature—it only exists in order to help those functions procure their supplies. And, of course, while Procurement can influence, in most companies, 50% to 80% of the cost base, it doesn't actually “own” any of this spend and is not ultimately in charge. That makes life difficult…it means that Procurement can't do its job out of a position of authority, but it must use sophisticated influencing skills to work effectively with other functions.
As discussed in Chapter 1: Introduction, in many companies the budget-holders effectively do their own Procurement…with Procurement just coming in at the end to finalize contracts and, at best, negotiate an extra discount at the eleventh hour. The problem is that the budget-holders don't necessarily have the skill, or the objective, of optimizing the cost of what they buy…they care far more about reliability and other factors. They do care about cost, but the task of optimizing it is secondary to the other factors, and often they just don't know how to go about it. Of course, their primary incentive often lies elsewhere—keeping the line running, keeping the network secure…which are higher-order objectives compared to optimizing the cost of a spare part or component.
But that's exactly why there is a need for a commercial force—one that is incentivized to optimize the total cost of ownership and to work alongside budget-holders to represent the commercial perspective. And it makes sense to have a function like Procurement, one that is expert at facilitating a Procurement process that seeks a balance between capability and cost, an approach that packages up the budget-holder's needs and then generates attractive commercial options from the supply market. But clearly, it's no easy task…and the ability to work effectively with the other functions is absolutely critical for success.
Procurement Often Lacks the Required Skills and Mindset
Procurement often doesn't know how to work collaboratively and cross-functionally with budget-holders. Having the ability to influence and persuade others is a rare skillset, especially when it comes to influencing senior management. But these skills are critical for Procurement success, as is the right mindset.
As we saw in Chapter 1: Introduction, Procurement functions sometimes don't help themselves, by adopting a policeman / compliance-type role (“It has to go through Procurement!”)…which is of course highly off-putting to the other functions. Insistence on process (“We have to get three quotes; this is how Procurement does it.”) is also very unhelpful in getting others on your side!
To be fair, and as already said, it's not an easy ask to be tasked with working collaboratively with other parts of the business, who may not welcome you being involved on their turf in the first place. But that doesn't matter…working effectively cross-functionally is a skill that Procurement desperately needs to have.
How Do We Do It Effectively?
So, what's the answer? How do we do it? How do you work effectively cross-functionally in an influencing capacity? We suggest seven success factors:
- You need to execute well and have good deliverables.
- You need to engage formally and meaningfully at all levels.
- You need to use effective stakeholder engagement skills.
- You need to exhibit a service mindset.
- You need to position yourself internally as a proactive dealmaker.
- You need to share credit, and help rather than take away.
- You need air cover.
Let's briefly examine each in turn. You will recognize these points by now, so we'll try to be brief.
1) You need to execute well and have good deliverables
In Procurement, you're providing a service by sourcing the budget-holder's spend on his or her behalf; therefore, you need to earn your right to be in the room. If you don't add value, why are you there? the budget-holder rightly asks. On a human level, what it boils down to is that the budget-holder is going to assess your capability: “Well then show me, let's see what you've got.” And at this point, you need to impress. You need to command respect from the representative of the other function, so that they can see that you're a high-caliber, value-adding resource.
So, how do you impress? Well, you do it in a number of ways, but in business, you do it first and foremost by executing well (for example, organizing structured and effective supplier review meetings, following up on all actions, and more).
Next, you earn respect through your “deliverables.” Granted, this is consulting speak…but along the category management journey, there are a number of deliverables—spend analysis, category baseline, supply market analysis, sourcing strategy, RFI document, supplier long-list, RFP document, RFP bids analysis output, negotiation packs, supplier management plans. These are what you deliver: in many ways, they are your product, and their quality speaks volumes about you. Simple things: a half-assed supplier long-list suggests that you're not great at your job; an excellent supplier long-list suggests that you're very good at it. Simple as that.
So, do make sure your team's deliverables are of the highest-possible quality. Anything that goes in front of a stakeholder needs to be buttoned up, accurate, crisp, and clear. And no typos!
2) You need to engage formally and meaningfully at all levels
Again, we've talked about this at length throughout the book. It sounds obvious, but this is where buyers and category managers often just don't have enough time; and you need to put the time in, you need to listen and get to know your stakeholders and their objectives, their issues, what keeps them awake at night. If you don't have the time, you need to make it! See Chapter 5: Operating Model, for suggestions on how to rebalance the Procurement team's activities. And when you do effect a change in their time allocation, make sure there's plenty of time for stakeholders.
You also need to engage formally: not through corridor chats, but through structured meetings and powerful workshops where things are decided; for example, a negotiations strategy workshop, a supplier shortlisting workshop, a specification harmonization workshop. These mechanisms get everyone in the room involved and enable you to drive to decisions—as long as these workshops are well-prepared and executed.
The quality of the engagement is also important, and quality engagement is what moves things forward. It's when you have proper, intelligent, meaningful dialogue that things get resolved and the right outcome for all parties concerned is chosen.
When you do engage, of course, you don't just talk. You need to make sure you align; you need to make sure everyone is in agreement. This takes some effort, but it's effort well spent. So, before that big Steering Committee meeting, you need to pre-brief the CEO, the CFO, the COO, the CIO, the Head of the Americas (and in the right order)…so that they're aligned going into the meeting. You need to be engaging and aligning horizontally (across functions), but also vertically—up and down the organization chart in terms of seniority.
And let's not forget the suppliers. The more you've talked to all of them, the more credible you are. Even better if you spend a bit of time on the shop floor, like the consultant with whom I recently spent a full week in an auto repair body shop before sourcing the category for an insurer. His credibility went through the roof, because he'd invested time in understanding how things work bottom up—from a supplier's perspective and from a shop floor perspective.
We've talked at length elsewhere about how to structure a formal program, and how the associated formal governance structure facilitates formal cross-functional representation at all levels—both in the sourcing / execution teams and in the Executive Steering Committee. Structuring work in a formal program naturally fosters a degree of cross-functionality and should be the modus operandi wherever possible.
3) You need to use effective stakeholder engagement skills
This is not about using some fancy change management tool to map your stakeholders on a three-dimensional matrix. This is about the fundamental change management skills of listening, empathy, influencing, persuasion…the soft skills that will win your stakeholders over.
In my 27-year Procurement consulting career, poor stakeholder engagement skills are by far the biggest deficit we see in Procurement functions. Their buyers often don't know how to influence, let alone persuade people. And you can see that because of this, they can't break through to the stakeholder, and so they don't move forward. It's heart-breaking.
And yet, these soft skills can be learned and acquired to a very significant degree: presentation skills, influencing skills, Neuro-linguistic proramming (NLP)—there are plenty of training programs out there. Procurement training is traditionally too focused on the hard skills of negotiating and contracting. But those don't get you in the door!
4) You need to exhibit a service mindset
This, we have also talked about in Chapter 1: Introduction. You are there to serve; it's not your spend, you are a support function. So, don't adopt policeman tactics…instead, use a mindset of “We are here to serve you, but we will try to influence you in the commercially right direction.” But don't be a push-over either, which is extremely common in Procurement—buyers afraid to challenge their stakeholders. Service mindset does not mean push-over.
Part of that service mindset is understanding who the ultimate decision maker is, and that is unequivocally the budget-holder. Do not try to argue that supplier selection is Procurement's decision. What utter rubbish! What Procurement needs to do is to show a range of fully negotiated commercial options, with pros and cons attached to each; it can highlight the trade-off in cost for going for the higher cost option, but no more.
A lot of being successful cross-functionally is to just act professionally and courteously. Being polite, listening to the other party, showing humility, being their support function that elicits their needs and builds the category strategy around them and their priorities…these things go a long way.
5) You need to position yourself internally as a proactive dealmaker
As with everything in life, you need to be proactive. Don't wait for the contract to expire and then get called in to muddle through a last-minute extension…be on the front foot. Originate exciting new deals and opportunities, don't simply react.
And don't leave it all to your people; the job of PR is the CPO's job. You need to go sell your function internally, and you need to bring exciting opportunities to the table. And you can only do that if you're proactive, if you're talking to suppliers, talking to peers to compare notes, learning about the latest supply market developments. A dealmaker is forever scouring for that deal, so you need to keep your eyes and ears open and cast a wide net. And then you need to strike and bring the opportunity to the table in a compelling way. The “art of origination” should be part of the cross-functional contract. A high-performing Procurement function must be highly proactive.
6) You need to share credit, and help rather than take away
If you want to get along with others, don't set yourself up as a competitor for “credit”—that goes for qualitative credit for the effort, but also for who gets “financial credit” for the savings. It's inescapable that there is an overlap when it comes to savings, because Procurement is generating a saving in someone else's budget. Don't let this be a source of conflict; have Finance manage this issue. As we will discuss in Chapter 9: Savings Realization, Finance should position Procurement as the hero, by applying their budget haircut before Procurement is deployed.
And another tip from the consultants…they're good at getting buy-in because their ethos is to operate behind the scenes and let the client take all the glory. It works, and it can be applied to Procurement. Procurement facilitates, operates behind the scenes, and lets the budget-holder be the hero…don't worry, you'll get your credit—people know when you've done good work.
7) You need air cover
Again, we have discussed this in a number of chapters, but it's worth stressing again. Without appropriate air cover, you will fail. You can't do this job alone, you need the CEO and the CFO as a bare minimum, to root for you all the way.
What does this mean, specifically? It means that they need to give you the remit that you need, and then tell the rest of the organization that you now have that remit. At a recent client, a strengthened Procurement remit was agreed explicitly and in detail with the CFO and with the new Private Equity owners, but it was never communicated to the rest of the organization. Unfortunately, this is common, but it isn't helpful. The organization needs to be told that Procurement is coming!
Next, your sponsors need to remove the roadblocks you encounter that you can't overcome by yourself. Execution is hard, and blockages are constant—the sponsors need to actually help! They are the escalation point for un-sticking cross-functional issues.
In turn, this means that your sponsors have to keep abreast of what you're doing, and at a detailed level. They need to understand the ins and outs of the sourcing strategy, because that's where the conflict will be.
I remember a global insurance brokerage client a few years ago. The whole executive team, the CEO out front, was sitting with us in the conference room during the Procurement Steering Committee and wordsmithing the travel policy with us on the screen. I can tell you that policy really, really got traction, and it's because the sponsors at executive level were personally invested.
Personal investment is good. Beyond the C-Suite, you should ensure that your broader business stakeholders are fully invested. Bring them to executive committee meetings to discuss key Procurement negotiations—that way they're on the hook and will work to make the initiative a success.
Sponsorship needs to be active. “Lip service sponsorship” is not enough.
Specific Functions
All parts of the business have their own characteristics. Finance is a particular function with which Procurement needs to work very closely, and this is addressed in detail in Chapter 9: Savings Realization.
Beyond this, the other “professional” functions, such as Marketing and Legal, need to be engaged intelligently and on their own terms and language. A Marketing Executive is not looking for the cheapest deal when it comes to creative agencies, so stop talking about price! It's about overall effectiveness and return on Marketing investment, and that's the language you need to use.
The IT function is often a little different to other functions, in that it does much of its own Procurement and supplier management, albeit outside the fold of the Procurement function. IT team members tend to be intelligent people who know what they're doing, and they need to be treated as such. So, to open the door to IT, Procurement needs to articulate how it can help beyond what the IT function may already be doing. And it needs to navigate what can often be an ever-shifting, phased roll-out IT strategy, to see where it can best engage and add value.
Finally, the sourcing of Direct Materials requires a good understanding of the downstream processes (for example, Engineering, Manufacturing, Quality), and Procurement needs to adapt to work within the very real constraints of switching costs and the need for supplier certification.
In the end, when it comes to the various functions, the approach is the same, but it pays to speak their language, understand their world, and make sure your ideas fit with their plans.
What Can We Learn from the Consultants?
I'm not talking about “toolkits and techniques” here. These are often what our clients ask for when we talk about change management, and they can be useful. Problem is, in the end, they're often just static observations and plans on a page.
What's more interesting to learn from the consultants is their often-solid execution skills. Good presentation skills, for example, go a hell of a long way towards impressing people, which gets them on board…good data, good slideware (yes, it matters!), good people engagement skills…if you bring in consultants, make sure your people watch and learn. The other thing that consultants do well is project management: structure, detail, and discipline. Again, make sure your people pick up some of this good practice along the way.
And again, that service mindset and courteousness—consultants have this in spades, because their clients are external clients that pay their bills rather than internal peers. Procurement can learn from this, as it's a mindset that is helpful in getting things done.
Finally, let's talk about PowerPoint! People who say, “function is more important than form” and deny the need for high quality visuals are missing the point. Your conclusions, your strategy, your personal credibility will be measured by what's on the page. When people sit in a conference room and stare at your slide on the screen, they'll notice all those little errors and nit-pick. So be clear in your visuals, be sure of the message on each page, label the titles and axes of your graphs, show the units, don't show too many decimal places, cite a source, make sure lists of things are Mutually Exclusive and Collectively Exhaustive (MECE) and prioritized, start sentences in a consistent way, don't have typos, ever…and be compelling!
Conclusion
Cross-functional influencing and change is not about change management toolkits, and there is unfortunately no silver bullet for getting other parts of the business to play nicely with you. Ultimately, the answer to change management is to push, push, push relentlessly, while bringing everyone on board along the way.
In the end, of course, you need to deliver an outstanding result—one in which the budget-holder is fully on board and is very happy with his suppliers and the savings…then you know you've got it right.