Since the financial crises hit us all in 2008, we’ve seen stretching cost reduction demands on most procurement organisations and in every sector. The gung-ho optimists say this is a time when procurement can make its mark, while the sceptics raise their eyebrows and sigh “here it comes again”.
Indeed, some cost reduction targets have come uncomfortably close to parody. Among our clients, we’ve seen targets placed on procurement in the past couple of years that are patently “top-down” – on one occasion doubling within three months of being agreed. No-one believes them and staff certainly aren’t committed to them.
On 11 June, SM reported that food services company Aramark is asking suppliers for a 12 per cent price cut. Having been there in my corporate career, I’m as guilty as the next man, but with one company we’ve begun working with this year, things are very different.
Imagine this: procurement professionals of high quality, operating in hi-tech and committed to providing tangible contributions to their business, but – here’s the catch – no targets. Rather than limiting procurement to hitting the short-term numbers, the business instead expects compliance to a series of collaborative and leadership behaviours that incorporate continuous working-practice improvement.
The assumption made by the CEO is that he trusts that people come to work wanting to do a good job and that they are intrinsically motivated towards personal and professional growth. In this business, there are plenty of opportunities for team members to work cross-functionally and to lead their own projects. It is simply expected that they will do so, with a genuine desire to work on behalf of the whole system, rather than their functional silo. This behaviour is very definitely rewarded, but woe betide mavericks that don’t fit into the culture – they are soon on their way to pastures new.
This is no nirvana though. There are many challenges and the procurement team has developed its strategy map and is implementing it. It is doing this with a vision and a focus that those in other firms, who have targets dumped on them, often lack.
Food for thought.
This blog was first published in Supply Management magazine in June 2011.
By David Atkinson