Outsourcing Procurement

IMAGINE THIS SCENARIO… You’ve made the decision in outsourcing procurement and bring in a procurement consultancy to review your procurement function, inject new ideas, drive change and positively impact your department.

Now for your team’s reaction…

How do you guard against a threatened, defensive position and instead foster a collaborative, opportunity-focused response? This webpage argues that how your team and stakeholders feel about the engagement stems from your selection of the performance objectives, how they are prioritised and how they are communicated.

Success, therefore, comes from challenging yourself to think through why the business needs a procurement consultancy and what is it you want them to achieve.

If you prioritise and value Savings and Speed are you willing to possibly compromise on Quality, Compliance and Flexibility to achieve this? An aggressive, fast-paced cost reduction programme led by an outsourcing procurement consultancy working on that brief could leave your team feeling alienated, stakeholders disengaged and not getting the solutions they need.

You will make Savings quickly, but at What Cost?

Or do you need a high Quality, Flexible service that drives Compliance where a symptom of that is Savings? To achieve this, the pace of delivery will inevitably be slower as a result. But you will establish a stronger, long-term positive climate with stakeholders and your team and create sustainable solutions. Is that what you want instead?

CLARITY HERE WILL REAP DIVIDENDS LATER.

Pappianou and Spencer (2019, paragraph 25) regard compliance as high for any procurement department and experienced practitioners will normally expect a savings target (Struthers, 2020) so these have been added. It is not possible to achieve all of the objectives at the same time, so a compromise needs to be made.

Before choosing to engage a consultancy, assess what it is you need to compliment and support your existing team and how they need to fit into your organisation. Consultancies will bring a huge amount of benefits in expertise, resource, tools and experience across industries and businesses which will help accelerate delivery of your objectives, so it is important to select from their menu of options to meet your needs.

How you incentivise your consultancy or any supplier, has a direct effect on how they behave. An in-year pain/gain model linked to their profit will mean that the consultancy will push for larger categories with quick-win potential to deliver savings. Stakeholders and your team will be expected to move at pace to provide information to achieve challenging timelines.

Whereas a service that incentivises high-quality category plans, delivery of projects and highly engaged stakeholders will mean all strategies are considered equally. The speed will be slower, and savings are more likely to be multiyear rather than in-year.

The incentive model you choose must be directly linked back to the performance objectives to ensure they are delivered. Like any supplier selection process, the consultancy firm you choose from the marketplace will have strengths and weaknesses. So it is important that you pick one that has the best fit and experience in what you are aiming to achieve.

It is difficult for your team not to feel concerned about any external resource coming in depending on how they are positioned against the performance objectives. It is important therefore that you have empathy with your team because they will need to invest time bringing the consultants up to speed on your processes, stakeholders and business.

It is possible that your team and business stakeholders will feel a mix of excitement and trepidation.

Use the performance objective model to communicate the rationale behind the introduction of the consultancy into the business by:

• Holding a briefing meeting with your incumbent team so they can better understand the specific objectives and any non-confidential parts of the incentive model to aid transparency.
• Clearly communicating the benefits of the consultancy and what they will deliver including any value add.
• Creating opportunities for your team and stakeholders to provide feedback.
• Providing regular progress updates linked back to the performance objectives throughout the consultancy engagement.

It is through these communication channels that you need to really articulate why and how you are measuring the consultancy’s ongoing performance against what you originally set out to achieve. Keep this crisp, clear and easy to understand for your audience. Your team and stakeholders will feel better about the engagement as a result.

Success is about seeing the consultancy as an extension of your team and then collaborating to make sure that you both deliver the right outcome for your business based on the selected performance objectives. A good consultancy needs to deliver tangible results not just write recommendations. However, you need senior leadership buy-in across the business that is then driven down into managers and teams to ensure the consultancy is set-up for success.

So being clear and consistent in the management and communication of your performance objectives is crucial.

This webpage argued that how your team and stakeholders feel about the engagement stems from your selection of the performance objectives, how they are prioritised and how they are communicated.

Success therefore comes from challenging yourself to think through why the business needs a procurement consultancy and what is it you want them to achieve. We have made some practical suggestions to help manage this risk and set you up for success.

Whatever you choose to do and how you decide to engage, enjoy the journey and the collaboration and learning you receive from working with the Consultancy.