This week in San Francisco I spoke with Jonathan Evans, Director of Vendor Relations at DonorsChoose.org, about their organization’s use of spend management tools and principals to move from a manual, paper process to a scalable, efficient model. To the “customers” (innovative teachers, their students, and the donors who select which projects to support), this procurement transformation looked like…
“The teacher posted the project on a Monday. The project was funded on a Tuesday. We purchased the materials on a Wednesday. The materials arrived in the teacher’s classroom on a Friday. And we had digital photos and thank-you notes to send back to the donor the following Monday.”
***The video interviews from the NY, Chicago and San Francisco Ariba LIVE World Tour events are now in a playlist on YouTube.***
Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.
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Buyers typically focus on a few key objections to avoid the E-Sourcing process, even with its potential for savings and the promise of a condensed sourcing timeline:
“It will destroy my relationship with the supplier.”
“The service, quality and support my supplier currently delivers will suffer.”
“My supplier’s profitability will be depressed to the point of no return, and they will return for price increases or simply become unsustainable.”
A few recent studies have indicated that opinions on both the buyer and supplier sides are evolving, and warming to the E-Sourcing process - showing that E-Sourcing is no longer the least desirable tool in the box. And as The Chartered Institute of Purchasing & Supply (CIPS) points out, organizations have little reason to reject the E-Sourcing process and opportunities, evidenced by their 7 Effects of E-Sourcing:
Transparency - Both sides win on transparency in an E-Sourcing event - suppliers see fair market price that doesn’t have to be validated by a buyer. While the buyer sees fair market pricing and can determine supplier’s sustainability based on price or whether it’s the right time to source.
Publicly visible online event - A level playing field introduced to the supply base where an apples to apples comparison is forced by the process. The integrity of the process is indisputable as a third party executes the event, leaving the supplier and buyer focus on managing their relationship rather than price.
Enables multiple rounds and bid adjustments - E-Sourcing events allow the supplier to bid multiple times and to receive market feedback quickly. This leads to process efficiency, which eliminates the lengthy manual negotiations, communication gaps, and lends back to the transparency effect.
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My visits with business executives and media mavens over the past few weeks involved heated discussions about the future role of the Chief Information Officer in this age of Software as a Service (SaaS). Public perception is that SaaS is in direct competition with the CIO, chipping away at the death grip this top IT exec has long-held over enterprise technology infrastructure and buying decisions.
But, as is often the case, the reality is much different than the going perception.
In fact, my discussions reaffirm that savvy CIOs view SaaS as an opportunity to reassert their importance and improve their role as a strategic advisors. With the growing adoption and relevance of SaaS business applications, the role of the CIO becomes less about managing infrastructure purchases and uptime, and more about identifying and assembling best-practice processes to support and improve enterprise performance.
I floated this observation during a chat with CIO Magazine Editor-in-Chief Maryfran Johnson recently and she concurred. In fact, she noted seeing an increasing number of CIOs with new titles: CPO, that is, Chief Process Officers.
As further evidence of this shift, a CIO at a major hospital network I was speaking with last week said he too sees a “natural role expansion into process as well as sourcing leadership for top-tier CIOs.” However, he notes that transitioning to the role as Chief Process Officer will require a mindshift for the CIO as well as his or her IT team.
“For that role expansion to happen, [the CIO] must have a seat at the table. To get a seat, he must earn it by showing that he is not a geek but a businessman. So he must free himself of all the toys and gadgets and look at the big picture: the TOTAL COST of Ownership.”
In addition to doing some soul-searching on their own role, CIOs looking to become more strategic process directors must overcome pushback from their own teams, many of whom feel that SaaS somehow reduces their role in the organization. Maryfran and the CIO both argue that SaaS doesn’t kill IT. Instead, it enhances the role of the IT organization, finally making them tighter partners with the businesses in defining and assembling the best processes for competitive advantage.
While we are surely in the pioneering stage of this trend, the growing adoption and large-scale deployments of SaaS applications - not to mention the hype around Cloud Computing - could accelerate the CIO’s transition to a more strategic process director role. Yet, the hospital CIO projects that the transition will happen quickly out of sheer necessity: “Sad to say that if expectations and standards don’t change in the CIO community - if the CIO continues to be the ‘head geek in charge’ - then the CIO role will rightfully be banished to a subordinate role.”
The only question that remains is will your CIO make the transition?
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In this economy, one thing we can count on is that all organizations will be asked to do is stretch their budgets and increase productivity. And although an efficient procurement department is a net plus on the company’s bottom line, they won’t be immune from the calls to do more with less. So, how do you do it?
Getting more from your organization involves liberating Purchasing staff and organizations from stultifying systems and structures, and from unclear objectives, arbitrary use of power, and the frantic activity and effort (much of it wasted) found in the unorganized organization. Organizational Design is one of the most potent tools available to senior managers for shaping the direction of their organizations. Organizational Design focuses on human behavior at work and, more importantly, how to develop processes and systems that keep employees intellectually engaged, rather than driving them to distraction, burnout…and seeking “other opportunities”.
We have found that CPOs need to keep the following 6 factors in mind to create a successful purchasing organization:
Design a structure that empowers. Although there is no one-size-fits-all org chart, a well designed organization balances centralization to maximize economies of scale and decentralization to empower local requirements and decision making. Excellent examples are Telefonica, RWE, J&J and Schlumberger (the later 3 are described in this white paper).
Attract and retain Purchasing talent. With purchasing staff moving away from transactional roles and towards strategic functions, job requirements have changed…a lot. McKinsey Quarterly found that “paying an additional 40% to hire an A player could yield an overall return of 100% or more in a single year.” Once you have found and hired that top talent, retain them by proactively aligning their aspirations with organization goals. Encourage high performers, stimulate their minds and minimize the hassles that hinder their performance.
Frequently update tools and processes. With the most advanced productivity tools on the market, it’s hard to get bored. This is particularly true of top performers, who typically embrace continuous change and adoption of new capabilities. SAS’ philosophy on the subject sums it up best: help staff do their best work, keep them intellectually engaged, and remove distractions. Evolving technology and processes certainly helps on all 3 fronts.
Implement meaningful metrics and reward systems. First figure out what metrics will be meaningful for measuring the purchasing organization’s impact on their goals (a chart that maps goals and measurements is available here). Then create rewards that encourage people to care about the metrics. These don’t have to be monetary. Recognition, career-growth, influence and even something as simple as a preferred parking space can be very powerful motivators.
Nurture a culture of entrepreneurship. Entrepreneurs are empowered to perform and tasks and utilize any processes needed to get the job done. They loath overhead (the dreaded bureaucrat’s empire) and always try to do the most with the least. Foster this spirit and your department’s profile, results and reputation with the company will flourish. And your empowered, engaged employees will surprise you with their positive attitudes and creativity.
Deliver an impact. Once all of the above factors have been integrated into the purchasing organization, success is a sure (or near-sure) thing. Communication and alignment of goals within the department is key. But, it’s also important to sing the praises of your group to the company at large. Be vocal about the achievements in order to grow the influence and spend under management of the procurement organization.
***Sections of this post were based on a white paper I co-authored titled “How to Get More From Your Organization”. You can download the pdf version here.***
Colleen Slaughter is a Senior Consultant in Ariba’s Spend Management Services group. Colleen specializes in Change Management, Talent Management, and Organizational Design.
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All too often, we have good intentions in life but aren’t quite sure how to put those intentions into action. The cynics among us (and are there any non-cynics left?) question whether petitions we’re asked to sign really mean what we’re told and whether or not donations end up going where they claim.
Enter the internet and a great idea from former school teacher, Charles Best. Charles started DonorsChoose.org, which allows people to search for school projects - submitted by teachers and validated by DonorsChoose - they feel are worthy. People can then “procure” (full disclosure - the system utilizes Ariba’s SaaS procurement solution) some or all of that project’s cost. It is a model that literally cuts out the middle man and connects “buyers” of charitable contributions with “suppliers” of underfunded education projects.
Aside from jumping in and “procuring” a specific project for a worthy teacher and students, there is something else we can do to help. For the second year in a row, DonorsChoose is one of five finalists in American Express’ Members Project competition, where the winning organization walks away with $1.5 million for their cause. Obviously, that’s a lot of pencils, text books and field trips. In fact, DonorsChoose estimates that money would “help 100,000 children thrive in the classroom!”
If you’re an AmEx card holder, you can cast your vote for DonorsChoose here. They finished 2nd last year and are currently in 2nd again…and well…we just can’t let that happen again.
And if you don’t have the privilege of AmEx membership but still want to lend a hand, you can search for a worthy school project here. Sourcing and procurement never felt so good.
Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.
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