Permissions based procurement: Finding success without a mandate

Situating your Procurement organisation correctly can make or break a CPO. I offered some ideas on choosing the right focus areas given your environment in an article here. This time I'm focusing on the bottom left quadrant of the model: Permission based transformation.

In the permission-based procurement environment, business units maintain decision making power and can choose to 'opt-in' or 'opt-out' of central initiatives. There will typically be cultural and brand loyalty towards the business unit rather than the 'parent'/ 'centre'. Sometimes historical apathy or hostility too. And if the corporate DNA is not likely to change, then making this role a success is one of the most challenging procurement roles to take on. The aim of this article is to support CPO's in taking the right path here.

What are the options from a central delivery perspective?

The first thing to mention is that you need to start small and build more permissions. This is a long-game compared to the CPOs taking on the challenges from other dimensions in the -above 4-box model.

Thanks to my wonderful linkedin network, I canvassed views on what a 'decentralised CPO' should take on. Here is a menu of services, mapped against maturity and investment requirements.

By quadrant lets look at 3 potential services:

1. Start here: Where few permissions exist and there is limited alignment from the business.

• Cross pollinator of best practices. The central function with limited investment can become the sharer of knowledge, the knowledge manager and the spotter of good practices.
• Custodian of Policies & Systems. Focusing policies on the 'WHAT' not the 'HOW' then a central team can provide the principles that all business units should follow. From a code of conduct (for buyers and suppliers) to the correct approach to negotiation (post-tender negotiation ethics for example). Setting the tone of your organisation to the external world.
• Commercial centre of excellence. Perhaps its a suite of trainings or perhaps its an offer of help on some tricky contract or negotiations. But establishing a reputation as commercially competent is a key foundation for future departmental success.

2. Prove the case: These services require headcount and/or systems investment of considerable size but if the argument is won then the critical mass of a core team can form.

• Central initiatives. A growing number of cross-business unit requirements are emerging from stakeholder groups- Scope 3 and critical infrastructure resilience being just two. These are ideal opportunities to strengthen your coordination role and create an infrastructure that promotes consistency and collaboration between business units
• Aggregator of common goods and services. his would appear to be a no-brainer, but amazingly many goods that could be bought commonly and at better scale, nevertheless continue to be maintained and acquired locally. If resistance is met to 'obvious' commonality (e.g. and Enterprise agreement for stationery, or Microsoft licenses) then there are cultural inhibitors that may need addressed at a more senior level first
• Spend control towers. Being able to understand the holistic spend profile with a particular supplier across business units allow for an elevation of the relationship with the supplier above what is achieved locally. Perhaps one business unit dominates with buying power but the halo-effect can benefit everyone. These insights are only possible with good data and standard reporting across the portfolio.

3. Test the water: These services are potentially of significant value but can lead to friction where the business unit feels they are giving a 'veto' to the central team.

• Dispute resolver. When a voice one -step removed from a crisis is needed to bring calm judgement on a situation then a central function can be a soothing balm in a dispute situation and offer clear, more impartial perspective.
• Large spend governor. A central point of challenge or approval over large or long-term purchase decisions is not untypical given delegated authority frameworks. However, Procurement is not always an approver. Getting a 'seat at this table' ups the authority of the team and promotes that good procurement matters before a significant investment is made.
• Make v Buy provocateur. Decisions on what to outsource or bring back in house are generally taken on an ad-hoc basis at a functional level. A more systematic review process on an annual or bi-annual basis is emerging as a norm, and the central function is ideally placed to take on this service for BUs and the corporate centre.

4. Grow to here: Mature permission-based Procurement teams have evolved to provide services of quality in these areas, but they are in the minority:

• Engine room for sourcing ops: Having a shared service centre for running RFP's , auctions or other competitive events can liberate the independent procurement teams of capacity whilst ensuring they still feel in control of outcomes.
• Advisory services: Having the consulting skills to support opportunity identification, operating model reviews, digital road-mapping or capability growth enables the centre to dive in as a key support advisor to the retained business unit Procurement team, providing high impact in a short time frame without "taking over".
• Special project SWAT team. For large and complex buys a skilled team of commercial specialists may be temporarily needed and the central unit can support on an in then out basis, like the Advisory services above but this time focused on project delivery.

For any readers with a private equity background then there are some parallels- some of these services are provided in different flavours by the holding company (or their team of internal/external consultants) to their portfolio. I think/ hope this is the first time an 'exhaustive' list of service offerings has been constructed to meet the unique needs of the permission-based Procurement corporate culture, so I hope it finds use for some struggling in this tricky space.

Thanks to Nicolas Passaquin , Beth Seager MCIPS , Beth Wallace and Evert Karsen for their inspiring builds for this article.

I am a sales and Procurement Leaders who writes long-form articles that I know the algorithm hates so very few people will read it. But still there's something nice about writing down a body of work isn't there?