Strong governance is key to procurement transformation

12 April 2010
Reviewing recent topics in SM, three headlines in particular caught my eye: “CEOs urged to get involved”, “Care UK buyers lead business change” and “Procurement at Kimberly-Clark goes global”. The common thread for me was governance. In the first instance, it’s failure. The second, it’s ambiguity and in the third, what will it need to look like to make it work? The first headline covers the scandal at Northern Ireland Water, which clearly shows that the executive board’s eye was not focused on procurement issues. This demonstrates how, without the appropriate decision rules, processes and reporting mechanisms major failings can occur. In the second headline, the route described by the Care UK CEO suggested a low level of procurement maturity and coherence, which will result in a long slow road on which to demonstrate value from procurement. In my experience such an approach usually runs out of steam and dies without leaving any permanent change embedded in the organisation. The third headline provides the biggest challenge of the three. Strong effective governance will be critical to its success. A global approach to procurement, requires decision rights, processes and enabling technology that supports a centre-led approach to work at the local, regional and global levels, if CPOs are to effectively capture purchasing synergies across countries and regions. Ineffective governance is a major reason why many corporate procurement transformation initiatives fail. Often this goes hand in hand with ambiguous corporate strategy and a weak corporate culture, which fails to manage the balance between corporate synergy and decentralised business unit autonomy. CPOs must therefore make governance issues a priority and make sure their CEOs are prepared to back up their stated goals with clear unambiguous governance structures that enable achievement. Only then can the CEO and CPO live up to the challenge of transforming procurement. * Dave Henshall is the president of consultancy Purchasing Practice. Follow his own Buying Magician Blog.
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