Bad Buying – Organizational Competence is Key to Avoiding It
Since I stepped back from running Spend Matters Europe at the end of 2018, I have had more time for cycling and my bass guitar (although if you heard me, you might not be convinced that I’ve improved …) But I have been busy with more business-like activities too, and on October 8th, one of the results will become obvious when Penguin Business publishes “Bad Buying – how organizations waste billions through failures, frauds and f*ck-ups” (available to pre-order),
For many years, I’ve wanted to write a book that was fundamentally about procurement, but would appeal to a wider business audience, rather than just our core professional community. My inspiration behind the Bad Buying idea was basically that everyone likes reading about things going wrong! Many of the case studies I’ve got in the book are genuinely fascinating, sometimes jaw-dropping and occasionally even funny. Fraud and corruption is often a “fun” read too, which must say something about the human psyche.
There is also the slightly trendy idea that failure is positive and that we learn more from it than we do from success. There is some truth in that, and I do think anyone reading the book will get some useful pointers in terms of what to avoid in their buying and procurement lives. But it is certainly not a textbook in any sense.
However, I did draw some strategic conclusions myself after reading literally hundreds of stories of things going wrong. One strong finding, which might not come as a total surprise to experienced professionals, is how vital organisational competence and capability is in terms of avoiding Bad Buying (and of course in promoting good buying).
There aren’t actually many stories in the book where you can lay the blame at the door of the “procurement function”. There are a few, including some public sector fails where core procurement competence was lacking. But the vast majority of cases can be traced back to broader issues such as the user getting the specification wrong, or budget holders who placed too much trust in what suppliers told them (that’s the “Believing the Supplier” chapter!)
Then we move into chapters on contract and change management, where problems are very rarely centred in “the procurement l department”. And the whole section on fraud and corruption is littered with case studies where you have to ask why the CFO wasn’t fired for having such lax finance processes in place.
So if we really want our organisation to be competent from a procurement, contract and supplier management perspective, we need to move beyond our own team and function. In fact, I do wonder if the growth and increasing profile of procurement functions over recent years has in some cases been a double-edged sword? Have top executives become complacent ? “I’ve got a really good procurement team, they keep winning awards, so my organisation must be getting procurement right”. And the rest of management can wash their hands of any responsibility.
But in fact, if everyone who plays a critical role in the end-to-end process is not aligned, or does not understand how to execute their role, or has selfish motives, then “organizational procurement” is unlikely to be genuinely top-class and you are open to buying failures. So to avoid that, we need to bring a wide range of colleagues into the fold – those who are involved in developing specifications, or choosing suppliers, or helping to frame contractual terms and conditions, as well as all those involved in post-deal contract and supplier management.
Even our top team members need to play their role, starting with being able to understand strategically how procurement and suppliers can provide competitive advantage and business success for the organisation. (In the public sector, that often means increasing the understanding of politicians, which is a real challenge, as several of my case studies highlight).
Whilst I do see that the real leaders in the procurement world are embracing this idea already, for many, it will be the next stage of the procurement maturity journey. Procurement leaders need to educate internal stakeholders and communicate constantly to understand the power of good procurement, and what suppliers can do to drive success. Once everyone is playing their role in terms of the critical procurement success factors, then you can be pretty sure that “The Return of Bad Buying, Vol. 2” won’t be featuring your organisation.
Cross-functional team sourcing does help.