The orchestra of SRM is ready to play
It seems the word 'governance' does not have universal recognition; indeed in the United States the word is not commonplace, yet it is the perfect word to help describe the arrangements needed for SRM. Bevir (2013) describes governance as 'all processes of governing, whether undertaken by a government, market or network, whether over a family, tribe, formal or informal organization or territory and whether through laws, norms, power or language'. That seems to pretty much cover everything. Within SRM governance relates to how the philosophy is realized within the organization; what gets done, the processes that support it, decisions that are taken, how roles and responsibilities are agreed and arrangement to verify performance. In the orchestra of SRM governance ensures the stage is set, that all the seats are set out for all the performers, that the performers are skilled and talented musicians then it ensures there is a single conductor who will make the music happen.
There are five components within governance in, what is, I promise, the last alliterative model in this book: the 5P governance framework (Figure 15.1). These are people, proficiency, promote, payoff and programme and I will explore each over the next five sections. Governance is not necessarily
FIGURE 15.1 The 5p governance framework
unique to SRM, but rather could support, coordinate and enable multiple strategic initiatives and projects within a purchasing function or indeed across the entire organization. Indeed it is governance that plays a key role in realizing corporate strategy by providing the means to integrate various strategic initiatives including SRM but also including other cross-functional initiatives such as category management, Lean or Six Sigma, CSR projects or any other project that helps realize corporate goals. Therefore governance should be constructed as the enabler for the function not just SRM.
Structure and organizational design
The first component of governance is people and is concerned with structure and organizational design. We need the right people, with the right capability doing the right things. SRM, and indeed other strategic purchasing initiatives, may not naturally overlay a traditional hierarchical organizational structure but rather requires a more matrix based way of working that fosters cross-functional teams and groups. This does not necessarily mean a complete organizational redesign, but rather a refocusing of roles or even parts of roles of individuals.
For SRM interventions with important suppliers any structure needs to provide for two things: individuals who need assigned roles and responsibilities to support the various aspects of SM, SCM, SPM, SI&D and cross-functional teams who will champion special projects in some of these areas but especially for SCRs. Here the cross-functional engagement becomes core to the entire project, requiring a cross-functional team to be formed, meet regularly and work towards delivering a specific outcome such as a new collaborative strategic relationship. In fact, cross-functional working lies at the heart of SRM and indeed every other strategic purchasing and business improvement project.
Creating a 'virtual structure' to foster cross-functional working
We need a functional and organizational structure that enables both individual as well as cross-functional, project driven supplier intervention. It would be impractical to structure most organizations around this but it is possible to create a new 'virtual structure' where a series of individuals can come together in a team for a set period of time, meet and work together to deliver a goal (Figure 15.2). These teams would typically be led by someone from purchasing, perhaps the Supplier Relationship Manager for SRM initiatives (described below) but could equally be led from elsewhere in the
FIGURE 15.2 A typical cross-functional team
business. Each team requires a sponsor to support the team, ensure resources are available and remove obstacles, and may also demand facilitation support for key meetings. Team members may be core members but could also be extended team members or stakeholders who are involved, consulted or kept informed.
Cross-functional team working sounds an attractive and obvious pursuit for any organization, but embracing it requires commitment from the executive team and then the wider organization to make it happen. If someone from a technical function is to join an SRM team working on a SCR project, then it is likely they will need to step back from their day job but instead be seconded onto the team for a few half days each month until the project is completed. This is quite a commitment and one the business must provide for from the top down, with individual objectives and even incentives supporting this; after all if people are to contribute to a team they need to want to be there and believe there is something in it for them. Incentives could be money, but could equally be personal or career development or just the interest of something different.
At any one time a number of cross-functional teams might be needed, each working on key initiatives. How many and what they work on is a product of availability of resources and organizational priorities. Here good governance is founded on the principle that there is only so much resource and potentially many competing projects and so determines an overarching programme of priority projects and assigns these to cross-functional teams;
FIGURE 15.3 A typical governance structure
some may work on strategic SRM projects and drive in new collaborative relationships whilst others work on category management or CSR projects. This assignment of resources against opportunities is the backbone that connects corporate strategy to action and intervention and it requires a small steering group and project manager to do this.
The steering group sits at the heart of governance (Figure 15.3) and is the small group of typically senior individuals responsible for coordinating all the components of governance and therefore determining how strategic corporate objectives are met. The role of the steering group is to meet regularly to ensure:
• overall management of all initiatives;
• the required capable resources are available;
• effective communications with the executive team;
• effective and timely performance of all initiatives;
• effective managed communications to the organization and externally; and
• robust governance for SRM and all other strategic initiatives is in place.
There are a number of practical components to this including programme management, benefits tracking and reporting which I shall cover shortly but this suggests the need for some analytical or administrative support as well as a good project manager to support the steering group. This is shown in Figure 15.3 as 'programme office', as a resource separate, but connected to and supporting the steering group. Dedicated resources here may be a luxury, but if governance is to be effective it is essential that these roles are provided for, even if part time.
The supplier relationship manager role
Important suppliers need relationship managers, just like the supplier has an account manager. Great if you can have a separate army dedicated to this, but in practice we have busy jobs and the modern purchasing professional will need to cover many bases.
The supplier relationship manager is the individual who has a specific responsibility to establish and maintain one or more important or strategic supplier relationships. The role of supplier relationship manager may by a dedicated role for an individual, but is more likely to be one of many roles an individual has.
Responsibilities here might include:
• to keep a watchful eye on the market, environment and the changing needs of the business and identify when action is needed in response to any change;
• to maintain a current understanding of all supplier and supply base risk, ensuring ongoing contingency and mitigation actions as appropriate and watching for any changes that might require intervention;
• ongoing supplier management including supplier reviews and ensuring the contract continues to be robust;
• to ensure the ongoing relationship with a supplier is maintained including maintaining an up to date supplier calendar and, where appropriate, an SRM strategy and relationship charter; and
• to maintain KPIs and the measurement system. And for strategic collaborative relationships:
• to manage a programme of joint working; and
• to lead FIFI innovation projects;.
The supplier relationship manager role requires certain skills and capabilities, and perhaps personality traits in order to be effective. In the perfect world a company implementing SRM would go and recruit a team of individuals perfectly matched to this role. In practice we are more likely to be working with the team we have and developing capability as needed. SRM, and indeed all strategic purchasing initiatives, requires a skill set that is quite a leap on from that of the traditional purchasing buyer and might include:
• Technical and process skills - SRM but also perhaps category management, CSR, Lean etc.
• Project management skills - to implement supplier improvement projects.
• Research skills - to gather and synthesize market, supplier and internal data.
• Facilitation skills - ability to successfully lead cross-functional workshops and joint workshops with suppliers.
• Communications skills - to present complex messages to many and varied stakeholders and secure buy-in.
• Conflict management skills - to deal with difficult suppliers and manage through conflict and challenge with internal stakeholders.
• Advanced negotiation skills - to negotiate deals within complex supplier relationships.
• Leadership skills - to lead and inspire cross-functional teams to work on procurement-led initiatives for the good of the business.
In addition, there are certain characteristics and traits that are particularly relevant and should be born in mind when considering individuals for such a role:
• Ability to build rapport and cultivate good working relationships.
• Confidence to voice concerns confidently (rather than staying silent or just neglecting a relationship).
• For innovation: a mindset to see things differently or challenge why things are done that way.
• Potentially experience of improvement initiatives such as Lean, Six Sigma, Kaizen, TQM etc.