Stakeholder engagement is Achilles’s heel for procurement professionals. I hope you would agree with me that stakeholder management is an important skill for any procurement professional.
All of us have struggled with this issue at one or another time in our careers and if you are struggling this with now, don’t worry.
By the end of this article, you would have learned techniques that successful procurement managers leverage to build a strong relationship with their internal customers.
Even if you start using one of the techniques mentioned here, you would see significant improvements in internal customer satisfaction.
Better stakeholder management leads to proactive engagement for sourcing and that leads to more overall savings.
Just to be clear, I am using the word procurement but that covers strategic sourcing and purchasing.
It is a known fact among procurement professionals that proactive engagement leads to better saving results. So needless to say, for a procurement department to be effective, there needs to be better engagement and stakeholder management.
But this is easier said than done and for the following reasons:
Whatever the reason, procurement professionals need to find a way to engage the stakeholders in order to increase purchasing efficiencies and reduce overall costs.
Procurement is mainly measured on savings delivered, There are other performance measurement yardsticks for procurement but the main driver still remains cost savings.
Need factual data?
As per a CPO(Chief procurement officer) survey done by Deloitte, 76% of the CPO’s mentioned cost savings as the primary driver for performance measurement, following by 57% at risk management.
Source: Deloitte https://www2.deloitte.com/uk/en/pages/operations/articles/cpo-survey.html
For procurement to deliver savings, there are three main prerequisites
All three need a dedicated focus on engaging stakeholders.
Before we get further into how to be effective in managing your stakeholders, let’s define who these stakeholders are
Procurement stakeholders can be divided into two major categories
Internal stakeholders include the following:
Department/Budget owners: Budget owner’s engagement is the most important and hence they are the most important stakeholders.
Finance: Engagement with finance is required to understand budgets as well close coordination to ensure that negotiated savings are reflected in your income statement (Reduction in expenses leading to increased EBITDA).
Legal: Ensure that all contracts adhere to corporate legal policies and contract risk is mitigated through proactive review of all key legal terms across various contracts.
Senior Management: Management is always looking for visibility, procurement job is not just negotiating the savings but it is CPO’s (Chief Procurement Officer) job to ensure that the management understands value delivered by procurement. More importantly, the value needs to be presented in financial terms – for example how savings negotiated leads to better EBITDA margins.
External stakeholders include
Since the focus of this article is internal stakeholders, we will keep vendor management for another blog post.
How procurement organizations measure stakeholder engagement
As you all know, you can only improve what you measure and the same is true with stakeholder engagement. If you ask a CPO, they would always mention that engaging stakeholders is a challenge but then some of them don’t even have a formal way to measure the engagement and internal customer satisfaction. This is pretty evident from a recent survey:
As per Deloitte survey, only 44% of procurement organizations are measuring internal customer satisfaction – which is a yardstick for stakeholder engagement. In another word, 56% of organizations are not measuring satisfaction with internal customers.
Procurement departments need to baseline procurement performance and engagement before they take steps to improve it. Following are some of the ways to measure stakeholder engagement. If you want a more comprehensive view, you might want to create a balanced scorecard for some of these measures
a) Internal customer satisfaction survey
One way to measure stakeholder engagement is a quick survey. The challenge with surveys is that the quality of feedback depends on how well or how badly the survey is created.
When conducting surveys, you would want feedback both from supporters and critics, so ensure that you are picking a diverse base of internal customers for your survey.
The other aspect of surveys is that it needs to be done frequently so that one can track the trend. A quarterly survey might be an appropriate measure but it depends from organization to organization.
b) Informal feedback
Another way to gauge stakeholder engagement is through informal feedback. You can do this over coffee, drinks, or lunch.
The challenge with this approach though is that takes time to gather feedback and it could be expensive over a period of time.
c) Spend under management and savings delivered
In my view, this is the most objective way of measuring stakeholder engagement.
First of all, the more engaged your stakeholders, the more spend under management, so this is a direct measure of procurement influence as well engagement.
Second, some departments might be more engaged than others. Look at the savings delivered in the last few months and see where the savings are coming from. That should give you a clear idea of how engaged procurement is across all departments.
Wherever possible, use more than one measure to get a complete assessment of how engaged procurement is with stakeholders.
Now let’s look at some of the ways to improve engagement with internal stakeholders
It is very clear that Procurement’s role in the organization is to reduce cost and deliver savings, but is this the only thing you want your internal customers to remember? It is a sure-shot way to create a purely transactional engagement.
Most of the new procurement professionals focus a lot on savings and that makes the relationship very transactional. Rather, focus on building the relationship first with your internal customers.
Before you meet with your stakeholders, Do your homework on what the department’s function is, how it sits in the overall hierarchy, etc.
You should do this irrespective of whether you are starting with a new category or starting a new job.
Focus on understanding their function and how they impact the business. Some questions to ask.
Note that your questions might change based on whom you are meeting but the following is a basic guideline
Once you have established the relationship and your stakeholders see value in what you do, they will start engaging you and savings follow.
Procurement policy or corporate spend policy is an important aspect of the corporate procurement function. However, policy enforcement should not be the core function of the department.
Don’t get me wrong, ensuring purchasing compliance is important but procurement shouldn’t lead with a policy enforcement mindset.
In other words, don’t start a conversation with “as per our procurement policy you should…”
Rather start with asking probing questions about the current business challenges and how procurement can help enable better decision making.
Let’s take an example:
Your policy requires that every purchase order must be reviewed and approved by purchasing before it can be sent to the supplier. Your stakeholder complains is that it takes too long to process orders.
If you focus is strictly on being a policy enforcer, then you would focus on how to get the approvals done faster.
If you have an enabler mindset, then you would think about why they need frequent orders and what can be done to consolidate that.
If it is the case that there is a need for frequent orders, find a way to avoid approvals while keeping purchasing compliance intact.
This is the most obvious way to build trust with your stakeholders. If you don’t understand the business you are supporting, there is little hope that your stakeholders would consider you a trusted advisor.
Procurement professionals who understand the business very well are great at understanding their stakeholder needs as well as adding value to the conversation.
But if you don’t fully yet understand the business, here are some tips
Talk to your sales colleagues, they can provide you with details about the company’s products, competition as well as how your customers view your company.
Marketing should be able to give you an overview of the competition, brand, and positioning of the company. The work they do is primarily dependent upon the positioning of the company.
Once you are done talking to sales and marketing, talk to different operation teams. These are different departments that support the operations. For example, if you are a software company, then the various operations departments are engineering, customer support, infrastructure management, etc.
Once the procurement teams understand the business, there are different approaches a CPO(Chief procurement officer) can take to ensure that procurement is working closely with the business to gather requirements.
As per a survey conducted by Deloitte, the following are some of the techniques
Both of these are very good approaches for procurement to better understand business.
Procurement always complains that they don’t have a seat on the table and things would be so much better if they did. I don’t disagree but procurement needs to earn that seat.
If procurement can find a way to add value to the conversation, it would significantly elevate the role procurement plays in supporting the business.
There are multiple ways you can do this in your day to day interaction
Tell them something valuable:
Not every budget owner is reviewing their spending every day to understand whether they are over their budget or are there are anomalies in the spending.
You might say, that is the role of finance and you are absolutely correct.
I am not saying that you go out of your way to review budgets and spend every day on this, but this could be an observation.
For example, you are conducting spend analysis and you realize that vendor monthly spend is trending up.
This could be that the vendor is overcharging or the department is doing more business with that vendor. Your stakeholders would appreciate the heads up.
Educate them about the market:
Procurement teams could be structured very differently, some are category-based and some are department-based.
If your team is structured around categories, then procurement managers are in a better position to educate their stakeholders about the category.
Let say you are about to run an RFP for marketing automation software, so rather than asking your stakeholders if they have identified the vendors, add value by providing the following information
All of us are wired very differently and the same is true for procurement stakeholders. So to be effective, procurement needs to learn how to work with different personalities and adapt based on different situations. Following are some examples of what different personalities your stakeholders might have
a) Introvert vs Extrovert
Some stakeholders are introverts and some are extroverts, and understanding individuals can help a lot in day-to-day conversations.
I am not asking you to be a psychologist, but when you meet your stakeholders for the first time, spend time in knowing them.
Your first question should not be “What Can I help you with”! But get you to know them first.
Acquiring this trait itself can help build a strong relationship with your stakeholders.
Now you must be saying, all this makes sense but I am an introvert myself, so then how do I approach this?
It is pretty simple, ask a very open-ended question. For example – “Are you born and brought up in “City Name” “? Once you ask this question, observe how your stakeholders respond to that question
Here is a simple traits comparison between introverts and extroverts
b) Understanding stakeholders Learning style
“Learning style is an individual’s unique approach to learning based on strengths, weaknesses, and preferences.”
Why should you care about learning styles?
A lot of the work involved in a sourcing event is either gathering data or presenting information obtained from suppliers. If you are working with a stakeholder and they have one primary learning style (say listening) then it doesn’t help if you go prepared with an elaborate slide deck.
I am not saying you customize your presentation style based on each stakeholder but be aware of the learning preferences and try to accommodate wherever possible.
A good framework to understand individual learning preferences is VARK. As per the VARK framework, an individual learning style can be categorized in one or more of the following models
A – Auditory
R – Read/Write
K – Kinesthetics
If you are interested to know your own learning style, you can take a quick test here.
I am sure you are not hearing this for the first time!
Having empathy towards your internal and external stakeholders is key to procurement success.
But how do you go about developing empathy towards your stakeholders?
Following is a good map that will guide you to be more empathetic towards your internal customers. This map is designed mostly for understanding your customer’s user persons for product development, but I feel this can be used by procurement teams too
Source: https://www.solutionsiq.com/resource/blog-post/what-is-an-empathy-map/Understand their job
The reason I like this map is that it is self-explanatory, but here are some of the ways this empathy map can be used by procurement professionals
a)Understanding what your customers say and do would help you understand the business better.
b) Gain: What they can gain by leveraging procurement.
If you think about what they are going to gain, then you are in a better position to quantify and present the Procurement value proposition to your stakeholders.
c) Pain: What are their pain points
I am not sure what other pains procurement can alleviate but you can certainly understand stakeholder challenges in terms of dealing with vendors.
Procurement involvement generally ends with vendor selection. Procurement should help stakeholders manage the vendor relationship through the vendor life cycle.
d) Hear: This is more from the head of the department’s perspective.
What they hear about procurement engagement from their teams and co-workers. If you have a strong relationship with your internal customers, that would help elevate procurement value add in the eyes of senior management.
Procurement always looks at cost savings as their primary goal.
As per Deloitte survey, 79% of CPO’s consider this as their top priority.
However, cost reduction is not the only goal for your internal customers.
For example, procurement can reduce the cost of a widget by sourcing it from a low-cost country.
But, your stakeholder has no experience with the international supply chain and how to mitigate the risks with logistics and planning. This is an example of a clear misalignment of goals.
Another example, assume that you have a supplier deeply integrated into the business. You could RFP it and get better pricing from other vendors, but it is a high-risk item for your stakeholder.
So if your approach is that we are going to RFP this, then your stakeholder might be apprehensive about it and might not be willing to take the risk.
The first and foremost goal of a department is to deliver on its key metrics and not cost savings!
Cost savings may help them to get this done in the allocated budget and that’s where procurement helps.
So obviously you have misalignment on what you want to achieve. Hence, for procurement to be successful, there has to be a goal alignment between procurement and stakeholders.
Your procurement/sourcing strategy should align with the goals of your internal customers.
So how do you go about aligning it?
The key aspect of goal alignment is to understand that not every vendor relationship is equal and hence you need a different strategy for each category or vendor you are supporting for your stakeholders.
Following is a good framework to think about procurement strategy alignment with your stakeholders.
You divide your suppliers into 4 buckets and each bucket has a different sourcing strategy.
How to use this framework?
a) Create a slide deck with an analysis of key vendors for a department, which includes total spend, categories purchased, vendor capability, contracts, and vendor performance information if available.
b) Discuss this information with your internal customers and preferably along with senior management for that department. The goal is to identify supplier criticality into the following buckets
The focus of this exercise is to ensure that your stakeholders are aligned with the vendor classification.
The next step is to discuss the sourcing strategy for each of the buckets and align it with your internal customers/stakeholders.
You should do this exercise at least once a year to get better alignment with your stakeholders. Do this preferably towards the end of the year or beginning of the new fiscal year when operations activity is low.
Let’s say you are meeting a marketing manager, and she is describing the issues with the current supplier and looking for recommendations on how to solve this.
If the first response in your mind is let’s put it out for bid – then you might be failing to listen effectively.
When a supplier doesn’t work, it is not always the supplier’s fault and this could be happening due to different reasons.
For example, the contract is not structured properly or the stakeholders are not fully engaged.
There could be multiple reasons why the engagement is not working and effective listening can help you identify this.
As per Julian Treasure, We spent 60% of the time listening but we only retain 25 % of the information.
Here are a couple of ways, procurement can listen better and better engage with stakeholders
a) Suspend Judgement:
It’s hard not to immediately jump to conclusions, so try to suspend judgment on the correct strategy or decision until your stakeholders are done explaining the situation.
b) Keep an open mind:
You might have a preconceived solution to a problem but develop the attitude to understand others’ points of view too. I am not saying you drop the solution you have a mind, but you need to temporarily put it in the memory cache so that you can fully evaluate an alternate solution proposed by your stakeholder.
c) Ask questions at right time:
When you are listening to someone, ask questions when they take a natural pause. That way you are not interrupting them while they are speaking.
If you can’t keep your questions in your mind, write them down as they come up.
Just let the speaker know that you are taking notes.
Successful procurement teams understand the need for stakeholder engagement and they are continuously finding ways to better engage the stakeholders.
The more engaged the stakeholders, the easier it is for procurement to meet its organizational objectives.
We have covered a lot of content in the above sections, don’t get overwhelmed – at the least find a way to measure the current stakeholder engagement level. Once you have done that, you can pick one of these techniques and start incorporating it in your interactions and start measuring if there is an improvement.
We would love to hear your favorite techniques for building stakeholder engagement, so feel free to drop a line in the comments section.