By: Sakthi Prasad -- Content Director
21 August, 2022
(Pic Courtesy: Accenture)
If one were to ask whether Procurement is a process or relationship-based function, the answer would be, it is a mix of both. However, discord sets in when process alone begins to dictate the terms of the relationship with business stakeholders.
Beroe spoke to Kai Nowosel, Chief Procurement Officer at the global professional services company, Accenture to understand the art of striking a fine balance between relationship and process.
Kai led Accenture’s Sourcing and Procurement Consulting practice before his role as Chief Procurement Officer (CPO) in 2017. As a consultant, he excelled in the art of building relationships and networks—skills he believes are equally important for a CPO. Recent research from Accenture shows that CPOs are adding more priorities to their list, moving beyond typical supplier contracts, demand and planning management. CPOs also mentioned non-traditional priorities such as sustainability, workforce diversity, and inclusion, especially for the future.
It was 10 a.m. in Frankfurt, Germany, when Kai received Beroe’s video call. A previous interview with Kai took place before the pandemic; this conversation began by discussing what has changed for him as a CPO since then.
“The supply chain disruptions over the last three years ended up accelerating the digital transformation of the procurement function,” Kai noted. “The pandemic reinforced my view that the relationship matters more than the process. This is because with unprecedented disruptions, we cannot just apply historical processes.
“We’ve come to the point where how you partner with the business matters the most, because there is no historical reference for this level of disruption. The procurement function must earn the trust of the business in order to better manage disruption; and maintaining good relationships is paramount to earning trust.
“If we continued our process view, we might have looked at historical data and come up with wave plans; we might have looked at historical supplier performance and come up with improvement programs and shifted volumes. If we looked at our sourcing strategies, we might have gone with single sourcing or dual sourcing consolidation strategies; but the pandemic was a starting point where you see that supply chain got disrupted very aggressively and radically, in ways that you couldn't anticipate. You can't update a function by applying the same old logic,” Kai said.
Stakeholder Management is an important activity for Procurement. After all, stakeholder success is what the function strives to achieve. Although it sounds obvious, oftentimes relationship building turns into an arduous exercise.
“The historical heritage of the Procurement function has been three Cs: Cost, Compliance, Control,” Nowosel stated. “Of course, there is also a fourth C, which is Competition. However, building relationships is not about competition.
“This mindset of ‘cost, compliance, control, and competition’ has been drilled into many Procurement teams. And in that case, you can end up damaging relationships. The basis of ‘control’ is ‘I don’t trust you.’ Whereas having a relationship is all about trust. It’s a 180-degree difference.
“That’s why it takes real effort to build trust among your stakeholders, because it requires a mindset change. You need to replace the old Cs with a fresh set: Collaboration, Cooperation, and Core Innovation. The aim is to supplement typical processes with relationships in order to get the job done more effectively,” Kai elaborated.
He added that during the COVID-19 crisis, many procurement teams succeeded in securing supplies due to strong relationships with their suppliers; paying a higher price alone did not guarantee supplies.
“It's all about mindset, how you approach your stakeholders. And that's why I think the pandemic ushered in this need for a mindset change much faster,” he explained.
To that end, Kai works with his team to communicate in the language of business, and not the language of procurement, when interacting with business stakeholders.
“I lead by saying, ‘I'm here to partner with the business.’ There comes a shift in the mindset not by demanding, but by telling and living by example; and that's what my whole management team does. The business stakeholder should not think that I’m a corporate function guy out to make their life difficult. Instead, the stakeholder should say ‘I’m calling you because I need your expertise.’ How much nicer it is to get a call from a stakeholder asking to collaborate? It’s a significant difference between ‘because I have to call you’ versus ‘because I want to call?’”
Giving importance to relationships can also lead to a situation where Procurement may have to bend the process, especially the one set by the function, and that is not usually a desirable outcome. Ensuring a process requires discipline, which can come in the way of managing stakeholder relationships. And would it be ok to break the process to ensure the relationship is not marred? This is a tricky and touchy subject to deal with.
“I'm a strong believer that ‘one size fits all’ doesn't exist beyond the P2P (procure-to-pay) process. I will not bend the process when it comes to figuring out the right standard, the right tool, etc. However, I am willing to bend the process on how you collaborate, because every party is different, every relationship is different,” according to Kai.
There always is a situation where there is a disagreement between the stakeholder and the Procurement Manager when it comes to picking a supplier. What if the stakeholder does not agree with the supplier picked by the sourcing team? What if the procurement manager’s analysis shows that Supplier A is better than Supplier B, but the stakeholder wants to work with Supplier B? Would that also require bending the process?
“In order to use the term ‘our analysis,’ the Procurement Manager should have already gotten buy-in from the stakeholder. That’s the key; collaboration is the key. No point in acting in silos. That’s the whole point of building relationships as opposed to running a process,” Kai reasoned.
The collaboration between the CPO and the CFO has already reached a mature stage in many companies. The new, evolving dynamic is between the CPO and the CIO. Procurement is buying and implementing a lot of technology, which would require close collaboration with the company’s IT team.
“I'm a lucky one, right? I'm the CPO of a tech-savvy company. I speak with Accenture’s CIO almost daily. And I'm not just speaking to her about procurement technology. I'm speaking to her about our IT partners because they are a platform business to Accenture. And that's probably a little bit unique. That's why I can only answer in the Accenture context. We have a lot of 360-degree relationships where the supplier is also the customer with whom I am innovating; and that’s why I get a seat at the table quite frequently, because procurement is part of a business discussion,” he said.
He added that it is important not to treat the CIO as a supplier: “Our CIO was asked by the business to support a contract management capability that we wanted to use internally and provide to clients as well. We had the same objective, and the procurement team’s implementation became the reference case. When business interests coincide, then there are no arguments about resources,” Kai concluded.