Recently I had a chance to see a talk from the CEO of Innovation Norway Anita Krohn Traaseth titled “Change Leadership in Changing Times.” She began by describing Norway’s oil boom; her generation has only known Norway as a prosperous country. Now, with flagging oil prices, Norway must innovate or suffer the consequences of a stagnant economy. Norway, like other small countries, must learn to “play with others” and closely collaborate if this is to succeed.
I couldn’t help but think that Procurement, too, must learn to “play with others.” This isn’t the natural state of things at most companies; it involves change. Just as Norway must innovate in order to adapt to a changing world and a changing economy, procurement innovation must also take place in order to adapt to increasingly complex supply chains and mitigate the risks caused by environmental, political, and social threats.
The importance of change leadership in Procurement
As she spoke, I thought of the phrase my colleague Peep Tomingas frequently likes to invoke: “Implementing e-sourcing software is an exercise in change management.” If adopting new technology requires change management skills, then Procurement must understand the fundamentals of change leadership as well. But change management doesn’t, and shouldn’t, end with procurement technology.
Krohn Traaseth spoke of a power shift in business; companies are increasingly focused on people, on their consumers. This shift can be traced to technological advancements and social media, both of which have placed power in the hands of the individual. No longer is change merely a dictate coming down from on high; instead, it comes at the behest of those who ultimately use or benefit from the service. This large scale shift can also be seen in the procurement function. New collaborative technologies - including social media - means Procurement can communicate across functions and look for better ways to provide its valuable service to internal customers.
How company culture affects change
In business, and perhaps especially in Procurement, we like to think that it’s all about the numbers - profit, loss, cost reduction, cost avoidance, and so on. But in reality, it’s all about the people behind those numbers. Procurement has yet to be 100% automated, and so long as it continues to become more strategic, it likely never will be. Therefore, any change must be focused on the people involved with the function, from the C-suite on down to the buyers, from internal customers to suppliers.
When you’re dealing with people, you can’t ignore company (and departmental) culture. Krohn Traaseth advised the audience to never underestimate culture in a change. Procurement would do well to take heed. According to a 2013 142-country Gallup study, about 13% of employees worldwide are engaged, but nearly double that amount, 24%, are actively disengaged. This means they are unhappy and unproductive at work, and actively disengaged employees may spread their negativity and have an unfortunate impact on their co-workers’ levels of satisfaction.
Take a look at your organization. How many of your co-workers are engaged? How many are actively disengaged? Better yet, take a look at yourself. Are you engaged? If you want to lead procurement innovation at your organization, you must begin by being an example. Gather other engaged employees together, both inside and outside the function, listen to their constructive criticism, and encourage them to help you champion the changes you want to implement.
Champion procurement innovation first with your network of engaged employees. The actively disengaged can be dealt with later. But even they are not entirely lost causes. In fact, Krohn Traaseth didn’t recommend firing them off the bat, which may be your knee-jerk reaction. In her experience, she found that often these employees don’t want to be disengaged - they were simply in need of feedback and encouragement.
Management vs. Leadership
The procurement function is full of procurement managers. In order to achieve true change, you need to have procurement leaders. Dr. John Kotter, the leading authority on change management, defines the difference between leaders and managers as one of scope - leaders are concerned with communicating a vision and long-term planning whereas managers follow this vision and plan for the short term. Both types are needed in the function, but procurement innovation can’t take place without leaders.
According to Krohn Traaseth, there’s an old Norwegian proverb that says, “You must leave your farm to the next generation in better shape than you inherited it.” Millennials will soon make up the majority of procurement professionals. What type of function will they inherit in your organization? There’s no reason to wait for them to initiate procurement innovation, and with the rate that technology is changing, those who do wait will find themselves struggling to catch up.