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Mastering cross-border procurement

If you want to go fast, go alone; if you want to go far, go together.
African proverb

Go fast or go far? The implications of these different paths are a perennial dilemma for any leader within a multi-national or divisional organization. Speed versus strength, agility versus security, cost versus revenue – all are considerations when looking to leverage an entity’s position. Within procurement, it’s no different.

That’s just the theory. Delivery itself overlays a wide range of further complications – from technical to organizational – and, for more than 20 years, Efficio has partnered with clients to solve them.

We hope that our experiences implementing change across borders, languages and cultures can help your procurement organization thrive across borders in 2020 and beyond.

Alone or together – organizational motives

There are reasons that some businesses may wish to operate at organizational extremes of decentralization or centralization. Two key parameters concern the importance of control and leverage.

However, most organizations aim to lie in the wide continuum that sits between these extremes: for example, a center-led or global-local approach.

Leaders tend towards a goal that mixes elements of all these factors – effectively, the desire to make an organization more than the sum of its parts. This ‘cherry-pick’ ambition has large potential rewards, but it also makes the process complex and fraught with pitfalls.

Objective reflection – agreeing the right procurement strategy

Once organizational motives are clear, agreeing the right procurement strategy and operating model depends on a mixture of operational and market factors.

Consider the following parameters to gain a thorough view of your organization’s target procurement model.

Market factors

  1. Common product – Are you selling or providing the same goods and services across regions or is there a high degree of differentiation? This will dictate the likely extent that spend can be leveraged back through a common supply chain.
  2. Common market maturity – Is the market equally sophisticated and uniform in its requirements and dynamics? Are you the new entrant with a need for agility and speed to market or is the market mature and dictated by scale and efficiency?
  3. Common supply chain – Are suppliers common across borders and motivated to work as one entity? Too often global organizations will have a common product or service but find that the supply market is local, or when multi-national, they are often not organized or incentivized to work globally. All supply chains have a tipping point between scale and complexity. For some it’s at a local level, for others at a national level, but fully global suppliers are less common.  

Operational factors

  1. Common systems – Does your company’s operations have a way of sharing and aggregating granular data to drive insight? If not, what is the roadmap for system alignment? Without a common set of data and measures, leaders lose the ability to objectively challenge decisions and must rely more heavily on collaboration of regional leads.
  2. Common language – Are internal teams and suppliers able to converse and collaborate freely? Beyond the obvious language barrier, process effort scales with each new location and language. Additionally, the right skillsets may not be held by the people with the best language ability.
  3. Common scale and skills – Does your organization have a uniform weight of resource and expertise across regions? A successful solution to pan-global success can be to foster centers of excellence where location is not a barrier to leadership. As teams become smaller, however, capacity and the risks of double or triple ‘hatting’ become worse.
  4. Common objectives – Are regions motivated to collaborate and do your financial performance metrics support recognition of the whole as well as the individual parts? Where P&Ls sit regionally or divisions are led by entrepreneur managers, leaders must be pragmatic about the extent and speed of change. If change is only led centrally, you initially remove self-serving behaviors but risk sowing longer-term ambivalence to the program. If you secure commitment locally, the benefits case needs to be clear, equitable and secure quick wins.

Culture shock – delivering change across borders

Once your strategy has been defined as a result of logical and pragmatic assessment, next comes the process of change – a more sensitive and nuanced activity.

Kotter’s 8-step change model is a well-regarded framework centered around communication, vision, coalition and culture. However, too often these elements are misunderstood or ignored in pursuit of quickly securing the benefits case within a change agenda. When working across borders, they become of paramount importance.

A nation’s culture resides in the hearts and souls of its people
Mahatma Gandhi

Toby Munyard, VP at Efficio, suggests, “The pan-European projects that we see fail share the same hallmarks: they are centre-led, homogeneous and view country-level input as binary – either right or wrong.

Those that succeed find synergy between the strategy and the realities within each country; they are led by people who listen and relate. People who are consistently filter through the myriad of reasons not to change to find the pockets of excellence and the critical local content insight that really adds value.”

Language counts

International change programmes must be made up of multi-cultural teams – not just in terms of being able to operate with local languages, but also local culture and ways of working to anticipate misconceptions before they occur.

Julian Catchick, a Principal at Efficio in Europe, suggests, "Operating in a common language, but having members of a central team that are able to speak some of the local language – especially in regions that account for the bulk of a company’s spend – helps foster relationships, trust and a common goal with local procurement and business stakeholders."

We have observed notable differences in the ways of working and expectations from the perspective of each region.

Cultural differences in leadership

On leadership styles, Jose Oliveira, Efficio VP for the Americas says, "The U.S. structure tends to be less hierarchical and more business case. You have to craft a good narrative about why your proposition is logical. The way you communicate is sometimes more important than the substance."

Whereas Philippe Salavert, a French national who is now a Principal in Efficio Nordics tells us, "In France, people don’t hesitate to challenge you; they often ask for detailed rationalization and discussion to be convinced for the need to drive change. In Scandinavia, you can’t really push too hard for change. Working with them requires a more collaborative, inclusive approach."

Management and expectation

What practical steps need to be taken? Some common pan-global themes become apparent. There are no silver bullets, but there are some common best practices that, balanced with the right expectation setting, deliver results.

Launch control: Conducting a program launch upfront is essential. If budgets allow, launch locally – not just at Group level – to avoid the perception of the activity being led by the center for the good of the center. Set a vision, agree a plan and ways of working, acknowledge and record concerns and constraints. Review this process at mid-program and at its conclusion.

Share the love: The winner should be the business as a whole. Everyone needs to buy into this as, from time to time, local sacrifices may need to be made for the common good. Set common incentives and agree common ways of working.

Communicate, communicate, communicate: Once started, keep up the communication, make it positive and deliver it in a timely manner. Quick wins are essential, as is personal and local team recognition.

Major TOM: Establish a clear Target Operating Model and governance structure that outlines the roles of different teams and individuals on a global, regional and local basis.

Mission control: Establish senior leadership sponsorship and representation to help drive change.

Patience: Be patient. This level of change doesn’t happen overnight and will take time. While a challenging and tightly managed plan should be in place, the steps should not be rushed.

Pan global poll

Does your procurement organisation intend to act more as a group or global function in the future?

  • Yes, to some extent
  • Yes, very much so
  • No, we will move to regonalise more

It wasn’t raining when Noah built the ark …

Organizations operate across borders; supply chains operate across borders; and so do procurement functions. This doesn’t mean a rush to centralize, but it does require a careful plan. Cross-border procurement collaboration presents a great opportunity for the organization prepared to understand its business and its requirements, to then build a strategy that leverages its unique skills and position – all in a well-executed plan.

Successful leaders who carefully evaluate these questions and practices to structure their pan-global plan can increase their likelihood to realize reduced costs, greater agility, deeper control and insight and nurture thriving teams.

So, pack your passport and business cards, and start your journey. It’ll be worth it.

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