In my last few posts on this topic (Part I, Part II, Part III), I led up to the primary reason why strategic sourcing engagements fail - change management. When procurement professionals or others engaged in cost reduction efforts focus too much time on achieving savings and too little time engaging others within the organization, the results you obtain will not be implemented. So what to do?

Every implementation has specific challenges inherent to the type of spend, the end-user personalities or concerns, and the level of executive sponsorship or control you have over the category. However, regardless of the specific characteristics of the project, there are things you can do to help implementation move along and ensure its successful completion.

Be the Savings Cheerleader
The counter to every argument presented by end users and other internal stakeholders should include a restatement of the savings opportunity. While the expected savings will not speak for themselves, and misinformation and other challenges will continue to present themselves, it is important for everyone involved to remember exactly what is at stake in terms of hard dollars that will have a meaningful impact on the bottom line.

Particularly if momentum wanes, keeping the savings dollars in the forefront of everyone’s mind helps keep the project on track. Quite often, as hurdles are encountered, people forget the process undertaken to identify the savings opportunities, and maintaining the status quo is certainly easier than addressing challenges. As project lead, it is your job to continually lead the cheer—restating both the savings and the benefits of the process—to ensure people make choices and take actions based on sound business decisions, rather than attempts to remain in their comfort zones.

Keep in mind that, strictly speaking, expected dollar savings do not tend to motivate all the people involved. In these cases, you can motivate the change through the use of relationships. For example, instead of saying the project will save you $60,000 annually, explain that the implemented project will save the company enough money to save someone’s job.

Never Lose Focus
One of the biggest challenges during implementation is misinformation, which typically comes into play when an end user or stakeholder challenges a premise, but it eventually turns out that the challenge was invalid. For example, let us suppose that you just completed a freight project and discovered that an additional 10 percent discount was available from a new supplier. However, the new supplier also has a fuel surcharge that is 10 percent higher than the incumbent. There is still savings to be realized, though, because the discount is taken off the gross price and the fuel surcharge is a factor of the net price. In other words, the additional discount dollars are still greater than the impact of the additional fuel surcharge. You present the new savings opportunity to end users, and they comment that the fuel surcharge is going up. Because they are unfamiliar with how the fuel surcharge works, they falsely believe the savings numbers are incorrect and ask you to go back to improve the fuel surcharge cost. They also ask for more time to review the numbers and make sure they understand them.

In this case we have confused end users who do not trust the analysis provided to them. They quickly share their opinions with others in the organization, and suddenly everyone is asking you about your analysis and whether there really are potential savings on the freight project. At this point it can become easy to lose focus on the end result. You might even begin to mistrust your own assessment!

Of course, end users typically ask for more information to help them understand your analysis. This is perfectly acceptable—if that information will lead them to make a decision. Quite often, an analysis is challenged in order to prolong a process or allow an end user to avoid making a final decision. Once an analysis or recommendation is challenged, it is easy to get bogged down in circular decision-making, where once one challenge is addressed another appears, and then another, until we are back to the original challenge again, with end users and other interested parties forgetting that the original issue was already addressed.

Projects can quickly get out of hand once a recommendation is challenged, but there are several steps you can take to counter lack of focus and keep the project on track. First, address the concerns and next steps in writing. Provide a clear picture of what issues need to be addressed, and ask end users to confirm, in writing, that they agree with the next steps.

Second, immediately schedule a meeting and set due dates to answer additional questions. Often the biggest hurdle you encounter once someone challenges an analysis is getting all the interested parties back in a room together again. We have seen clients and their end users drag out an analysis review for as long as one year before reconvening. Get a meeting on the calendar and make sure you have all questions answered in time for that meeting.

Lastly, try to make the end user accountable. The primary reason why a recommendation is challenged is because end users have grown accustomed to the status quo and are reluctant to change. However, if the success of the project is tied to their annual objectives, they have a stake in seeing the project through to its completion. Of course, tying a sourcing engagement into annual objectives is easier said than done, particularly if you do not have authority over the end user. This leads us to the next way to overcome challenges: maintaining high-level support.

Maintain High-Level Support

Developing strong executive sponsorship is a critical component to any successful implementation. Without high-level support, projects often stall and savings are never fully implemented. Unfortunately, many project managers do not provide their executive teams with regular updates or enlist them to help troubleshoot internal issues with change management, and the project often suffers as a result. There are many reasons for this. Some project managers see change management as their responsibility, and failure to convince an end user to support their decision might be seen as an admission of a lack of leadership or effectiveness skills. Others might work in a company where the overall corporate culture is decentralized in nature, and executive-level sponsors see it as the responsibility of individual business units, divisions, and end users to appropriately manage costs.

Regardless of the reason, avoiding communication with high-level sponsors is always a mistake. Without executive support, project managers may lack the political capital or clout to enforce change-management decisions if end users decide to push back, leading to stalled or failed implementations.

There are many ways that you can easily maintain high-level management support within your company. You could simply create a status report and submit it to the high-level sponsor or sponsorship team on a regular basis. However, a written report does not always properly relay what is going on with a project. If possible, try to get 15 minutes with the sponsor every week or every other week to provide updates. Do not just start these updates during implementation; keep the executives involved from the beginning of the project. In this way, sponsors are able to provide their input along the way, which invests them in the end result. In addition, this allows them to see that the process was designed and executed in an objective manner, and keeps them up to speed on potential issues well in advance of them becoming problems.

Continuous internal communication and engagement requires you to be accountable for your own actions. After all, if a project stalls for a week or two, or fails to produce savings, you will need to answer for it. But it also makes others accountable for the end result, which ensures when you identify savings, they will be realized.

Sections of this four part blog post are excerpts from the book, Managing Indirect Spend by Joe Payne and William R Dorn. Pre-order your copy today!
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