The Secret Ingredient to Achieving Projected Savings

Planning and executing a complex sourcing project is no small task. Procurement teams spend months defining requirements, running a sourcing event, negotiating with suppliers, and executing contracts. When an organized approach is followed this typically results in substantial savings. Yet too often organizations fail to realize the full potential of Procurement’s contributions due to implementation challenges following contract execution. In many cases, 40% of more of forecasted savings are not realized as a result.

The solution to this problem is Change Management. While Change Management is more often associated with mergers, acquisitions, and complex technology implementations, the reality is Change Management will yield positive results for any initiative that involves change. It is particularly effective at solving the problems that typically plague contract implementations such as savings leakage and rogue spend. Below I am going to introduce three Change Management tools than are useful when engaging with stakeholders throughout the Sourcing process and when implementing new contracts.

Stakeholder Analysis

Everyone knows we must engage the appropriate business units when planning a sourcing event to define requirements. However, taking things a step further and formally assessing the effects on different stakeholder groups can provide tremendous value when we reach implementation. The purpose of conducting stakeholder analysis is to ensure we identify ALL affected stakeholders and gain an understanding of the ways in which they are impacted. This will allow us to assess which groups are most impacted so we can be sure to carefully target these groups and prepare them to purchase goods and services once new contracts are implemented.

Resistance Management Plan

Resistance is the natural human reaction to change, and therefore should always be assumed. Stakeholder attachments to their supplier relationships is a prime example. While there is no magic answer to eliminating resistance, early anticipation and planning will greatly mitigate the occurrences. It is important to spend time considering which of the groups identified in our Stakeholder Impact Analysis are most likely to resist purchasing from new suppliers. Some basic questions we should be asking include:

• What are some possible resistance points: particular groups, locations, managers?
• What types of resistance should be expected: avoidance, rogue spend, vocally expressing discontent?
• What are the reasons for resistance: fear over loss of control, personal attachments to suppliers, concern over needs being captured?

Once we have identified our expected sources of resistance and the underlying reasons, we can plan out tactics to neutralize the impacts. Reactive resistance management is much more difficult and time consuming to resolve. Developing a Resistance Management Plan puts Procurement in a proactive position and will greatly accelerate our path to ROI.

Communication Plan

My final recommendation for integrating Change Management into the Sourcing process is to develop a formal Communication Plan. The purpose of developing a Communication Plan is to ensure all necessary stakeholders are engaged and receive effective communications that will drive adoption. A well-designed Communication Plan will ensure stakeholders are aware of the categories and suppliers impacted and informed about important dates and timelines. A Communication Plan is also a great way to engrain sponsor participation into the project plan which reinforces the need to comply amongst stakeholders. The basic steps to completing a Communication Plan include:

1.  Identify the audiences.
2.  List key messages and timing.
3. Determine means of communication packaging, method, frequency, and sender.
4. Convert into detailed outline and schedule.

Savings projections typically assume 100% adoption and compliance. To come close to that mark all stakeholders need to know what categories and items are changing, when the new contracts take effect, and how to purchase the relevant goods and services. Following the steps outlined above to complete a Communication Plan will ensure that all stakeholders receive this information and are prepared as new supplier contracts are implemented.

Hopefully I have made it clear how incorporating Change Management into the Sourcing approach will greatly improve the odds of Procurement teams obtaining projected savings. When we achieve our saving projections, we improve our standing amongst our internal stakeholders and clients alike and move closer to reaching our goal of becoming trusted business advisors. If you are interested in learning more or receiving services related to Strategic Sourcing or Change Management, please visit our website.