When it comes to procurement compliance, there isn’t one standard all organizations adhere to. And we wouldn’t expect them to. Every organization has unique compliance needs, including yours. So how do you develop, plan and implement a framework for compliance that works for your organization? Here are nine steps to get you started.
Word to the wise: Keep relevant stakeholders involved at every step of the process
1. Know Where You Currently Stand with Procurement Compliance
Are there specific areas of the business where you have compliance issues? Or are individual departments and teams are humming along just fine, but they don’t share information with each other? To help identify specific opportunities for improvement in your organization, A.T. Kearney came up with the Stages of Excellence for Procurement Compliance. (It’s a little dated, but the classifications are timeless).
2. Rank your Compliance Priorities
If you’re living off ad-hoc practices, there are probably glaring issues to address right off the bat. And if your C-Suite has decided to cut back, getting a handle on what everyone is buying becomes Job #1. If you’re a little more advanced you might have solid contracts in place, but not everyone purchases against them.
Starting with the business case for your procurement compliance targets – the “so what?” – will help you recognize when you’re creating process for the sake of process, and when you’re actually adding value.
3. Research Compliance Solutions
Perhaps you need to develop value-driven processes where none have existed? Maybe you need better tools that align with your processes? Or is the issue that you need better training on the tools you already have? Take the time to research all the ways you could address a given issue – not just the first one that comes to mind.
4. Understand Your Resources
Think broadly here. Take inventory of your financial resources, the abilities and skill sets of your team, intra-department dynamics and organizational culture. All of these will come into play as you work to optimize procurement compliance.
Does your organization move quickly in the face of a strong business case? Are people generally open to trying new things? Are there certain departments that are easier to work with than others? Do you have direct control over any business areas? Acknowledge any barriers or areas of smooth sailing up front.
5. Map the Complexity
Go through each item on your list and map it according to impact and difficulty. Difficulty here can encompass anything that might hinder the project. Think things like budget, internal expertise, the need to get approval from multiple stakeholders, success being dependent on end users outside of your control, or anything else you identified in #4.
6. Develop your list of “High Value Targets”
At this point, it should be pretty easy to cross off anything that falls under “Low Impact, High Difficulty.” “High Impact, Low Difficulty” are usually the no-brainers. Tackle those first to gain momentum.
Often, getting the most fruit from your labors means focusing on those items with “High Impact, High Difficulty.” These items will usually require ongoing conversations across multiple stakeholders, extensive due diligence, and/or significant budget. Look carefully at items with low budget impact. If there’s not a high dollar price tag, there’s usually still a massive change management effort that landed it up in the top right quadrant to begin with. Plan accordingly.
The “Low Impact, Low Difficulty” projects are usually afterthoughts. It’s unlikely you’ll tackle these.
7. Define what it means to be successful with procurement compliance
Now that you have the bones of an action plan, take some time to think through what procurement compliance success would look like. At one extreme, perhaps your goal is to make your accountants more efficient by requiring everyone to submit receipts to the same email address. Compliance success may be that they no longer walk in to crumpled receipts on their desk.
At the other extreme, your goal may be to capture more value from the teams and tools you have in place by fully integrating their data and processes. In this case, you may have several goals – percent of spend on contract, preferred supplier usage, etc.
However you define success, be sure it’s measurable.
8. Develop Timelines
Once you know success looks like, map how long it will take to reach your procurement compliance goals. If we go back to our accountants and receipts example, a simple companywide announcement about the new process would probably do, so you can reasonably expect to see results within a few days.
For the more complex data and process integration example, your timeline would include things like implementation, training, and the time it will take to start seeing results.
9. Hold Yourself Accountable
Make sure you have processes or tools in place that provide visibility into how you’re tracking against your timelines and goals. If you haven’t already done so, performing a spend analysis will provide a baseline of what you’re spending, how much you’re spending, and who you’re spending it with. This can be a great place to start. (Learn how to conduct a spend analysis in seven steps.)
When it comes to managing and tracking savings initiatives, our savings management software integrates project forecasting, initiative approval workflows and real-time savings tracking all in one solution.
If all goes well, the procurement compliance issues you’ve identified through this process shouldn’t stay issues for long. And since no good deed goes unpunished, soon enough you’ll be back, ready to start again at #1.
What compliance issues are you constantly dealing with? Let us know!