This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide.
In recent years, many public institutions have drifted into all-encompassing, enterprise-wide, “end-to-end” technological transformations of their business operations. However, as this discussion explains, these “end-to-end” initiatives generally do not end well for procurement departments, who typically see their potential for contributing strategic procurement advice buried under other institutional priorities as their function is marginalized and assimilated within the larger generic automation exercise. Rather than integrating the winning conditions for strategic execution, these mass production exercises trap procurement departments into their stereotypically outdated roles as the clerical cogs within an underperforming procurement machinery. This discussion explores the causes behind this strategic failure, explaining the importance of escaping this artificial assimilation, and building real procurement process improvements within the public institution.
Mass-Produced “Business Process Improvement”
As Paul Harmon observes in the second edition of Business Process Change: A Guide for Business Managers and BPM and Six Sigma Professionals, recent decades have witnessed the mass migration of large institutions into generic, enterprise-wide business process improvement initiatives. As Harmon states, starting in the 1990s, “many companies installed off-the-shelf applications from a variety of companies, including SAP, Peoplesoft, Baan, J.D. Edwards, and Oracle”, and that these companies “sold applications that performed certain common tasks that companies faced, like those in accounting, inventory, and human resources”. However, as Harmon notes, to respond to the increasing need for institutional process improvement, “these companies began to reposition themselves by showing that groups of their modules could be linked together to create business processes”, so they clustered their applications together as “enterprise resource planning (ERP) applications.”
As Harmon observes, instead of improving institutional processes in a manner tailored to an organization’s strategic objectives, these large-scale software recycling efforts led to an era of mass-produced and highly artificial “business processes improvements” that forced institutions to adapt their existing procedures to the prefabricated business processes embedded in the 1990s software. This worked against the original objectives of business process improvement since, as Harmon states, “the heart of this ERP redesign effort is to accommodate the way your company works to the ERP application, and not the other way around.” In other words, the ERPs look to assimilate your organization into its generic procedures. As Harmon explains, these mass-production exercises resulted in the implementation of “average processes”, since “the use of ERP applications occurs in reverse order”, where “you begin with a solution and then modify your business process to adapt to the solution”.
Harmon acknowledges that this approach may be satisfactory for improving a wide variety of general business processes that may be easy to automate in areas that “add very little value to your overall business” and where adopting average solutions for routine needs is acceptable. However, he warns that problems arise “when companies try to use ERP applications for tasks that are not routine and decide to tailor the ERP applications to better fit with the way their companies do business”. As Harmon explains “it is very hard to modify the internal workings of ERP applications once they are installed.” In other words, once assimilated, resistance does become futile within those areas of mass standardization.
Recognizing the Strategic Role of Procurement
The public procurement process is an acute example of how mass-produced end-to-end automation imposes artificial standardization of a business process. While this may be acceptable for non-strategic functions, relinquishing the role of procurement within a public institution to an average generic process is a critical strategic error. The strategic objectives of public institutions are highly dependent on the proper functioning of its procurement processes. This means that the improvement of procurement processes must be treated as a key strategic objective of the organization and should not be dismissed as a non-strategic function that can be supported by generic and average processes based on generic and standard software applications that were primarily developed by the private sector for private sector institutions.
While generic business applications may assist in other areas of public administration, they are not useful from the standpoint of achieving the proactive governance and the strategic execution of the procurement function since they were never designed to meet the unique needs of public procurement. Strategic procurement was never in the software’s DNA and it never will be. Updating and integrating the procurement function within an organization calls for parting company with the misconception that generic mass-produced solutions that are based on recycled 1990s applications will ever solve an organization’s strategic procurement shortfalls. No amount of customization and configurations will change the fact that the software programmers are not procurement experts and will not be able to program strategic procurement into a flawed source code. For strategic procurement, assimilation is futile.
Resisting Assimilation: Rebooting Strategic Execution
As Harmon notes, most process managers “are assigned to manage an existing process that is already organized and functioning”. As he states, the role of those who have assumed the management of already established processes “does not require them to organize the process from scratch, but, if they are wise, they will immediately check the process to assure that it is well organized and functioning smoothly.” However, in the world of public procurement, those new managers quickly discover that the process is not functioning smoothly. In fact, from both a compliance and efficiency perspective, the process is often hardly functioning at all. Furthermore, it is now the new manager’s fault that the system is not functioning and it is that person’s responsibility to fix it.
Embedding the principles of strategic execution within a public institution means that outdated, non-compliant, and inefficient procurement processes cannot be buried under generic automation efforts. Rather, those procurement processes need to be torn down, rebuilt, and rebooted. This strategic redeployment requires top-down endorsement within the organization so that a new procurement operating system can be properly deployed at all levels within the organization. This means that procurement managers need to champion change instead of tinkering with tactics from their marginalized role as clerical cogs in the faulty procurement machinery.
Experience shows that new procurement managers are disproportionately more likely than existing mangers to champion this change within public institutions. However, public institutions need to overcome this inertia. They simply cannot wait for an old guard to give way to new managers before updating their procurement processes. They cannot afford to find themselves a generation behind the times, scrambling to catch up to those institutions that have already embraced strategic procurement. Those who are currently responsible for leading procurement departments should be at the forefront of resisting assimilation and championing the change to strategic procurement. Any other course is an exercise in futility.
